The legal definition of a charitable organization (and of charity) varies between countries and in some instances regions of the country. The regulation, the tax treatment, and the way in which charity law affects charitable organizations also vary. Charitable organizations may not use any of their funds to profit individual persons or entities.[2] However, some charitable organizations have come under scrutiny for spending a disproportionate amount of their income to pay the salaries of their leadership.
The second-hand shop of UFF (U-landshjälp från Folk till Folk i Finland), a non-profit and non-governmental humanitarian foundation, in Jyväskylä, Finland.
Financial figures (e.g. tax refund, revenue from fundraising, revenue from the sale of goods and services or revenue from investment) are indicators to assess the financial sustainability of a charity, especially to charity evaluators. This information can impact a charity's reputation with donors and societies, and thus the charity's financial gains.
Charitable organizations often depend partly on donations from businesses. Such donations to charitable organizations represent a major form of corporate philanthropy.[4]
To meet the exempt organizational test requirements, a charity has to be exclusively organized and operated,[1] and to receive and pass the exemption test, a charitable organization must follow the public interest and all exempt income should be for the public interest.[1] For example, in many countries of the Commonwealth, charitable organizations must demonstrate that they provide a public benefit.[5]
Until the mid-18th century, charity was mainly distributed through religious structures (such as the English Poor Laws of 1601), almshouses, and bequests from the rich. Christianity, Judaism, and Islam incorporated significant charitable elements from their very beginnings[6] and dāna (alms-giving) has a long tradition in Hinduism, Jainism, Buddhism, and Sikhism. Charities provided education, health, housing, and even prisons. Almshouses were established throughout Europe in the Early Middle Ages to provide a place of residence for the poor, old, and distressed people; King Athelstan of England (reigned 924–939) founded the first recorded almshouse in York in the 10th century.[7]
During the Enlightenment era, charitable and philanthropic activity among voluntary associations and affluent benefactors became a widespread cultural practice. Societies, gentlemen's clubs, and mutual associations began to flourish in England, with the upper classes increasingly adopting a philanthropic attitude toward the disadvantaged. In England, this new social activism led to the establishment of charitable organizations, which proliferated from the middle of the 18th century.[8]
This emerging upper-class trend for benevolence resulted in the incorporation of the first charitable organizations. Appalled by the number of abandoned children living on the streets of London, CaptainThomas Coram set up the Foundling Hospital in 1741 to care for these unwanted orphans in Lamb's Conduit Fields, Bloomsbury. This institution, the world's first of its kind,[9] served as the precedent for incorporated associational charities in general.[10]
Painting by Antoine-Alexandre Morel (1765–1829) depicting charity during the Enlightenment era.
Another notable philanthropist of the Enlightenment era, Jonas Hanway, established The Marine Society in 1756 as the first seafarers' charity, aiming to aid the recruitment of men into the navy.[11] By 1763, the Society had enlisted over 10,000 men, and an Act of Parliament incorporated it in 1772. Hanway also played a key role in founding the Magdalen Hospital to rehabilitate prostitutes. These organizations were funded by subscriptions and operated as voluntary associations. They raised public awareness about their activities through the emerging popular press and generally enjoyed high social regard. Some charities received state recognition in the form of a royal charter.
Charities also began to take on campaigning roles, championing causes and lobbying the government for legislative changes. This included organized campaigns against the mistreatment of animals and children, as well as the successful campaign in the early 19th century to end the slave trade throughout the British Empire and its extensive sphere of influence.[12] (However, this process was quite lengthy, concluding when slavery in Saudi Arabia was abolished slavery in 1962.)
The Enlightenment era also witnessed a growing philosophical debate between those advocating for state intervention and those believing that private charities should provide welfare. The political economist, Reverend Thomas Malthus (1766–1834), criticized poor relief for paupers on economic and moral grounds and proposed leaving charity entirely to the private sector.[13] His views became highly influential and informed the Victorianlaissez-faire attitude toward state intervention for the poor.
