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

The business has federal tax exemptions.
The business has federal tax exemptions.

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

The business does not earn profits.

Answer 1

If a local business has been designated as a 501(c)(3), the following must be true:

• The business has federal tax exemptions.

This is the correct statement because a 501(c)(3) designation specifically grants the organization tax-exempt status under federal law, meaning it does not have to pay federal income tax on its income related to its charitable purpose.

The other statements are not necessarily true:

• A 501(c)(3) can be a public charity or a private foundation, but this designation alone does not specify which it is.
• A 501(c)(3) can earn profits, but those profits must be used for charitable purposes and not distributed to owners or shareholders.