What is a Nonprofit
What is a "Nonprofit"?
When you think of a "nonprofit" what do you think of? Most likely, you think of a group making a difference in your community. Maybe you are thinking of a large organization, such as Big Brothers Big Sisters or Make-a-Wish, or maybe you think about a local animal shelter or community theatre. These are groups that are tax-exempt under Internal Revenue Code Section 501(c)(3) as "public charities" because they are formed to provide "public benefit." Community foundations are also part of this group (and so are private foundations, although tax rules treat them a bit differently than public charities.)
There are actually 29 types of organizations that are tax-exempt under Section 501(c), including chambers of commerce and other business leagues, exempt under 501(c)(6), and state-chartered credit unions, which are tax-exempt under Section 501(c)(14). These organizations are exempt from certain taxes because of the contributions they make in the community. However, only 501(c)(3) groups will provide donors with a tax-deduction for their contribution.
Nonprofits are further classified by the National Taxonomy of Exempt Entities (NTEE), which breaks down 501(c)(3) groups into 10 major categories and a total of more than 600 different sub-categories
Nonprofits are all around us
Working in every community, nonprofits are making a difference every day. The figures below illustrate how the numbers of nonprofits that operate in different states covers quite a range. (Source: IRS)
Nonprofits Per Thousand People
Number of Nonprofits by State
Source: Internal Revenue Service, Exempt Organizations Business Master File (November 2015), The Urban Institute, National Center for Charitable Statistics, http://nccsweb.urban.org/
There are many types of 501(c)(3) nonprofits
Even among nonprofits recognized as tax-exempt within section 501(c)(3) there are many different types of nonprofits, focusing on diverse missions. Within section 501(c)(3) there are two primary distinctions: those organized as "private foundations" and those organized as "public charities." Private foundations are diverse too: For example, there are family foundations, private operating foundations, and also corporate foundations. Visit the Foundation Center to learn more about foundations and how they operate.
Public charities (what we refer to as "charitable nonprofits," to distinguish them from private foundations) have many different missions. The National Taxonomy of Exempt Entities (NTEE) identifies 645 categories(NTEE classification codes) in eight primary groups: The majority of charitable nonprofits (35.5 percent) are classified as "human service" organizations. These include groups providing food and shelter, assistance in times of disaster, services for children and the elderly, and much more. Other NTEE classifications include arts organizations (9.9 percent), education groups (17.1 percent), nonprofits focused on health - from finding cures, to providing mental health services (13 percent), community and civil rights groups (11.6 percent), religion-related organizations (6.1 percent), environmental and animal protection groups (4.5 percent), and those focused on international development and human rights (2.1 percent).