Growth during the 19th century
During the 19th century, a profusion of charitable organizations emerged to alleviate the awful conditions of the working class in the slums. The Labourer's Friend Society, chaired by Lord Shaftesbury in the United Kingdom in 1830, aimed to improve working-class conditions. It promoted, for example, the allotment of land to laborers for "cottage husbandry", which later became the allotment movement. In 1844, it became the first Model Dwellings Company– one of a group of organizations that sought to improve the housing conditions of the working classes by building new homes for them, all the while receiving a competitive rate of return on any investment. This was one of the first housing associations, a philanthropic endeavor that flourished in the second half of the nineteenth century, brought about by the growth of the middle class. Later associations included the Peabody Trust (originating in 1862) and the Guinness Trust (founded in 1890). The principle of philanthropic intention with capitalist return was given the label "five percent philanthropy".[14]
There was strong growth in municipal charities. The Brougham Commission led to the Municipal Corporations Act 1835, which reorganized multiple local charities by incorporating them into single entities under supervision from the local government.
Charities at the time, including the Charity Organization Society (established in 1869), tended to discriminate between the "deserving poor", who would be provided with suitable relief, and the "underserving" or "improvident poor", who was regarded as the cause of their woes due to their idleness. Charities tended to oppose the provision of welfare by the state, due to the perceived demoralizing effect. Although minimal state involvement was the dominant philosophy of the period, there was still significant government involvement in the form of statutory regulation and even limited funding.[15]
Philanthropy became a very fashionable activity among the expanding middle classes in Britain and America. Octavia Hill (1838–1912) and John Ruskin (1819–1900) were important forces behind the development of social housing, and Andrew Carnegie (1835–1919) exemplified the large-scale philanthropy of the newly rich in industrialized America. In Gospel of Wealth (1889), Carnegie wrote about the responsibilities of great wealth and the importance of social justice. He established public libraries throughout English-speaking countries[16] and contributed large sums to schools and universities.[17] A little over ten years after his retirement, Carnegie had given away over 90% of his fortune.[18]
With the advent of the Internet, charitable organizations established a presence on online social media platforms and began initiatives such as cyber-based humanitarian crowdfunding, exemplified by platforms like GoFundMe. Another notable charitable organization is Beyond the Crisis. This organization distributes food and resources to housing communities and homeless shelters in the U.S. It was founded by young philanthropists Camden and Colton Francis.
By jurisdiction
Australia
The definition of charity in Australia is derived from English common law, originally from the Charitable Uses Act 1601, and then through several centuries of case law based upon it. In 2002, the federal government initiated an inquiry into the definition of a charity. The inquiry proposed a statutory definition of a charity, based on the principles developed through case law. This led to the Charities Bill 2003, which included limitations on the involvement of charities in political campaigning, an unwelcome departure from the case law as perceived by many charities. The government appointed a Board of Taxation inquiry to consult with charities on the bill. However, due to widespread criticism from charities, the government abandoned the bill.
Subsequently, the government introduced the Extension of Charitable Purpose Act 2004. This act did not attempt to codify the definition of a charitable purpose but rather aimed to clarify that certain purposes were charitable, resolving legal doubts surrounding their charitable status. Among these purposes were childcare, self-help groups, and closed/contemplative religious orders.[21]
To publicly raise funds, a charity in Australia must register in each Australian jurisdiction in which it intends to raise funds. For example, in Queensland, charities must register with the Queensland Office of Fair Trading.[22] Additionally, any charity fundraising online must obtain approval from every Australian jurisdiction that mandates such approval. Currently, these jurisdictions include New South Wales, Queensland, Victoria, Tasmania, Western Australia, and the Australian Capital Territory. Numerous Australian charities have appealed to federal, state, and territory governments to establish uniform legislation enabling charities registered in one state or territory to raise funds in all other Australian jurisdictions.
