A nonprofit organization is an organization forms for the express purpose of serving the public where no part of its earnings go to benefit private shareholders or individuals. This is not to say that a nonprofit does not or should not make a profit. On the contrary, nonprofits should attempt to make a profit but then reinvest their net revenue into their programs, operations or capital expenditures. For this reason, many of us working in this sector prefer to refer to ourselves as not-for-profit as it more accurately reflects our business.
Description of 501(c)(3)s
The Internal Revenue Service has established a variety of categories for nonprofit organizations. Though all of these organizations are tax-exempt, only donations given to 501(c)(3)s can be written off taxable income. To be a 501(c)(3), an agency must fall into one of five categories:
- A house of worship, school or college, hospital or medical research organization or other enterprise that Congress has determined to be eligible for non-private foundation treatment due to the nature of its activities
- An organization whose base of support is diverse enough to satisfy one or two alternative mathematical tests of public support
- An organization that receives a substantial portion of its revenue from dues, admissions, sales, fees for services or other gross reciepts related to the organization’s exempt purpose
- An organization that is not publicly supported but is controlled and closely associate with another charity
- An organization that operates exclusively for testing for public safety.
Other Types of Nonprofits
- 501(c)(1)– Federal Credit Unions, as organized under acts of Congress
- 501(c)(2)–Title holding corporations for exempt organizations
- 501(c)(4)–Various political education organizations
- 501(c)(5)–Labor Unions and Agriculture
- 501(c)(6)–Business league and chamber of commerce organizations
- 501(c)(7)–Recreational club organizations
- 501(c)(8)–Fraternal beneficiary associations
- 501(c)(9)–Voluntary employee beneficiary associations
- 501(c)(10)–Fraternal lodge societies
- 501(c)(11)–Teachers’ retirement fund associations
- 501(c)(12)–Local benevolent life insurance associations, mutual irrigation and telephone companies and like orgs
- 501(c)(13)–Cemetery companies
- 501(c)(14)–Credit Unions
- 501(c)(15)–Mutual insurance companies
- 501(c)(16)–Corporations organized to finance crop operations
- 501(c)(17)–Employees associations
- 501(c)(18)–Employee-funded pension trusts created before June 25, 1959
- 501(c)(19)–Veterans’ organizations
- 501(c)(20)–Group legal services plan organizations
- 501(c)(21)–Black lung benefit trusts
- 501(c)(22)–Withdrawal liability payment fund
- 501(c)(23)–Veterans’ organizations created before 1880
- 501(c)(25)–Title-holding corporations for qualified exempt organizations
- 501(c)(26)–State-sponsored high-risk health coverage organizations
- 501(c)(27)–State-sponsored workers’ compensation reinsurance organizations
- 501(c)(28)–National railroad retirement investment trust