- A state nonprofit corporation may be exempt from that state’s income tax or sales tax – if properly registered; however, it is not exempt from federal income tax, and donations to it are not deductible on the donor’s federal income tax return.
- All 501(c)(3) organizations are state nonprofit corporations or trusts, but not all are recognized as exempt from federal income taxes unless approved by IRS based on an application for income tax exemption submitted to and approved by the IRS.
- If approved, IRS issues a favorable Determination Letter as evidence that a nonprofit has been approved as a 501(c)(3) organization.
- Contributions to most Section 501(c)(3) organizations are deductible on the donor’s federal income return if that characteristic is included in the organization’s Determination Letter.
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