A Public Benevolent Institution (PBI) is a specific type of charity with its primary purpose being to alleviate suffering in the community, whether due to poverty, sickness, or disability. Examples of institutions that might qualify include hospices, providers of subsidized housing, and certain not-for-profit aged care services.[24][25]
Charities in Canada need to be registered with the Charities Directorate[26] of the Canada Revenue Agency. According to the Canada Revenue Agency:[27]
A registered charity is an organization established and operated for charitable purposes. It must devote its resources to charitable activities. The charity must be a resident in Canada and cannot use its income to benefit its members. A charity also has to meet a public benefit test. To qualify under this test, an organization must show that:
its activities and purposes provide a tangible benefit to the public.
those eligible for benefits are either the public as a whole or a significant section of it. They should not be a restricted group or one where members share a private connection, such as social clubs or professional associations with specific memberships.
the charity's activities must be legal and must not be contrary to public policy.
To register as a charity, the organization has to be either incorporated or governed by a legal document called a trust or a constitution. This document has to explain the organization's purposes and structure.
France
Most French charities are registered under the statute of loi d'association de 1901, a type of legal entity for non-profit NGOs. This statute is extremely common in France for any type of group that wants to be institutionalized (sports clubs, book clubs, support groups...), as it is very easy to set up and requires very little documentation. However, for an organization under the statute of loi 1901 to be considered a charity, it has to file with the authorities to come under the label of "association d'utilité publique", which means "NGO acting for the public interest". This label gives the NGO some tax exemptions.[citation needed]
Hungary
In Hungary, charitable organizations are referred to as "public-benefit organizations" (Hungarian: közhasznú szervezet). The term was introduced on 1 January 1997 through the Act on Public Benefit Organizations.[28]
India
Under Indian law, legal entities such as charitable organizations, corporations, and managing bodies have been given the status of "legal persons" with legal rights, such as the right to sue and be sued, and the right to own and transfer property.[29] Indian charitable organizations with this status include Terna Public Charitable Trust and Sir Ratan Tata Trust.
Ireland
In Ireland, the Charities Act (2009) legislated the establishment of a "Charities Regulatory Authority", and the Charities Regulator was subsequently created via a ministerial order in 2014.[30][31] This was the first legal framework for charity registration in Ireland. The Charities Regulator maintains a database of organizations that have been granted charitable tax exemption—a list previously maintained by the Revenue Commissioners.[32] Such organizations would have a CHY number from the Revenue Commissioners, a CRO number from the Companies Registration Office, and a charity number from the Charities Regulator.
The Irish Nonprofits Database was created by Irish Nonprofits Knowledge Exchange (INKEx) to serve as a repository for regulatory and voluntarily disclosed information about Irish public benefit nonprofits.[citation needed]
Nigeria
Charitable organizations in Nigeria are registerable under "Part C" of the Companies and Allied Matters Act, 2020. Under the law, the Corporate Affairs Commission, Nigeria, being the official Nigerian Corporate Registry, is empowered to maintain and regulate the formation, operation, and dissolution of charitable organizations in Nigeria.[33] Charitable organizations in Nigeria are exempted under §25(c) of the Companies Income Tax Act (CITA) Cap. C21 LFN 2004 (as amended), which exempts from income tax corporate organizations engaged wholly in ecclesiastical, charitable, or educational activities.[34] Similarly, §3 of the Value Added Tax Act (VATA) Cap. V1 LFN 2004 (as amended), and the 1st Schedule to the VATA on exempted Goods and Services goods zero-rates goods and services purchased by any ecclesiastical, charitable, or educational institutions in furtherance of their charitable mandates.
Poland
A public benefit organization (Polish: organizacja pożytku publicznego, often abbreviated as OPP) is a term used in Polish law. It was introduced on 1 January 2004 by the statute on public good activity and volunteering. Charitable organizations of public good are allowed to receive 1% of income tax from individuals, making them "tax-deductible organizations". To receive such status, an organization has to be a non-governmental organization, with political parties and trade unions not qualifying. The organization must also be involved in specific activities related to the public good as described by the law, and it should demonstrate sufficient transparency in its activities, governance, and finances. Moreover, data has shown that this evidence is pertinent and sensible.
