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

Responses

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

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 is a public charity.

1 answer

The statement that must be true regarding a business designated as a 501(c)(3) is:

The business has federal tax exemptions.

501(c)(3) organizations are recognized as tax-exempt by the federal government, which means they do not have to pay federal income tax on the money they earn related to their exempt purposes.

The other statements are not necessarily true. A 501(c)(3) can earn profits, but those profits must be reinvested in the organization to further its charitable purposes. Additionally, a 501(c)(3) may be a private foundation or a public charity, but being one or the other is not guaranteed just by being classified as a 501(c)(3).