§508 Special rules with respect to section 501(c)(3) organizations

Summary

Organizations created after October 9, 1969 must tell the IRS when they apply for recognition as a 501(c)(3) charity. If they do not give that notice, or give it late, they are not treated as a 501(c)(3) for the time before the notice. Any group that is a 501(c)(3) (including ones that existed on October 9, 1969) must tell the IRS if it is not a private foundation, or it will be assumed to be a private foundation. Churches (and their integrated auxiliaries and church associations) and groups that normally get $5,000 or less a year are not covered by these notice rules. The IRS can also exempt certain educational organizations (those described in section 170(b)(1)(A)(ii)) and other classes of groups by rule. Gifts to an organization that has had the tax under section 507(c) imposed are not tax-deductible if the gift is made after the IRS notification under section 507(a), or if it is made by a substantial contributor in certain years tied to the actions that led to the tax; this rule does not apply if the unpaid tax is fully abated under section 507(g). Gifts are also not deductible to a private foundation or a section 4947 trust in any year they fail to meet the governing-instrument rules. A private foundation must have rules in its governing documents to require yearly distributions (to avoid tax under section 4942) and to forbid self-dealing, excess business holdings, disallowed investments, and taxable expenditures. For organizations formed before January 1, 1970, some temporary exceptions apply during and after certain court cases that began before January 1, 1972. A sponsoring organization must notify the IRS if it has or plans to have donor‑advised funds and explain how it will run them.