The legislation governing charitable activities and the process of obtaining charitable organization status is regulated by Ukraine's Civil Code and the Law of Ukraine on Charitable Activities and Charitable Organizations.
According to Ukrainian law, there are three forms of charitable organizations:
A "charitable society" is a charitable organization created by at least two founders and operates based on the charter or statute.
A "charitable institution" is a type of charitable trust that acts based on the constituent or founding act. This charitable organization's founding act defines the assets that one or several founders transfer to achieve the goals of charitable activity, along with any income from such assets. A constituent act of a charitable institution may be contained in a will or testament. The founder or founders of the charitable institution do not participate in the management of such a charitable organization.
A "charitable fund" or "charitable foundation" is a charitable organization that operates based on the charter, has participants or members, and is managed by them. Participants or members are not obliged to transfer any assets to such an organization to achieve the goals of charitable activity. A charitable foundation can be created by one or several founders. The assets of a charitable fund can be formed by participants and/or other benefactors.[citation needed]
The Ministry of Justice of Ukraine is the main registration authority for charitable organization registration and constitution.[37] Individuals and legal entities, except for public authorities and local governments, can be the founders of charitable organizations. Charitable societies and charitable foundations may have, in addition to founders, other participants who have joined them as prescribed by the charters of such charitable associations or charitable foundations. Aliens (non-Ukrainian citizens and legal entities, corporations, or non-governmental organizations) can be the founders and members of philanthropic organizations in Ukraine.
All funds received by a charitable organization and used for charitable purposes are exempt from taxation, but obtaining non-profit status from the tax authority is necessary.
Legalization is required for international charitable funds to operate in Ukraine.[clarification needed]
United Kingdom
Charity law in the UK varies among (i) England and Wales, (ii) Scotland and (iii) Northern Ireland, but the fundamental principles are the same. Most organizations that are charities are required to be registered with the appropriate regulator for their jurisdiction, but significant exceptions apply so that many organizations are bona fide charities but do not appear on a public register.[38] The registers are maintained by the Charity Commission for England and Wales and by the Office of the Scottish Charity Regulator for Scotland. The Charity Commission for Northern Ireland maintains a register of charities that have completed formal registration (see below). Organizations applying must meet the specific legal requirements summarized below, have filing requirements with their regulator, and are subject to inspection or other forms of review. The oldest charity in the UK is The King's School, Canterbury, established in 597 AD.[39]
Charitable organizations, including charitable trusts, are eligible for a complex set of reliefs and exemptions from taxation in the UK. These include reliefs and exemptions in relation to income tax, capital gains tax, inheritance tax, stamp duty land tax, and value added tax. These tax exemptions have led to criticisms that private schools are able to use charitable status as a tax avoidance technique rather than offering a genuine charitable good.[40]
Before the Charities Act 2006, which introduced the definition now contained in the 2011 Act, the definition of charity arose from a list of charitable purposes in the Charitable Uses Act 1601 (also known as the Statute of Elizabeth), which had been interpreted and expanded into a considerable body of case law. In Commissioners for Special Purposes of Income Tax v. Pemsel (1891), Lord McNaughten identified four categories of charity which could be extracted from the Charitable Uses Act and which were the accepted definition of charity prior to the Charities Act 2006:
other purposes considered beneficial to the community.
Charities in England and Wales—such as Age UK, the Royal Society for the Protection of Birds (RSPB)[44] and the Royal Society for the Prevention of Cruelty to Animals (RSPCA)[45]– must comply with the 2011 Act regulating matters such as charity reports and accounts and fundraising.
