501(c)(3) status is an IRS recognized status for a religious, charitable, educational, or scientific organizations. As a recognized 501(c)(3), such an organization is exempt from the payment of federal income tax. State agencies and institutions are also exempt from federal income taxation pursuant to Section 115 of the Internal Revenue Code (IRC). Where 501(c)(3) status focuses on the organization’s status, Section 115 exempt status focuses on the income derived from an entity’s activities. The respective status of an organization is not mutually exclusive – specifically, a state university is a Sec. 115 entity and can also apply for and secure recognized 501(c)(3) status – though there is generally no reason to do so. UNCW does not have a 501(c)(3) recognition letter from the IRS.
For Purpose of Federal and State Taxes. While there is an argument that “The University of North Carolina” is an IRS recognized 501(c)(3) organization and UNCW is included in that recognition by extension as a constituent institution of the System, the more accurate analysis for UNCW’s federal tax-exempt status and the authority to remain exempt from the payment of federal income tax is as an IRC Sec. 115(1) entity. The UNC System possesses a July 1929 ‘award’ of federal tax-exempt status under Sec. 103(6) of the former Revenue Act of 1928 – that section was later carried forward as Sec. 501(c)(3) of the current Code. UNCW is exempt from North Carolina state income and property taxes pursuant to State General Statutes, not by virtue of its federal 115 status.
For Purpose of Charitable Gift Credit. Conversely, if donors wish to know if their gifts, bequests, or contributions are tax-deductible charitable contributions – all gifts to UNCW, as a 115(1) entity, are tax-deductible pursuant to Section 170 of the Internal Revenue Code. Similarly, charitable gifts to the Foundation (a 501(c)(3) organization) are also tax-deductible pursuant to Section 170 of the IRC.
