I am part of a team that is developing web-based organizing tools for activists, the nonprofit community, and civil society in general. Initially we thought we would pursue 501(c)(3) status, but unfortunately, being recognized as a public charity might not be possible as we have chosen, for various reasons, to pursue advertising revenue as our primary source of income. We have a clear vision, mission, and ideal human resources structure, but are not clear about the legal structure that will enable these plans most effectively. Can you suggest resources for a (high tech) social enterprise that is currently exploring various nonprofit AND for profit-business structures?—Isaac Holeman, soon-to-be CEO, and undergraduate at Lewis & Clark College's Biochemistry Department, Portland, Ore.
Questions about pursuing 501(c)(3) status are best answered by an attorney or CPA licensed to practice in the state where your organization is located. I'm not an attorney or CPA, so I can't give an authoritative answer to your question, but I can tell you that many nonprofit organizations with 501(c)(3) status obtain revenue from business-like ventures that support their public-benefit objectives. Ticket sales revenue received by a community theater group or tuition revenue received by a college are typical examples. So your plans for advertising revenue as your primary source of income are not out of the question, but you need to talk to an attorney or CPA who works with nonprofit organizations to learn the specific IRS requirements. If you are affiliated with Lewis & Clark College, talking with someone in the office of the college's attorney or CPA might be a good place to start.
The IRS code section 501(c)(3) offers tax-exempt status to organizations based on their "purpose" and other considerations, rather than their primary source of income. Here is a summary of tax-exempt purposes from the from the IRS website:
"The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency."
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