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.

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.

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).

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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?

Many nonprofit organizations pursue 501(c), or exempt, status from the Internal Revenue Service for tax benefits, and in some cases, to increase donations to the nonprofit. While there are 28 different types of exempt organizations, among the most common include 501(c)(3), 501(c)(4), and 501(c)(7) organizations. In most cases, nonprofits are formed under state law, while the IRS independently grants exempt status to qualified organizations.

The Purposes of a 501(c)(4)

A "501(c)(4)" is a tax-exempt organization that falls under section 501(c)(4) of the Internal Revenue Code. Like other classifications in the IRC, 501(c)(4) specifies that this type of organization is restricted to certain purposes. The IRC also spells out what acts the organization is allowed to engage in when it raises money or is involved in political activities.

What Are 501(c)4 Organizations?

Under federal tax law, an organization that promotes social welfare, and operates as a non-profit, can identify itself as a 501(c)(4) for tax purposes. The Internal Revenue Service sets the rules and guidelines for these groups, reviewing their statuses from time to time to ensure they are meeting legal requirements.

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