Nonprofit Organizations, Tax Exempt

Types of Tax Exempt Organizations

Nonprofit Corporations - Tax Exempt

Nonprofit Organizations - A Nonprofit corporations is an organization formed for the purpose of serving a purpose of public or mutual benefit other than the pursuit of profits. It is mandatory to know what a nonprofit corporation is not.

A nonprofit is not a way for ordinary businesses to shield assets or avoid paying income tax. The Internal revenue service haS determined that only specific types of organizations can qualify to be nonprofit, or tax exempt organizations. In giving these corporations tax exempt status, Congress imposed specific requirements and limitations on their activities. The IRS tends to enforce these rules. Failure to follow the rules can result in the corporation losing its tax exempt status.

These limitations on nonprofit corporation activities and operations are what give them unique needs that often are not well met by service providers to for-profit businesses.

The types of nonprofit corporations with which most of us are familiar religious organizations and so called public benefit corporations. Public benefit corporations are those that serve a scientific, literary, education, artistic or charitable purpose that benefits "the public". In the nonprofit world these are known as "501(c)(3)'s."

Types of Tax Exempt Organizations

  • Religious
  • Charitable
  • Scienific
  • Testing for public safety
  • Literary
  • Educational
  • Artistic
  • Health care and public health
  • Fostering national or international amateur sports competition
  • The prevention of cruelty to children or animals
  • Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare
  • Local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes:
  • Labor organizations
  • Agricultural or horticultural organizations
  • Business leagues
  • Chambers of commerce
  • Real-estate boards
  • Boards of trade
  • Professional football leagues
  • Clubs organized for pleasure, recreation, and other nonprofitable purposes
  • Certain fraternal beneficiary societies, orders, or associations
  • Voluntary employees' beneficiary associations providing for the payment of life, sick, accident, or other benefits to the members of such association or their dependents or designated beneficiaries
  • Teachers' retirement fund associations of a purely local
  • Certain benevolent life insurance associations of a purely local character
  • Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit
  • Corporations chartered solely for the purpose of the disposal of bodies by burial or cremation which are not permitted by their charter to engage in any business not necessarily incident to that purpose
  • Credit unions without capital stock organized and operated for mutual purposes and without profit
  • Insurance companies or associations other than life if the net written premiums for the taxable year do not exceed $350,000
  • Corporations organized by certain association for the purpose of financing the ordinary crop operations of such associations
  • A trust or trusts forming part of a plan providing for the payment of supplemental unemployment compensation benefits
  • A post or organization of past or present members of the Armed Forces of the United States, or an auxiliary unit or society of, or a trust or foundation for, any such post or organization
  • Legal services corporations
  • Trusts for the purpose of satisfying liability for claims under Black Lung Acts
  • Multi-employer trusts created to pay any amount described in section 4223(c) or (h) of the Employee Retirement Income Security Act of 1974
  • Corporations or trusts organized for the exclusive purposes of acquiring and holding title to real property for the benefit of a qualified pension, profit sharing, or stock bonus plan

Home | Nonprofit Organizations | Site-Map