Nonprofit Organization

What is a 'Nonprofit Organization'

A nonprofit organization is a business entity that is granted tax-exempt status by the Internal Revenue Service. Donations to a nonprofit organization are often tax deductible to the individuals and businesses making the contributions. Nonprofit organizations must disclose a great deal of financial and operating information to the public, so that donors can ensure their contributions are used effectively.

Nonprofit organizations are also called 501(c)(3) organizations after the section of the tax code that allows them.

BREAKING DOWN 'Nonprofit Organization'

Nonprofit organizations don't pay income tax on the money they earn from fundraising activities or donations. The organization must further a religious, charitable, scientific, literary, educational, public safety, amateur sports or cruelty prevention purpose to qualify for tax-exempt status; it must also provide a public benefit. Examples of nonprofit organizations include churches, hospitals and schools.

RELATED TERMS
  1. Nonprofit Marketing

    Activities and strategies employed by a nonprofit organization ...
  2. Charitable Donation

    A gift made by an individual or an organization to a nonprofit ...
  3. 501(c)

    A subsection under the United States Internal Revenue Code. The ...
  4. IRS Publication 557: Tax-Exempt ...

    A document published by the Internal Revenue Service (IRS) that ...
  5. IRS Publication 526

    A document published by the Internal Revenue Service (IRS) that ...
  6. Executive Director

    The senior operating officer or manager of an organization or ...
Related Articles
  1. Taxes

    5 Steps To Forming A Tax-Exempt Nonprofit Corporation

    Before you tackle this challenge, know the challenges of forming and operating an official nonprofit organization.
  2. Professionals

    How Nonprofits And Commercial Groups Can Help The Economy

    As the White House Summer Jobs Initiative takes effect, we look at the benefits of collaboration between for and nonprofit ventures.
  3. Personal Finance

    How To Make Your Holiday Giving Count

    With so many nonprofits to choose from, how do you know where to send your charitable dollars?
  4. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  5. Taxes

    How To Deduct All Of Your Charitable Donations?

    Donations made to charitable organizations can reduce your taxable income, thus your overall tax bill. But not all donations qualify to be deductable.
  6. Taxes

    Top Fund-Raising Strategies For Nonprofits

    Top fund-raising strategies for nonprofit organizations
  7. Saving and Spending

    Top Tips for Maximizing Charitable Deductions

    Charitable donations can be a great financial planning tool. Here are some ways to make the most of them.
  8. Taxes

    Tips on Charitable Contributions: Limits and Taxes

    An overview of the limits and tax deductions of charitable donations.
  9. Taxes

    Tax Breaks For Volunteering

    Your volunteer ventures could earn you some welcome tax deductions, along with the satisfaction of helping others.
  10. Entrepreneurship

    How To Start Your Own Private Foundation

    The most common type of private foundation is a grant-making foundation. These typically provide grants to charities to fund expenses or programs.
RELATED FAQS
  1. Do nonprofit organizations have working capital?

    Discover why financial reserves in the nonprofit world are equivalent to working capital used by for-profit businesses, and ... Read Answer >>
  2. How does revenue recognition differ between profit and non-profit companies?

    Read about some of the differences between for-profit and nonprofit, or not-for-profit, revenue recognition rules according ... Read Answer >>
  3. How do NGOs get funding?

    A non-governmental organization (NGO) is a non-profit, citizen-based group that functions independently of government. NGOs ... Read Answer >>
  4. What are the tax deductions for donating office space to a non-profit?

    I have a small (1,500 sq ft) stand-alone office building and parking lot that I donate a 100% of to the American Red Cross. ... Read Answer >>
  5. What's the best way to contact Warren Buffett?

    Learn how to contact Warren Buffett and what kinds of contact is most likely to receive a response from him or from his company, ... Read Answer >>
  6. What is the best place to invest the donation we have received?

    We are a small non profit organization with an annual operating budget of $70K. We received a pretty sizable donation (approx. ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center