You have recently discovered that a local business has been designated 501(c)(3). Which of the following must be true?(1 point)

Question

Responses

The business does not earn profits.
The business does not earn profits.

The business is a public charity.
The business is a public charity.

The business is a private foundation.
The business is a private foundation.

The business has federal tax exemptions.

Answer 1

The correct statement is:

The business has federal tax exemptions.

A 501(c)(3) designation means that the organization is recognized as a nonprofit entity that is exempt from federal income tax and can receive tax-deductible charitable contributions. The other statements may not necessarily be true. For example, a 501(c)(3) organization can earn profits, but those profits must be used to further its charitable purposes. Additionally, a 501(c)(3) can be either a public charity or a private foundation, depending on how it is funded and operated.