Structures
As of 2011[update], there are several types of legal structures for a charity in England and Wales:
The unincorporated association is the most common form of organization within the voluntary sector in England and Wales.[46] This is essentially a contractual arrangement between individuals who have agreed to come together to form an organization for a particular purpose. An unincorporated association will normally have a constitution or set of rules as its governing document, which will deal with matters such as the appointment of office bearers and the rules governing membership. The organization is not, however, a separate legal entity, so it cannot initiate legal action, borrow money, or enter into contracts in its own name. Its officers can be personally liable if the charity is sued or has debts.[47]
A trust is essentially a relationship among three parties: the donor of some assets, the trustees who hold the assets, and the beneficiaries (those eligible to benefit from the charity). When the trust has charitable purposes and is a charity, the trust is known as a charitable trust. The governing document is the trust deed or declaration of trust, which comes into operation once signed by all the trustees. The main disadvantage of a trust is that, like an unincorporated association, it lacks a separate legal entity, and the trustees must themselves own property and enter into contracts. The trustees are also liable if the charity is sued or incurs liability.
A company limited by guarantee is a private limited company where members' liability is limited. A guarantee company does not have a share capital, but instead has members who are guarantors rather than shareholders. If the company is wound up, the members agree to pay a nominal sum, which can be as little as £1. A company limited by guarantee is a useful structure for a charity where trustees need limited liability protection. Moreover, the charity has legal personality and can enter into contracts, such as employment contracts, in its own name.[48]
A small number of charities are incorporated by royal charter, a document that creates a corporation with legal personality (or, in some cases, transforms a charity incorporated as a company into a charity incorporated by royal charter). The charter must be approved by the Privy Council before receiving royal assent. While the nature of the charity will vary depending on the clauses enacted, a royal charter generally offers a charity the same limited liability as a company and the ability to enter into contracts.
The Charities Act 2006 introduced a new legal form of incorporation designed specifically for charities—the charitable incorporated organization (CIO)—with powers similar to a company but without the need to register as a company. Becoming a CIO was only made possible in 2013, with staggered introduction dates, with the charities with the highest turnover eligible first.
The term foundation is not commonly used in England and Wales. Occasionally, a charity will use the word as part of its name (e.g., British Heart Foundation), but this has no legal significance and provides no information about the charity's work or legal structure. The organization's structure will fall into one of the types described above.
Registration
Charitable organizations with an income of over £5,000 and subject to the law of England and Wales must register with the Charity Commission for England and Wales, unless they are an "exempt" or "excepted" charity.[49][50] For companies, the law of England and Wales will usually apply if the company itself is registered in England and Wales. In other cases, if the governing document doesn't specify, the law that applies will be the one most connected with the organization.[51]
When an organization's income doesn't exceed £5,000, it can't register as a charity with the Charity Commission for England and Wales. However, it can register as a charity with HM Revenue and Customs for tax purposes only. With the increase in the mandatory registration level to £5,000 by The Charities Act 2006, smaller charities can rely on HMRC recognition to demonstrate their charitable purpose and confirm their not-for-profit principles.[52]
Churches with an annual income of less than £100,000 need not register.[53]
Some charities, referred to as exempt charities, aren't required to register with the Charity Commission and aren't subject to its supervisory powers. These charities include most universities and national museums, as well as some other educational institutions. Other charities are excepted from the need to register but are still subject to the supervision of the Charity Commission. The regulations on excepted charities were changed by the Charities Act 2006. Many excepted charities are religious charities.[54]
Northern Ireland
The Charity Commission for Northern Ireland was established in 2009[55] and has received the names and details of over 7,000 organizations in Northern Ireland that have previously been granted charitable status for tax purposes (the "deemed list"). Compulsory registration of organizations from the deemed list began in December 2013, and it is expected to take three to four years to complete.[56] The new Register of Charities is publicly available on the CCNI website and contains the details of those organizations that have so far been confirmed by the commission to exist for charitable purposes and the public benefit. The Commission estimates that between 5,000 and 11,500 charitable organizations need to be formally registered in total.[57]
In the United States, a charitable organization is an organization operated for purposes that are beneficial to the public interest.[58] There are different types of charitable organizations. Every U.S. and foreign charity that qualifies as tax-exempt under Section 501(c)(3) of the Internal Revenue Code (IRC) is considered a "private foundation" unless it demonstrates to the Internal Revenue Service (IRS) that it falls into another category. Generally, any organization that is not a private foundation (i.e., it qualifies as something else) is usually a public charity as described in Section 509(a) of the IRC.[59]
In addition, a private foundation usually derives its principal funding from an individual, family, corporation, or some other single source, and it is more often than not a grantmaker that does not solicit funds from the public. In contrast, a foundation or public charity generally receives grants from individuals, government, and private foundations. While some public charities engage in grantmaking activities, most conduct direct service or other tax-exempt activities. Foundations that are generally grantmakers (i.e., they use their endowment to make grants to other organizations, which in turn carry out the goals of the foundation indirectly) are usually called "grantmaker" or "non-operating" foundations.[citation needed]
The requirements and procedures for forming charitable organizations vary from state to state, as do the registration and filing requirements for charitable organizations that conduct charitable activities, solicit charitable contributions, or hire professional fundraisers.[60][61] In practice, the detailed definition of a "charitable organization" is determined by the requirements of state law where the charitable organization operates, and the requirements for federal tax relief by the IRS.
