The records of Internal Revenue Service show that over twelve-thousand exempt organizations are listed as having the major purpose of fund raising. These organizations tagged as 501 (c) (3) organizations, are proper recipients of charitable contributions, and have had tens of thousands additional organizations being created engaging in fund raising programs to different degrees. 501 (c) (3) fund raising organizations devote their reputations, time, and energies to group fund raising projects.
Some of the most popular fund raising projects that 501 (c) (3) fund raising organizations undertake are athletic, entertainment, social or gambling events such as benefit concerts, charity balls, theater and movie premiers, antique shows, horse shows, flea markets, football games, bingo, cocktail parties, celebrity athletic events, and many more, that are attractive ways of raising funds. Some 501 (c) (3) fund raising organizations have even been holding lotteries with houses as prizes.
A fund raising event of enormity may not be just a collective, legally unorganized effort by community groups or organizations, since the effort is subject to individual liability in contract, tort law, and insurance, the collective effort may want incorporation under the appropriate state not-for-profit corporation laws.
The not-for-profit incorporated yearly fund raising event organization has legitimate reasons for applying recognition of exemption under the federal income tax laws. IRC 501 (c) (3) recognition, often encourage the public to attend the event and contribute to the fund raising efforts of 501 (c) (3) fund raising organizations.
In addition, IRC 501 (c) (3) exemption, has the major effect of freeing the organization from the charitable deductibility limit. Although the limit has been raised to ten percent of the taxable income in the Economic Recovery Act of 1981, this limit is not prevailed over by alleging an independent agency for the benefit of charitable theory.
The IRC 501 (c) (3) exemption in any given case, is bound by its organizational and operational tests. This has often avoided the problem of “destination income” with 501 (c) (3) fund raising organizations, by distinguishing annual fund raising for charity as an activity theoretically separate from “trade or business”. In the past years, deliberation on possible exemptions under IRC 501 (c) (3) for annual event fund raiser exemption has been granted to typical fund raisers if there has been a sufficient turnover of funds to charity, however this approach has resulted to inconsistency and confusion.
Today, all varieties of fund raisers have been subject to a lot of public criticism, with charitable fund raisers not being excepted. A lot of exposure of certain organizations have been published and been alleged of gross misinterpretations, waste, lack of significant charitable accomplishments, and private kick backs. Both the Filer Commission and the Department of Treasury have suggested that some federal regulatory control be performed to keep an eye on fund raising activities.