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For instance, a web service that public uses every day like Facebook or Stack Exchange, could it fall under a non-profit corporation with the 501c3 designation?

My understanding is that, these services for the public do not fall under the education or literary or public safety [abstract] qualifications.

But I saw this list while exploring ProPublica's reports for various non-profits https://nccs.urban.org/project/national-taxonomy-exempt-entities-ntee-codes#overview where several other categories exist.

However, I am unsure whether these auto-qualify for 501c3 designation.

These two caught my eye.

V. Human Services - I, J, K, L, M, N, O, P VII. Public, Societal Benefit - R, S, T, U, V, W

Web services like Facebook/StackExchange could fall under the above two categories, but I would appreciate your reasons to tell me I'm wrong. :)

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  • Why do you think web services offered to the public would inherently not count as educational?
    – cpast
    Commented Nov 20, 2023 at 13:43
  • Since getting the 501c3 status requires an additional step, I’m trying to figure out what reasons would one give to IRS to receive that status as a social network like Facebook/Stack overflow/Twitter. I agree that they can be educational, but what reasons would inform IRS to award them the special status? Commented Nov 21, 2023 at 16:53

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According to the IRS Website:

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

The statute itself, 26 U.S.C. 501(c)(3), states, that this particular exemption from taxation applies to (line breaks added for ease of reading):

Corporations, and any community chest, fund, or foundation,

organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals,

no part of the net earnings of which inures to the benefit of any private shareholder or individual,

no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

501(c)(3) organizations are special because donations to them are eligible for the charitable income tax deduction of Internal Revenue Code Section 170. In contrast, you cannot receive a charitable deduction for income tax purposes when you donate money or property to other kinds of organizations which are exempt from income taxation on their own income (mostly set forth in Section 501 of the Internal Revenue Code outside Section 501(c)(3)).

So, the answer depends upon the purpose of the organization. A non-profit software or web service entity could quality as a 501(c)(3) organization, if the entity has the right purpose, but doesn't automatically qualify for a 501(c)(3) organization, simply because it is a non-profit organization.

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  • Thank you! Yes, on the lines of “right purpose”, does the purpose of Facebook/Stackoverflow services qualify for 501c3 designation? I’m open to opinions since I don’t have IRS to guide me. :) Commented Oct 27, 2023 at 4:26
  • The purpose of Facebook is to make money by selling users' personal data. Any services offered are bait to get users to submit their personal data after clicking "I agree" under a lengthy contract they did not read. That does not preclude anyone else from forming a company with the purpose of running a social network in a way that does not turn a profit, e.g. because people want to have a social network and do not want their data sold, they agree to pay usage fees, which the company may use only for operational expenses. Commented Mar 19 at 7:48
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    @SimonRichter FWIW, FB makes money selling advertising space far more than selling personal data.
    – ohwilleke
    Commented Mar 19 at 14:20
  • Their advertising is based on personal data. Commented Mar 19 at 15:38

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