It sounds like your problems are more to do with IRS/US financial regulations than with Paypal. I doubt Paypal invented the concept of 501(c). Disclaimer: I don't live in the US so maybe I am not aware of some subtlety here.
On a more general note, it boggles the mind why anything like 501(c) would even exist in the first place. Sounds like unnecessary, out-of-control beauraucracy.
On a more general note, it boggles the mind why anything like 501(c) would even exist in the first place. Sounds like unnecessary, out-of-control beauraucracy.