Resources exist to provide information, including rankings, of US charities.[62]
Federal tax relief
Federal tax law provides tax benefits to nonprofit organizations recognized as exempt from federal income tax under section 501(c)(3) of the IRC. The benefits of 501(c)(3) status include exemption from federal income tax as well as eligibility to receive tax-deductible charitable contributions. In 2017, there were a total of $281.86billion in tax-deductible donations by individuals.[63]
To qualify for 501(c)(3) status, most organizations must apply to the IRS for such status.[64]
Several requirements must be met for a charitable organization to obtain 501(c)(3) status. These include the organization being organized as a corporation, trust, or unincorporated association. The organization's organizing document (such as the articles of incorporation, trust documents, or articles of association) must limit its purposes to being charitable and permanently dedicate its assets to charitable purposes. The organization must refrain from undertaking a number of other activities, such as participating in the political campaigns of candidates for local, state, or federal office. Additionally, the organization must ensure that its earnings do not benefit any individual.[58] Most tax-exempt organizations are required to file annual financial reports (IRS Form 990) at the state and federal level. A tax-exempt organization's Form 990 and some other forms are required to be made available for public scrutiny.
The types of charitable organizations that the IRS considers to be organized for the public benefit include those organized for:
Relief of the poor, the distressed, or the underprivileged
Advancement of religion
Advancement of education or science
Construction or maintenance of public buildings, monuments, or works
Lessening the burdens of government
Lessening neighborhood tensions
Elimination of prejudice and discrimination
Defense of human and civil rights secured by law
Combating community deterioration and juvenile delinquency.[58]
A number of other organizations may also qualify for exempt status, including those organized for religious, scientific, literary, and educational purposes, as well as those for testing for public safety and for fostering national or international amateur sports competition, and for the prevention of cruelty to children or animals.
Criticism
The charity has received criticism. These criticisms include:
Charity only addresses the symptoms of a problem instead of the causes.
Charity is a worse substitute for change that does not fix the fundamental injustices in societal structures and values.
Charity does not provide the best solutions to societal problems.
Charity results in less state funding for essential services because it replaces state services with external institutions at a lower cost.
Charity leads to favoritism instead of fairness.
Tax incentives for donating to charity result in the worsening of social inequalities by reducing state revenue available for social projects and retaining class systems within society.
Inefficient charitable giving, largely due to the splintering of funds that could be better used if pooled together.
Charities misusing their funds.
Charities are more accountable to donors and funders than to the recipients of the charity.
Through eligibility requirements such as sobriety, piety, curfews, participation in job training or parenting courses, cooperation with the police, or identifying the paternity of children, charity models enforce the concept that only those who can prove their moral worth deserve help, motivating citizens to accept exploitative wages or conditions to avoid being subject to the charitable system.
Charity makes rich people and corporations look generous and upholds and legitimizes systems that concentrate wealth.
