What Are the Different Kinds of Non Profit Organizations?
What types of nonprofits are there?
Despite the IRS’s extensive list of eligible tax-exempt organizations, many nonprofits fall into one of the primary categories listed in Section 503(c) of the federal tax code. Following are some of these typical nonprofit organization types:
Section 501(c)(3)
Organizations classified as corporations, foundations, or funds that carry out religious, charitable, educational, scientific, or literary activities are considered nonprofits under Section 503(c)(3). These NPOs can deduct donations from income taxes and typically fall into one of three categories: charities, private foundations, and churches and other religious institutions.
Section 501(c)(4)
The IRS grants tax-exempt status to NPOs that work to promote social and community welfare under Section 501(c)(4). One such NPO that would be eligible under Section 501(c)(4) is local business and employee associations with designated membership status. Organizations like homeowners associations, volunteer fire associations, and community associations are examples of 501(c)(4) eligible NPOs. The IRS occasionally acknowledges lobbying groups that work to advance a social cause or municipal service. Development associations that work to support social welfare may also be eligible for 501(c)(4) tax-exempt status.
Section 501(c)(5)
NPOs under Section 501(c)(5) include agricultural, horticultural and labor organizations. The IRS grants NPOs that meet a number of important requirements this tax-exempt status. For example, the NPO’s net earnings cannot be used for the benefit of a single member, and all proceeds given to the organization must be used to support efforts to improve working conditions, the quality of its products, and occupational efficiency. Associations like labor unions and farmers associations are a few examples of NPOs that fall under Section 501(c)(5).
Section 501(c)(6)
Nonprofit organizations that do not use any of their net earnings to benefit individuals or private shareholders are also granted tax-exempt status by the IRS. Chambers of commerce, trade boards, real estate associations, business leagues, and professional sports teams are a few examples of NPOs that meet the requirements for IRS Section 501(c)(6) tax-exempt status. Additionally, some lobbying organizations might be eligible under Section 501(c)(6) as well, but they might need to show participating members proof of their dues. Additionally, these nonprofits may be subject to a proxy tax on a portion of operational activity-related expenses.
Section 501(c)(7)
Organizations that support a group socially or recreationally may qualify for tax-exempt status under Section 501(c)(7). As long as a nonprofit organization’s operations support ongoing improvements to and maintenance of leisure and recreation Associations like social clubs, alumni associations, country clubs, and sports clubs are a few typical types of organizations that fall under this tax category. It’s also important to remember that many companies can change to this type of nonprofit as long as their operations comply with the requirements set forth by the IRS for 501(c)(7) eligibility.
Other types of nonprofits
Under Section 501(c), additional nonprofit classifications exist in addition to these typical NPO and NFPO types. Up until Section 501(c)(29), the subsections of this federal tax designation set forth specific requirements that organizations must satisfy in order to qualify for tax exemption. For instance, a number of different types of organizations, such as fraternal organizations, veterans associations, state-sponsored health organizations, and continuing education trusts, may be eligible for tax-exempt status under the additional Section 501(c) categories.
What is a nonprofit?
A nonprofit organization or foundation is one that focuses its efforts on promoting or advocating for a specific cause or social viewpoint. A nonprofit organization is a type of non-business entity that is tax exempt with the Internal Revenue Service (IRS) and does not make profits from the services it provides. If your organization wants to be tax-exempt, you must file with the IRS using the 501(c) code.
Nonprofit organizations (NPOs) and not-for-profit organizations (NFPOs), of which NPOs serve the general public and NFPOs serve a particular group, cause, or charity, are both recognized by the IRS. Depending on the nature of the organization and its activities, nonprofits can belong to a variety of NPO categories.
How to apply for tax-exempt status under Section 501(c)
Additional information on how to apply for tax-exempt status under Section 501(c) can be found in the steps that follow:
1. Determine the type of organization
It’s critical to determine the type of organization covered by the nonprofit designation before applying for Section 501(c) status. In general, nonprofits can identify as associations, corporations or trusts. When applying for tax exemption, corporations adhere to state laws and submit articles of incorporation to demonstrate this status. Groups that form in support of a particular mission, cause, or goal are known as associations.
Occasionally, associations may also be eligible under Section 501(a) of the federal tax code. In a trust NPO, an entity or person holds the title to a piece of property, such as an office building or a venue for events, but is obligated to use it only for the benefit of the general public, a cause, a group, or another association.
2. Meet your states requirements for registration
States may have different filing requirements and documentation, but all organizations registering as nonprofits must submit IRS Form 1023-EZ. Therefore, it’s crucial to research and comprehend your state’s laws regarding your type of organization’s eligibility for tax exemptions. The IRS typically requires corporations, associations, and trusts to include the following organizing documents when registering as a 501(c), despite the variations in filing requirements:
Additionally, your state might require your organization to submit copies of the record if your organizations recently changed their name and the organizing documents reflect this amendment. This means that your state laws will ultimately decide whether or not your organization complies with the necessary documentation requirements for Section 501(c) registration.
3. Get an employer identification number
Your NPO or NFPO is qualified for tax-exempt status under the appropriate Section 501(c) designation once it has been duly established and complies with all state requirements. The organization may use the IRS to request an employer identification number (EIN) once it has received approval. The Third-Party Designee section of Form SS-4 must be authorized in order for a third party to obtain an EIN on the nonprofit’s behalf.
Your organization can apply for the EIN if it is a legitimate nonprofit. All nonprofits must also submit a return or required notice to the IRS within three years of receiving an EIN in order to avoid having their tax-exempt status revoked.
This article is provided for informational purposes only and is not intended to be legal or financial advice. If you have any legal or financial questions, you should speak with a lawyer or tax expert.
FAQ
What are the 3 types of non profits?
There are three main types of charitable organizations: public charities, private foundations, and private operating foundations. The majority of organizations are eligible to fall under one of these three categories.
What are the 4 types of non profit organizations?
Information on the various types of nonprofit organizations is provided in IRS Form 557. Common examples of nonprofit organizations include public charities, foundations, social advocacy organizations, and trade associations.
What types of non profits are there?
Information on the various types of nonprofit organizations is provided in IRS Form 557. Common examples of nonprofit organizations include public charities, foundations, social advocacy organizations, and trade associations.
What are the 29 types of nonprofit organizations?
Information on the various types of nonprofit organizations is provided in IRS Form 557. Common examples of nonprofit organizations include public charities, foundations, social advocacy organizations, and trade associations.
