What is the Definition of a Non-profit?
A nonprofit organization is a type of organization that operates for a specific purpose, such as charitable, educational, scientific, religious, or literary purposes. Unlike for-profit organizations, nonprofits do not distribute profits to owners or shareholders, but instead reinvest any surplus funds back into their mission. Nonprofits may be formed as corporations, trusts, or associations, and they may be tax-exempt under certain conditions. They are governed by a board of directors and may rely on donations, grants, and other sources of funding to support their programs and services. The primary goal of a nonprofit organization is to serve its mission and make a positive impact on society rather than to generate profits.
What are the General Types of Non-profit Entities?
There are several types of nonprofit entities, each with their own characteristics and legal requirements. The general types of nonprofit entities include:
- Charitable organizations: These are organizations that exist for charitable purposes, such as providing relief to the poor, advancing education or religion, promoting health or science, or preventing cruelty to animals. Charitable organizations are often tax-exempt under section 501(c)(3) of the Internal Revenue Code.
- Educational organizations: These are organizations that exist for educational purposes, such as schools, colleges, universities, and research institutions. Educational organizations may be tax-exempt under section 501(c)(3) or under section 170(b)(1)(A)(ii) of the Internal Revenue Code.
- Religious organizations: These are organizations that exist for religious purposes, such as churches, synagogues, mosques, and temples. Religious organizations may be tax-exempt under section 501(c)(3) or may not need to apply for tax-exempt status if they meet certain requirements.
- Social welfare organizations: These are organizations that exist for the purpose of promoting social welfare, such as improving the community, advocating for public policies, or engaging in civic activities. Social welfare organizations may be tax-exempt under section 501(c)(4) of the Internal Revenue Code.
- Business leagues and trade associations: These are organizations that exist for the purpose of promoting business interests or trade associations. They may be tax-exempt under section 501(c)(6) of the Internal Revenue Code.
- Professional associations: These are organizations that exist for the purpose of promoting the interests of a specific profession, such as a bar association or medical society. They may be tax-exempt under section 501(c)(6) of the Internal Revenue Code.
- Civic organizations: These are organizations that exist for the purpose of engaging in civic or community activities, such as a local chamber of commerce or Rotary club. They may be tax-exempt under section 501(c)(4) of the Internal Revenue Code.
It’s important to note that the specific legal requirements and tax-exempt status of a nonprofit organization may vary depending on the type of entity and the specific activities it engages in.
What are the IRS Section Codes for Each Type of Non-profit Entity?
| Section of IRS Code | Organization Type | Activities Conducted |
|---|---|---|
| 501(c)(1) | Corporations Organized Under Act of Congress | Business leagues, chambers of commerce, real estate boards, boards of trade |
| 501(c)(2) | Title holding corporations for exempt organizations | Holding title to property used by exempt organizations |
| 501(c)(3) | Religious, educational, charitable, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals organizations | Charitable, religious, educational, scientific, literary, and testing for public safety activities |
| 501(c)(4) | Civic leagues, social welfare organizations, and local associations of employees | Promotion of social welfare, including lobbying for legislation |
| 501(c)(5) | Labor, agricultural, and horticultural organizations | Improvement of working conditions, efficiency of workers, and development of labor standards |
| 501(c)(6) | Business leagues, chambers of commerce, real estate boards, boards of trade | Promotion of common business interests |
| 501(c)(7) | Social and recreational clubs | Pleasure, recreation, and social activities for members |
| 501(c)(8) | Fraternal beneficiary societies and associations | Payment of life, sickness, accident, or other benefits to members |
| 501(c)(9) | Voluntary employees’ beneficiary associations | Payment of life, sickness, accident, or other benefits to members |
| 501(c)(10) | Domestic fraternal societies and associations | Lodge providing for payment of life, sick, accident, or other benefits to members |
| 501(c)(11) | Teachers’ retirement fund associations | Payment of retirement benefits to teachers |
| 501(c)(12) | Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations | Payment of life, sick, accident, or other benefits to members |
| 501(c)(13) | Cemetery companies | Operation and maintenance of cemetery |
| 501(c)(14) | State-chartered credit unions, mutual reserve funds | Promotion of thrift and savings among members |
| 501(c)(15) | Mutual insurance companies or associations | Providing insurance to members |
| 501(c)(16) | Cooperative organizations to finance crop operations | Providing credit for crop production |
| 501(c)(17) | Supplemental unemployment benefit trusts | Payment of benefits to members in case of unemployment |
| 501(c)(18) | Employee-funded pension trusts | Payment of pension benefits to employees |
| 501(c)(19) | Post or organization of past or present members of the Armed Forces | Promotion of social welfare of the community and support of veterans |
| 501(c)(20) | Group legal services plan organizations | Provision of legal services to members |
| 501(c)(21) | Black lung benefit trusts | Payment of benefits to miners suffering from black lung disease |
| 501(c)(22) | Withdrawal liability payment fund | Payment of withdrawal liability payment required by multi-employer pension plan |
| 501(c)(23) | Veterans organizations (created before 1880) | Assistance to needy veterans |
| 501(c)(24) | Section 4049 ERISA trusts | No longer used |
| 501(c)(25) | Title holding corporations or trusts with multiple parents | Holding title to property used by exempt organizations |
| 501(c)(26) | State-sponsored organization providing health coverage for providing health coverage to high-risk individuals | Provides health care coverage to high-risk individuals |
| 501(c)(27) | State-sponsored workers’ compensation reinsurance organization | Reimburse members for losses under workers’ compensation losses |
| 501(c)(28) | National Railroad Retirement Investment Trust | Provides independent investment management and asset allocation services for the Railroad Retirement Trust. |
| 501(c)(29) | Qualified Nonprofit Health Insurance Issuers | Provides health insurance coverage through state health insurance exchanges established under the Affordable Care Act. |
What is the Most Common Type of Non-profit Entity?
The most common type of nonprofit entity in the United States is the 501(c)(3) organization. These organizations are established for charitable, religious, educational, scientific, literary, or other purposes that benefit the public. They are tax-exempt under section 501(c)(3) of the Internal Revenue Code and are eligible to receive tax-deductible contributions from donors.
Examples of U.S. based 501(c)(3) organizations:
- American Red Cross: Provides emergency assistance, disaster relief, and education.
- Habitat for Humanity: Builds and repairs homes for low-income families.
- The Nature Conservancy: Protects land and water for people and nature.
- Feeding America: Distributes food to people facing hunger.
- St. Jude Children’s Research Hospital: Treats and researches childhood cancers and other life-threatening diseases.
- Boys & Girls Clubs of America: Provides after-school programs and activities for children and teens.
- Teach for America: Recruits and trains teachers to work in low-income communities.
- Doctors Without Borders: Provides medical aid in crisis situations around the world.
- Sierra Club: Advocates for environmental protection and conservation.
- Make-A-Wish Foundation: Grants wishes to children with life-threatening medical conditions.