How a 501(c)(3) may Jeopardize its Tax-Exempt Status

An approved 501(c)(3) tax-exempt nonprofit organization may undoubtedly lose its tax-exempt status if it stops operating for any of the exempt purposes outlined in section 501(c)(3) of the Internal Revenue Code. In addition, a 501(c)(3) organization must restrict itself from participating either directly or indirectly in political campaigns of candidates for local, state, or federal office. The organization must restrict its lobbying activities to an insubstantial part of its total activities. Earnings must not inure to the benefit of any private shareholder or individual. It must not operate for the primary purpose of conducting a trade or business unrelated to its exempt purpose. The organization may not provide commercial type insurance as a substantial part of its activities. It may not have purposes or activities that are illegal or violate fundamental public policy. In addition, it must comply with annual filing requirements, including filing Form 990-EZ, 990-N, or Form 990 annually. A tax-exempt organization that does not file a required annual return or notice for three consecutive years automatically loses its tax-exempt status.