Life Cycle of a Public Charity

Category: Business Law and Planning, Tax Law and Planning

Often a client approaches us to set up a charity. A public charity must benefit the public, that it, some objectively defined group of persons for a public purpose. Once formed, the charity must then apply for and receive recognition as a public charity - the most common are 501(c) charities, so called to refer to the Code section under which they are organized. For federal tax purposes, a person can only deduct contributions to an entity that has been recognized as a public charity by the IRS. Once formed and approved by the IRS, the public charity must comply with various reporting requirements. Of course, being a charity, the organization is also usually looking to minimize its legal and accounting expenses.

The IRS has taken some of the mystery out of forming and being a public charity through a section of its website called Life Cycle of a Public Charity.

"During its existence, a public charity has numerous interactions with the IRS - from filing an application for recognition of tax-exempt status, to filing the required annual information returns, to making changes in its mission and purpose. The IRS provides information, explanations, guides, forms and publications on all of these subjects - they are available through this IRS Web site. The illustration below provides an easy-to-use way of linking to the documents most charities will need as they proceed though the phases of their "life cycle."

There is also a one page a graphical depiction of the life cycle of the public charity, which includes functioning links back to various forms and publications.