Nonprofit Organization

DEFINITION of 'Nonprofit Organization'

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.

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RELATED FAQS
  1. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  2. Do nonprofit organizations pay taxes?

    Section 501 of the Internal Revenue Service (IRS) tax code exempts qualified nonprofit organizations from federal taxes. ... Read Full Answer >>
  3. How does revenue recognition differ between profit and non-profit companies?

    Under the generally accepted accounting principles, or GAAP, for-profit companies recognize revenue as it is earned through ... Read Full Answer >>
  4. What kind of philanthropy did Nathan Rothschild do?

    Nathan Rothschild contributed to many areas of philanthropy in the Jewish community. His family later expanded these charitable ... Read Full Answer >>
  5. What's the largest charitable donation Warren Buffett ever made?

    The most significant charitable donation Warren Buffett ever made is the $37 billion pledge to the Bill and Melinda Gates ... Read Full Answer >>
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    Giving stock, instead of cash, as a donation can greatly benefit both parties. You will find that most charities, hospitals, ... Read Full Answer >>
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