Different Types of Nonprofit Organizations

By Stephanie Kurose, J.D.

Different Types of Nonprofit Organizations

By Stephanie Kurose, J.D.

There are more than a dozen different types, or classifications, of nonprofit organizations recognized by the federal government.

Computer with the words "NGO" displayed on the screen

A nonprofit organization is characterized as a business that is organized for purposes other than generating a profit, such as furthering a social cause or advocating for a shared point of view. None of a nonprofit's income is allocated to its members, directors, or officers. In the U.S., nonprofit organizations are often granted federal tax-exempt status, meaning they do not pay income taxes on donations or any money they earn through fundraising activities.

You can find a list of the types of nonprofit organizations under section 501(c) of the Internal Revenue Service (IRS) tax code. The overwhelming majority of nonprofits, however, fall under section 501(c)(3).

Charities and Foundations

Section 501(c)(3) of the IRS tax code covers organizations that are considered public charities, private foundations, or private operating foundations. Examples of nonprofits that are considered a 501(c)(3) include organizations that promote religious beliefs, education, charitable efforts, scientific research, and literacy; organizations that conduct tests for public safety; organizations that cultivate national or international amateur sports competitions; or organizations that prevent cruelty to children or animals.

The federal government restricts how much political and legislative—or lobbying—activities these nonprofits can engage in. A 501(c)(3) also cannot be an action organization. This means it may not attempt to influence legislation as the main part of its activities or engage in any political campaign for or against a political candidate.

Nonprofit organizations that fall under 501(c)(4) of the tax code may be organized for similar purposes as a 501(c)(3). However, they are allowed to participate in political lobbying in ways that 501(c)(3) organizations cannot. Donors of a 501(c)(4) organization cannot deduct their donations from their taxes.

There are also organizations that function as a nonprofit but are actually created by the government. These organizations fall under section 501(c)(1) of the tax code and are specifically organized by an act of Congress. The best example of this type of entity is a federally chartered credit union, which is authorized by Congress but acts as an independent nonprofit organization that focuses on providing services to its members rather than paying shareholders. State credit unions fall under section 501(c)(14).

Beneficiary Associations

Groups such as teachers, veterans, and state or federal government employees often create associations that allow members to participate in insurance and retirement plans or purchase discounted legal services. These beneficiary associations can be considered nonprofit organizations that fall under several different sections of 501(c) depending on what groups are involved. For example, a teachers' retirement fund association falls under section 501(c)(11), whereas life insurance associations fall under section 501(c)(12).

These are just a few of more than a dozen classifications a nonprofit organization can fall under. If you would like more information or are thinking of starting a nonprofit organization, reach out to an online service provider who can help answer any questions you have.

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