What does charity mean?

Charities in the United States must be organized and operated solely for charitable purposes. For organizations seeking a Determination of Equivalence (ED) through NGOsource, it is important to understand the breadth and nuances of the term "charitable" as defined under U.S. law. The term often has different meanings in different countries. For example, in some countries, the term "charitable" does not include activities that generate income, or is limited only to activities that benefit the poor or needy. Under American law, however, the term is much broader, as we will explain in this post. We will also address some frequently asked questions on this topic.

Legal definition

U.S. regulations define "charitable" as follows:


• Helping the poor and needy or disadvantaged
• Promoting religion
• Promoting education or science
• Erecting or maintaining public buildings, monuments or structures
• Reducing government burdens
• Promoting the public good through organizations pursuing any of the above purposes


or


o Reducing neighborhood tensions
o Eliminating prejudice and discrimination
o Defending legally enshrined human and civil rights
o Combating social decay and juvenile delinquency


Most activities are considered charitable under U.S. law if they fall into one or more of the above categories. Promoting education, for example, is a particularly common charitable purpose: it can include anything from operating a traditional school to an activity that provides educational content for the general public, such as promoting the arts, organizing lectures or promoting cultural exchange. The regulations explain this as follows:


The term education, as used in section 501(c)(3), refers to:


(a) the instruction or training of individuals for the purpose of improving or developing their abilities; or (b) the instruction of the public in subjects useful to the individual and beneficial to society. If an activity is educational in nature under this broad definition and is not otherwise commercially oriented, it can probably be classified as charitable. However, not all charitable activities need fit neatly into these categories:


The term "charitable" is used in section 501(c)(3) in its generally recognized legal meaning and therefore should not be construed as being limited by the separate enumeration in section 501(c)(3) of other exempt purposes that may fall within the broad concept of "charity" as developed in case law.

What are the requirements forcharity classification?

U.S. law also requires charities to demonstrate that they serve a group that is eligible to receive charitable assistance. To meet this requirement, a charity's activities must either benefit a sufficiently large portion of the population that society as a whole benefits, or they must benefit an identifiable, indeterminate group that needs assistance. The Internal Revenue Service ("IRS") puts it this way:

 

An eligible group is a group of people that can properly be assisted by a charity. A class of charities must be either so large6 that the potential beneficiaries cannot be individually identified, or so indeterminate that society as a whole, rather than just a preselected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all people living in a city, county, or state. This group of people is large, and the charitable support provided to them benefits the entire community.


IRS rulings have identified the following groups, among others, as eligible to receive charitable support when they receive certain types of assistance, such as housing, transportation, scholarships, and other forms of assistance:


• Low-income and poor individuals
• Students (regardless of financial status)
• Older people
• Terminally ill individuals
• Needy artists, musicians, composers, writers, and scientists who would otherwise be financially unable to realize their projects
• People with disabilities
• Rural and disadvantaged communities in developing countries
• Individuals accused of a crime who cannot post bail
• Victims of natural disasters (as opposed to victims of a single, named natural disaster)


The above list is not exhaustive. Importantly, although it is a prerequisite for charity in many other countries, “the elimination of poverty is not a condition for the provision of charitable benefits. If the benefit provided has a sufficiently widespread social value, then a charitable purpose is present.”

Can an activity that generates income be charitable?

Yes! An activity does not lose its charitable character simply because it is profitable or generates income; it is the nature of the activity and the beneficiary of that activity that determine its character. For example, a museum, a university or a zoo can earn a lot of money from their programs and still be charitable.

Is an activity charitable if all the income is used tosupport charitable programs?

No, not necessarily. The income-generating activity itself must be charitable.
Therefore, a company that distributes 100 percent of its profits to
charities or charitable programs is not charitable itself solely
by virtue of those distributions.

Other examples of charity

The IRS has recognized that "the concept of charity is still evolving." Based on tax court rulings and past decisions, the IRS has identified a variety of purposes and activities that it considers to be charitable, consistent with the broad definitions originally published. The following non-exhaustive list provides some examples to illustrate the many opportunities for charitable giving, even if they do not exactly meet the statutory definition.

 

• Promoting health
• Preserving and protecting the environment
• Operating a public library
• Promoting and developing the arts
• Maintaining and improving public recreation facilities
• Assisting in the performance of legitimate government functions
• Public interest law firms offering free or low-cost legal aidDefinition of Charity
• Providing services at significantly below cost to other charitable organizations
• Promoting the products of disadvantaged artisans in developing countries
• Marketing of cooking and handicrafts made by needy women
• Providing vocational and industrial training to the unemployed and underemployed
• Preserving or promoting historical or architectural sites
• Library computer networks providing bibliographic information to other libraries
• Promoting student and cultural exchanges
• Developing and promoting a sport for children
• Non-profit adoption agency
• Counseling and assistance for widows, counseling for women with unwanted pregnancies, marriage counseling, career counseling, counseling for immigrants and family planning counseling for Men seeking sterilization
• Promoting civic spirit
• Providing public transportation to remote, previously unserved areas
• Nonprofit regional health data systems (promoting improvements in health care and facilities)
• Noncommercial television and radio programs for education and culture
• Providing interest-free loans for home repair to low-income homeowners in neglected neighborhoods
• Promoting the art of film through film festivals
• Operating a free computerized retrieval system to facilitate organ transplantation after the death of a donor
• Educating the public about accurate and fair news reporting
• Operating a volunteer fire department that provides fire protection, medical, and rescue services to a community
• Covering the cost of castration for insolvent pet owners (through an overbreeding prevention program)
• Promoting appreciation of theatrical and musical arts in a community by supporting professional performancesDefinition of Charity Residential facility and therapeutic group program for persons recently released from a mental institution
• Certain volunteer-run, donation-based thrift stores operated to raise funds for other charities
• Providing food and beverages to firefighters, police officers, and other emergency responders at the scene of major disasters
• Operating a clinic for victims of mind-altering drugs
• Promoting the integration of persons of other ethnic backgrounds in housing
• Assisting the National Park Service in improving its educational and scientific programs
• Rehabilitation of former prisoners and parolees

 

This list is far from exhaustive, and in particular, the actual performance of an activity may alter the character of the charity. For example, an educational activity (such as training or counseling) conducted on a commercial basis is generally not considered charitable.


The above list is intended to simply indicate the range of charitable activities and the way in which the meaning of the term "charitable" has evolved over the years. As a federal court stated in 1974, "a rigid interpretation [of the meaning of "charitable"] fails to recognize the changing economic, social, and technological principles and values of contemporary society." As the number and variety of organizations from around the world currently certified in the NGOsource repository demonstrates, there is more than one way to be charitable, and there are many ways to make the world a better place.

Google Maps content is not displayed due to your current cookie settings. Click on the cookie policy (functional) to agree to the Google Maps cookie policy and view the content. You can find out more about this in the Google Maps privacy policy.


MY WEBSITES