From the very beginning of our nation, people joined voluntary organizations to aid their less fortunate neighbors. Early communities had volunteer fire and militia groups, women’s societies and church aid societies to make life more tolerable for all. Later came trusts and foundations provided by the wealthy who saw the common relief as their duty. It would be many years before government got involved with legal descriptions like 501(c).
Philanthropy before the Revolutionary War was largely a local affair. Public hospitals, local police and schools were often charitable organizations. After the Revolution, charity groups became more institutionalized with philanthropic and women’s societies playing leading roles. The women were deemed vital—prevailing sentiment was that they could “soften men’s obdurate hearts” and get them to donate money.
By the end of the 19th century, large-scale organized philanthropy became the legacy of the wealthiest Americans—the industrialists and financial leaders. Andrew Carnegie proposed a doctrine of stewardship to induce his fellow millionaires to philanthropy. Trusts and foundations were established, and many of these later became the 501(c)s we know today.
The early part of the 20th century saw many changes in how the government deals with business and nonprofit organizations. From 1913 to 1918 the Congress passed laws regulating taxes and establishing tax-exempt status for philanthropic organizations. In the Revenue Act of 1918, tax deductions for charitable bequests were established. This was important as it gave incentive to the wealthy to donate to charity.
The Revenue Act of 1954 established the tax codes as we know them today. Section 501(c) of the Internal Revenue Code stated that in order to enjoy tax-exempt status a nonprofit institution must be organized and operated purely for nonprofit reasons with none of its earnings going to any member of the organization. The law under Section 170 provided for tax-deductible contributions to a 501(c) organization.
Since the Revenue Act of 1943, all nonprofit organizations must file a Form 990 declaring their earnings and disbursements. All 501(c)(3) organizations must report sources of income and all assets and liabilities. The code was revised later requiring all 501(c)(3) tax-exempt organizations make their Form 990 data available to the public. 501(c)(3) refers to the section and subsections of this part of the Internal Revenue Code.