Different Types of Nonprofit Organizations

By A.L. Kennedy

In the United States, federal tax-exempt status is available for many different types of nonprofit organizations. The types of nonprofit organizations recognized by federal law are listed in section 501(c) of the tax code. While most U.S. nonprofits fall under subsection 501(c)(3), there are several different classifications for various types of nonprofit organizations.

In the United States, federal tax-exempt status is available for many different types of nonprofit organizations. The types of nonprofit organizations recognized by federal law are listed in section 501(c) of the tax code. While most U.S. nonprofits fall under subsection 501(c)(3), there are several different classifications for various types of nonprofit organizations.

Private and Public Charities

By far the largest group of nonprofit organizations in the United States are those organized under section 501(c)(3) of the tax code. This section applies to "religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international amateur sports competition, or prevention of cruelty to children or animals organizations," according to the Internal Revenue Service. These organizations are further subdivided by whether they are run by private individuals or by a public, government organization. Organizations that fall under section 501(c)(4) of the tax code may have similar purposes, but are allowed to participate in political lobbying in ways that 501(c)(3) organizations are not.

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Nonprofits Created by Government Act

Section 501(c)(1) of the tax code applies to nonprofit organizations "created by act of Congress." A well-known example is federally-chartered credit unions, which are authorized by Congress, but act as independent nonprofit organizations that focus on providing services to members rather than paying shareholders. Credit unions chartered by states are covered in section 501(c)(14). State-sponsored workers' compensation associations fall under section 501(c)(27).

Beneficiary Societies and Organizations

Many types of groups, including teachers, veterans, and government workers create associations that allow group members to participate in retirement or insurance plans, or to purchase legal services at discounted rates. These associations are often nonprofit organizations organized under one of several different subsections of section 501(c), depending on what sort of group is involved. For instance, teachers' retirement fund associations fall under subsection 501(c)(11), while organizations for veterans typically fall under subsection 501(c)(19).

Cooperatives

Some types of cooperatives, or co-ops, fall under sections of the tax code other than section 501(c). For instance, cooperative hospital service organizations are granted tax-exempt status under section 501(e) of the tax code. Cooperative educational or service organizations are governed by section 501(f), while cooperative farm associations are covered in section 521(a).

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What Is a 501C Non Profit?

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The Difference Between Non-Profit Corporations & For-Profit Corporations

Not all corporations are created equal. For-profit corporations include large publicly traded corporations, such as Microsoft, and tiny entities, such as mom-and-pop stores, which are rarely publicly traded. On the other hand, non-profits include super-PACs, charities, churches, and professional organizations. Both state and federal laws make sharp distinctions between the two, as there are important organizational differences and tax implications.

501(c)(3) Types

Federal taxes are a significant expense for many businesses, but not for exempt non-profits. Non-profit charities that are organized under Internal Revenue Code Section 501(c)(3) are generally tax-exempt, and their donors usually get tax breaks for supporting them. The IRS divides these charities into two categories: public charities and private foundations.

Can a Non-Profit Also Have a For-Profit Division?

Many nonprofit organizations find it difficult to generate sufficient funding to maintain their operations. Especially with the ongoing challenges associated with the global financial crisis, generating revenue is a constant struggle. One strategy nonprofit agencies may employ to generate additional income is through one or more for-profit ventures associated with the nonprofit organization. While this arrangement is possible, both the law and federal tax code place limits on how nonprofit organizations are allowed to coordinate with for-profit enterprises.

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