Veterans Giving Back to the Community: What Veterans Need to Know About 501(c) Organizations

A 501(c) organization is a nonprofit organization that is exempt from paying federal income taxes and sometimes state taxes by virtue of their 501(c) designation. Additionally, donations to 501 (c) organizations can be tax deductible for the donor.  All in all, there are 29 different types of 501(c), and you can find a summary list here. The one you’ll most likely have heard of is a 501(c)(3). These are the most common organizations that people donate or volunteer for. They are for private foundations or public charities. Each of the 29 different types has different rules for deductibility of donations, uses of funds, etc.  

If you are a veteran trying to start a nonprofit to support veterans, 501(c)(19) and 501(c)(23) are the types most applicable to you. The bible on this can be found here. The Internal Revenue Code section 7701(a)(15) defines “Armed Forces of the United States” as all regular and reserve components of the uniformed services which are subject to the jurisdiction of the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force, and such term also includes the Coast Guard.

The 501(c)(19) is for a “Post or Organization of Past or Present Members of the Armed Forces, with activities according to the nature of organization. To apply for 501 (c) (19) status, an applicant uses Form 1024 and annually files the 990 or 990EZ.”

Basically, in order to be a tax-exempt organization under 501(c)(19), you must be a post or organization of past or present members of the United States Armed Forces, an auxiliary unit or society of such post or organization, or a trust or foundation for such post or organization.  For donations to a Veterans Organization to be deductible, the membership of a 501 (c) 19 organization must be primarily “war” veterans- greater than 90% of the membership must be war veterans. More details can be found here. You may be surprised to know that the IRS considers all military service since August, 1991 to be during a time of war!

The 501(c)(23) is for a “Veterans Organization (created before 1880). Provides insurance and other benefits to veterans. No form to apply. Uses tax forms 990 or 990EZ.”

With a 501(c)(23), the organization had to have been organized before 1880, more than 75% of its members are past or present members of the U.S. Armed Forces, and its main purpose is to provide insurance and other kinds of benefits to veterans or their dependents. More details can be found here.

Generally, because 501 (c) organizations are designed not to be profitable, they do not have shareholders.  They are usually formed as “non-stock” corporations. This type of organization can be slightly more difficult to organize and manage because there no “owners” or shareholders to answer to.  

Other Options.  If you want to serve veterans but cannot meet the requirements of a 501 (c) (19) organization, you may consider starting a Beneficial Corporation or “B” Corp.  Thirty-three states have authorized the B Corporation, but each state’s statute is different.  Generally, a B Corp differs from a normal corporation in that it still has shareholders, but the overall mission of the organization is not to make profits for the shareholders but to make profits for a worthy cause, like, veteran support services or training service dogs for veterans.  As a B Corp, the company can designate a portion or all of its after-tax profits, employee services or products to be donated to such other causes that it might want to support. A B Corp pays taxes just like a regular corporation and donations to it are not deductible to the donor.

Contact the Wilson Law Group for Help

If you are a veteran that needs help starting a nonprofit organization, please do not hesitate to contact or call the Wilson Law Group at 804-864-5268 today! We have helped many startup entrepreneurs get started with their business, as well as helped more established businesses make the most out of their operations. Attorney Jim is especially dedicated to helping veterans start and run their own businesses because he was a veteran himself. He looks forward to contributing to the success of your next business venture. To schedule a free consultation, call 1-804-477-7243 today.

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Wilson Law Group

Jim Wilson is the founder and principal attorney of the Wilson Law Group. For the past 25 years he has been combining legal dexterity with an entrepreneurial mindset to help aspiring and established business owners start, finance, buy, sell, and run their companies.

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