How are tax-exempt organizations defined under the IRS code?

Tax-exempt organizations are defined under the IRS code primarily as organizations that are exempt from federal income tax under Internal Revenue Code (IRC) Section 501(c). This section outlines various types of organizations that qualify for tax-exempt status, which includes charitable organizations, educational institutions, and certain social welfare organizations, among others.

Organizations that are classified under IRC Section 501(c) must meet specific requirements to maintain their exempt status, including operational activities that align with their stated charitable or public service purposes. The exemption from federal income tax allows these organizations to allocate more of their resources toward fulfilling their missions rather than paying income taxes.

The other statements are not accurate representations of how tax-exempt organizations are defined under the IRS code. For instance, merely providing free services does not necessarily qualify an organization for tax exemption, as there are specific operational and organizational criteria that must be met. Additionally, tax-exempt organizations can earn income, but that income must be related to their exempt purpose in order to maintain their status. The income threshold is also not a criterion for gaining tax-exempt status; rather, it is more about the nature of the organization's activities and compliance with IRS guidelines.