There are 5 Types of Nonprofit Organizations Recognized by the IRS. Follow along to learn more about these organizations.
There are a variety of nonprofit organizations that operate within the United States, but not all of them are recognized by the IRS. Tax-exemption status, which is awarded to organizations who have completed an application and review process, is a sign that the organization is indeed one of giving back to their communities or to the public. Here is a list of five nonprofit organizations recognized by the IRS.
5 Nonprofit Organization Types With Tax-Exempt Status
- Social Advocacy Groups
- Religious Institutions
- Private Foundations
- Public Charities
- Corporations Organized by Congress
1. Social Advocacy Groups
Social advocacy groups are ones that lobby the public and the government on behalf of a social or political effort. This includes environmental groups like Greenpeace, civil rights groups such as the American Civil Liberties Union, and politically-leaning groups such as the National Association for the Advancement of Colored People. This type of organization is classified under 501(c)(4), a category built for organizations that give back to their communities. They are exempt from taxes because the funds come from donations or membership dues, which are then used to promote that organization’s stated cause.
2. Religious Institutions
Religious institutions and charities are recognized by the IRS under the 501(c)(3) category as an organization that focuses on the promotion of civil or religious service based on the tenets of that religion. Churches, mosques, and synagogues, for example, are widely considered to meet the requirements by the IRS for tax-exempt status and therefore are not usually required to apply for the status. However, some religions have to fight for recognition, as the LA Times has reported; Scientology, for example, had to fight for their tax-exempt status, which was ultimately won in 1991 after a series of criminal acts and over 2,500 lawsuits were levied against the IRS. Religious institutions are classified as 501(c)(3) organizations because of the vast amount of community and charity work they complete.
3. Private Foundations
Private foundations, such as the Bill and Melinda Gates Foundation, are considered tax-exempt under the 501(c)(3) category. Private foundations work as large donors to other organizations and charities with only an individual or family contributing money to the foundation. These private foundations then generate income from endowment funds, which they can use to further their own programs or give grants to charitable organizations they feel worthy of the foundation. While private foundations are exempt, the families or individuals that provide the donations are still required to file income tax returns and report their donations every year.
4. Public Charities
Public charities are another type of nonprofit organization recognized by the IRS. These are publicly-funded organizations that receive their donations from the public, foundations, and even the government. They can receive 501(c)(3) status by proving to the IRS that they have not raised more than one-third of their donation fund from investments or commercial activities. Examples of public charities include the Special Olympics, the American Society for the Prevention of Cruelty to Animals, schools, and nonprofit hospitals.
Related Resource: Top 10 Most Affordable Accelerated Master’s in Nonprofit Management Online
5. Corporations Organized by Congress
Surprisingly, it is possible for corporations that were organized through an act of Congress, to be recognized by the IRS. The most common example of an organization in this category is federal credit unions. Because they were designed and created by legislation that passed through Congress, they are considered instruments of the United States government and do not have to file taxes.
There are more than five types of nonprofit organizations recognized by the IRS. ProPublica, which is itself a tax-exempt IRS-recognized nonprofit organization, offers a full list of these organizations. Individuals building these organizations who are interested in having their entity recognized by the IRS will want to research what 501(c) category they would fit best under for review. It is recommended for individuals to look over any requirements for their particular nonprofit organization before beginning the application process with the IRS.
WHAT IS A TAX-EXEMPT ORGANIZATION?