Charity is increasingly privatized and contracted out to the massive nonprofit sector, where organizations compete for grants to address social problems. Donors can protect their money from taxation by storing it in foundations that fund their pet projects, most of which have nothing to do with poor people.[66]
Economist Robert Reich criticized the practice of billionaires giving some of their money to charity, calling it mostly "self-serving rubbish".[67] Mathew Snow of American socialist magazine Jacobin criticized charity for "creating an individualized 'culture of giving'" instead of "challenging capitalism's institutionalized taking."[68]
Charity fraud is the act of using deception to obtain money from people who believe they are donating to a charity. Often, individuals or groups will present false information claiming to be a charity or associated with one, and then ask potential donors for contributions to this non-existent charity. Charity fraud encompasses not only fictitious charities but also deceptive business practices. These deceitful acts by businesses may involve accepting donations without using the funds for their intended purposes or soliciting funds under false pretenses of need.
In law, a trust refers to a relationship in which the owner of property gives it to a designated entity, usually described as a trustee. The trustee has a duty to safeguard and use the assets of the trust solely for the benefit of another person or group of persons until distribution, pursuant to the provisions of the trust. In the English common law tradition, the party who entrusts the property is known as the "settlor", the party to whom the property is entrusted is known as the "trustee", the party for whose benefit the property is entrusted is known as the "beneficiary", and the entrusted property itself is known as the "corpus" or "trust property". A testamentary trust is an irrevocable trust that is established and funded pursuant to the terms of a deceased person's will. An inter vivos trust is a trust created during the settlor's lifetime.
A nonprofit organization (NPO) or non-profit organization, also known as a non-business entity, or nonprofit institution, and often referred to simply as a non-profit, is a legal entity organized and operated for a collective, public or social benefit, as opposed to an entity that operates as a business aiming to generate a profit for its owners. A nonprofit is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. An array of organizations are nonprofit, including some political organizations, schools, business associations, churches, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without having tax-exempt status.
A charitable trust is an irrevocable trust established for charitable purposes. In some jurisdictions, it is a more specific term than "charitable organization". A charitable trust enjoys varying degrees of tax benefits in most countries and also generates goodwill. Some important terminology in charitable trusts includes the term "corpus", referring to the assets with which the trust is funded, and the term "donor," which is the person donating assets to a charity.
The Charity Commission for England and Wales is a non-ministerial department of His Majesty's Government that regulates registered charities in England and Wales and maintains the Central Register of Charities. Its counterparts in Scotland and Northern Ireland are the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland.
A foundation is a type of nonprofit organization or charitable trust that usually provides funding and support to other charitable organizations through grants, while also potentially participating directly in charitable activities. Foundations encompass public charitable foundations, like community foundations, and private foundations, which are often endowed by an individual or family. Nevertheless, the term "foundation" might also be adopted by organizations not primarily engaged in public grantmaking.
Tax exemption is the reduction or removal of a liability to make a compulsory payment that would otherwise be imposed by a ruling power upon persons, property, income, or transactions. Tax-exempt status may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and income taxes, veterans, and certain cross-border or multi-jurisdictional scenarios.
United States non-profit laws relate to taxation, the special problems of an organization which does not have profit as its primary motivation, and prevention of charitable fraud. Some non-profit organizations can broadly be described as "charities" — like the American Red Cross. Some are strictly for the private benefit of the members — like country clubs, or condominium associations. Others fall somewhere in between — like labor unions, chambers of commerce, or cooperative electric companies. Each presents unique legal issues.
A 501(c) organization is a nonprofit organization in the federal law of the United States according to Internal Revenue Code and is one of over 29 types of nonprofit organizations exempt from some federal income taxes. Sections 503 through 505 set out the requirements for obtaining such exemptions. Many states refer to Section 501(c) for definitions of organizations exempt from state taxation as well. 501(c) organizations can receive unlimited contributions from individuals, corporations, and unions.
A community interest company is a form of social enterprise in the United Kingdom intended "for people wishing to establish businesses which trade with a social purpose..., or to carry on other activities for the benefit of the community".
