How the IRS Classifies Nonprofit Organizations
If you are confused about nonprofit organizations, don t feel too bad. We tend to lump all nonprofits into one heap, when, in fact, there are several types of nonprofits.
The IRS recognizes 27 types of nonprofit organizations in fact. They are, to one degree or another, exempt from federal taxes and many state taxes. And each type is different when it comes to eligibility, lobbying, electioneering and tax deductible contributions.
A separate subsection of the 501(c) section of the tax code rules each type of nonprofit.
With so many kinds of nonprofits, they are hard to avoid. For instance, the daycare where your child may spend his days is a 501(k) nonprofit. The Chamber of Commerce your small business might belong to is a 501(c)(6). And the credit union where you bank might be a 501(c)(1).
However, the most common type of nonprofit organization is the 501(c)(3). These are the nonprofits we most commonly contribute to, volunteer for, and hear about through the media. We most likely think about the 501(c)(3) classification when we do our taxes Was that donation made to a tax-exempt nonprofit charity or not?
Here is a list of many of the most common types of nonprofits that the IRS recognizes. This information comes from IRS Publication 557, your bible if you are considering filing for nonprofit status. Also, IRS Publication 526 provides information about which of these organization can accept tax-deductible contributions.
Check out these publications for more specific information about nonprofit classifications.
These are corporations organized under Act of Congress. Federal Credit Unions are a good example of this type of nonprofit. These nonprofits do not have to file an annual return. Tax-exempt contributions are allowed if they are made for exclusively public purposes.
These are holding corporations for exempt organizations. That is, they can hold title to the property of an exempt group. They apply for nonprofit status using IRS form 1024. They annually file forms 990 or 990EZ.
This is the most common type of nonprofit. It includes organizations that are religious, educational, charitable, scientific, and literary; groups that test for public safety, that foster national or international amateur sports competition; or organizations engaged in the prevention of cruelty to children or animals.
This type of nonprofit applies for its status using IRS form 1023, and files annually Form 990, 990EZ, or 990-PF. Contributions are usually tax-exempt.
All 501(c)(3) organizations are considered either:
- A private foundation. These are nonprofits that don t qualify as public charities. Foundations may be sub-classified as private operating foundations or private non-operating foundations and receive some of the advantages of public charities.
- Or a public charity. These are the organizations we typically donate to.
These are civic leagues, social welfare organizations, and local associations of employees. They promote community welfare, charitable, education or recreational goals.
They apply using IRS Form 1024. They file annually 990 or 990EZ. This type of nonprofit is often confused with the 501(c)(3). But they are very different, especially regarding permissible political activity.
Labor, agricultural, and horticultural organizations fit under this classification. They are educational or instructive, with the goal of improving conditions of work, and to improve products and efficiency. They apply by using IRS Form 1024, and file annually form 990 or 990EZ.
These organizations are business leagues, chambers of commerce, real estate boards, etc. They seek to improve business conditions. They apply using IRS form 1024 and file annually the 990 or 990EZ.
Social and recreation clubs fall into this category. They promote pleasure, recreation, and social activities.