Know the Tax Code: IRC § 501

The Internal Revenue Code contains the vast body of federal tax law. Certain code sections are ubiquitous and well-known based upon their frequency of use. Some of the more infamous tax provisions are Sections 61, 162, and 501. This blog will cover § 501 otherwise known as 26 U.S.C. § 501: Exemption from tax on corporations, certain trusts, etc. § 501 of the U.S. tax code outlines which types of nonprofit organizations are tax-exempt. § 501(a) states that certain organizations are exempt from some federal income taxes if they fall under §§ 501(c), 501(d), or § 401(a).

Can Your Non-Profit Foundation Pay $10,000 For Your Self-Portrait, Like Trump?

In September, one of Donald Trump’s advisers offered an explanation regarding a portrait of Trump which was placed on display at a Florida golf resort owned by Trump. The Donald purchased the painting at a charity auction for $10,000 in 2014. The painting was paid for with a check from the Donald J. Trump Foundation, the tax records of which show no personal donations from Trump since 2008.

What Is A 501(C)(6) Organization?

While I.R.C. § 501(c)(3) organizations must advance a charitable purpose such as religion, education or public assistance, I.R.C. § 501(c)(6) nonprofit associations typically help small businesses advance their industry or business community. To qualify for the tax exemption allowed under § 501(c)(6), a nonprofit’s entire earnings must be reinvested into the organization and may not benefit any individual member or shareholder.

The Tax Code provides that certain types of organizations qualify as § 501(c)(6) organizations, including business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.