Laws regulating nonprofit organizations, nonprofit corporations, non-governmental organizations, and voluntary associations vary in different jurisdictions. They all play a critical role in addressing social, economic, and environmental issues. These organizations operate under specific legal frameworks that are regulated by the respective jurisdictions in which they operate.
A 501(c)(3) organization is a United States corporation, trust, unincorporated association or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations in the US.
The Charities Act 2006 is an Act of the Parliament of the United Kingdom intended to alter the regulatory framework in which charities operate, partly by amending the Charities Act 1993. The Act was mostly superseded by the Charities Act 2011, which consolidates charity law in the UK.
A private foundation is a tax-exempt organization that does not rely on broad public support and generally claims to serve humanitarian purposes.
A foundation in the United States is a type of charitable organization. However, the Internal Revenue Code distinguishes between private foundations and public charities. Private foundations have more restrictions and fewer tax benefits than public charities like community foundations.
The Charity Commission for Northern Ireland is the independent regulator of Northern Ireland charities. It was established in 2009 under the Charities Act (NI) 2008.
A charitable organization in Canada is regulated under the Canadian Income Tax Act through the Charities Directorate of the Canada Revenue Agency (CRA).
Charitable trusts in English law are a form of express trust dedicated to charitable goals. There are various advantages to charitable trust status, including exemption from most forms of tax and freedom for the trustees not found in other types of English trusts. To be a valid charitable trust, the organization must demonstrate both a charitable purpose and a public benefit. Applicable charitable purposes are normally divided into categories for public benefit, including the relief of poverty, the promotion of education, the advancement of health and saving of lives, the promotion of religion, and all other types of trusts recognized by the law. There is also a requirement that the trust's purposes benefit the public, and not simply a group of private individuals.
Form 1023 is a United States IRS tax form, also known as the Application for Recognition of Exemption Under 501(c)(3) of the Internal Revenue Code. It is filed by nonprofits to get exemption status. On January 31, 2020, the IRS abandoned the paper format of the form 1023. Those who used the paper version were given 90 days grace period and that ended on April 30, 2020. Going forward, every application has to be filed online through Pay.gov portal.
Charities Directorate of Canada is part of the Federal Ministry of National Revenue, and is responsible for reviewing the applications for charity registration, as well as auditing and maintaining accountability through education and responsible enforcement. They work to count and monitor the registered charities operating in Canada in the fairest way possible. As of December 2014, there were 86,193 charities registered in the directorate. The Directorate is located in Ottawa, in the Canadian Revenue Agency offices.
The Charities Regulator is the operational name of the Charities Regulatory Authority, the statutory authority responsible for the regulation of charities in Ireland. The organisation is made up of a board, with four sub-committees, and as of 2019, a staff of 38, including a chief executive.
References
1 2 3 Reiling, Herman T. (1958). "Federal Taxation: What Is a Charitable Organization?". American Bar Association Journal. 44 (6): 525–598. JSTOR25720402.
↑ Tilcsik, A.; Marquis, C. (2013). "Punctuated Generosity: How Mega-events and Natural Disasters Affect Corporate Philanthropy in U.S. Communities". Administrative Science Quarterly. 58 (1): 111–148. doi:10.1177/0001839213475800. S2CID18481039. SSRN2028982.
↑ Jonathan Garton (2013), Public Benefit in Charity Law, OUP Oxford.
↑ Note, for example, Acts 2:44–45: "And all that believed were together, and had all things in common; And sold their possessions and goods, and parted them to all men, as every man had need." Zakāt (charity) ranks as one of the Five Pillars of Islam.
↑ "Associational Charities". Through the middle decades of the eighteenth century, a slew of new-style charities were created. They were directed at specific social problems (foundling children, prostitutes, venereal disease), funded by subscription, dependent on public support, and organized as associations of the living.
↑ "Captain Coram and the Foundling Hospital". The result was the first children's charity in the country and one that 'set the pattern for incorporated associational charities' in general (McClure 248).
↑ N. A. M. Rodger, The Command of the Ocean: A Naval History of Britain 1649–1815 (New York: W.W. Norton & Company, 2004), 313.
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