Federal Tax Exemptions for Special District Libraries

Submission Date:


I work at a special district public library, and we are not currently a 501(c)(3). Everyone I've asked from co-workers to administration to board members says no, we aren't eligible, but no one can answer *why* we wouldn't be eligible. First, we pretty explicitly meet the exempt purposes set forth in section 501(c)(3). Also, I have worked at different types of public libraries that have been 501(c)(3)'s. Based on my reading of the IRS's eligibility requirements and state education law, the important part as far as the IRS is concerned is the structure and authority of an organization's charter. The Board of Regents is responsible for chartering public libraries in the state, so why should it matter what type of library results from the charter? However, IANAL, so I may be misunderstanding or missing something important. That's where you come in!


In Greek mythology, the "chimera" is an intact, functioning animal boasting the features of other animals: the head of a lion, the body of a goat, and the tail of a serpent (or a dragon, depending on your source).

Libraries are legal chimeras.

In fact, not only are libraries legal chimeras, but depending on the "type" of library, they are each their own, special type of chimera.

For instance, a village public library/chimera would have: the head of a village, the body of a not-for-profit corporation with municipal fur, and the tail of an education corporation as chartered by the Regents.  An association public library, on the other hand, would have: the head of group of local library-loving people, a furless not-for-profit body...and more options for the shape of the tail.

Why all this chimera imagery?  Once we take the member's question out of the cold, harsh light of logic and throw it into the dappled sunlight of myth, it is easier to unpack the confusion underlying their question.[1]

Following our "hybrid mythical animal" analogy, a special district library has: the head of a three-headed dog[2], and, if the authorities determine that it has the power to tax, the tail of a scorpion, which could render it unable to be regarded as a 501(c)(3).

This "power to tax" part is at the heart of the question.

As set out on page 10 of the "2018 Library Trustee Handbook" posted at https://www.nysl.nysed.gov/libdev/trustees/handbook/handbook.pdf, the mythical creature that is a non-association public library (of any kind) can choose to register as a 501(c)(3):

"Public libraries (municipal, school district and special legislative district) are, by definition, a government entity under IRS code, and therefore tax exempt and not 501(c) (3) corporations. However, public libraries may receive a confirmation of tax exempt status from the Internal Revenue Service to use with grant makers and businesses."

But if a special district created by legislation has a scorpion's tail and can levy a tax, they might not even qualify for the "confirmation."

Why is that?  I'll let the IRS (mostly) do the talking[3]:

Examples of entities that may be considered "separately organized" [and thus able to qualify as a 501(c)(3)] include colleges and universities; hospital, housing, or development authorities; public library boards; water or park districts; public school athletic associations; charitable trusts; and organizations created by inter-governmental agreement.


Under Rev. Rul. 60-384, a government entity will not qualify for exemption if it has powers beyond the scope of section 501(c)(3). For example, where an instrumentality exercises substantial enforcement or regulatory powers in the public interest (such as health, welfare, or safety regulation), it will not qualify.

...[for example...]

Example (3): W is a public library board organized under a state statute authorizing it to determine the tax rate needed to support its operations within specific maximum and minimum rates. W does not impose or levy taxes, but submits the tax rate to the county auditor who certifies it to the county adjustment board. The library tax is collected in the same manner as other taxes by the county treasurer, who transmits to the library board its share of tax revenues. Since W does not itself have the power to levy taxes, but only to determine tax rates, it does not have a prohibited governmental power and may qualify for exemption under section 501(c)(3). Rev. Rul. 74-15, 1974-1 C.B. 126. [emphasis added]

On the flip side, the guidance quoted above confirms that once a "special district" has a substantial government power (like taxation), it does not qualify for exemption as a 501(c)(3).

Now, here's where I go out on a limb: most[4] special district libraries do not have the power to tax directly.  That said, there certainly are "districts" in New York that have the power to sting--I mean, to tax--or other powers the IRS has determined disqualifies the entity from qualifying as a 501(c)(3), so a library should assess this issue before deciding what it qualifies for.[5] But generally,[6] special district public libraries rely on municipalities and school districts (and perhaps other taxing authorities) to collect their annual levy...and per IRS guidance, that means they can qualify as a 501(c)(3), just like the Handbook says.

What is the magical formula by which a library can assess what type of chimera it is for tax purposes?  As of this writing[7], the IRS posts that at:


And since this ATL is all about the IRS, we'll give them the last word (taken from the link above):

As a special service to government entities, IRS will issue a “governmental information letter” free of charge. This letter describes government entity exemption from Federal income tax and cites applicable Internal Revenue Code sections pertaining to deductible contributions and income exclusion.  Most organizations and individuals will accept the governmental information letter as the substantiation they need.  

Government entities can request a governmental information letter by calling 877-829-5500.

So, you can call Charon[8]--uh, the IRS--and ask them to ferry you across into 501(c)(3)land, for free. 

Good luck crossing over the Styx...I mean, conferring with the IRS on your tax-exempt status!


[1] I am not saying the member is confused.  In fact, the question shows they are quite lucid; it's the legal picture that is muddy.

[2] Since it is usually comprised of a combination of other districts and/or municipalities.

[3] The full document is here: https://www.irs.gov/pub/irs-tege/eotopice90.pdf.  If you think I am off the rails with this "chimera" stuff, wait until you see how they distinguish an "entity" from an "instrumentality"!

[4] All?? I want to say all.  But I have learned to avoid absolutes in libraryworld.

[5] The IRS guidance cited states "There are three generally acknowledged sovereign powers: the power to tax, the power of eminent domain, and the police power. An entity is a "political subdivision" only if it has a substantial sovereign power. It need not have all three sovereign powers, but possessing only an insubstantial amount of any or all of the sovereign powers is insufficient."

[6] And by generally, I mean, "insofar as I know" because if there is one thing I have learned about libraries, it is to NEVER assume an absolute.

[7] July 6, 2022.

[8] Why yes...I have been re-reading "D'Aulaire's Book of Greek Myths" with my 8-year-old.


501c3, IRS, Taxes