Non-Profit And Tax-Exempt Organizations

Non-Profit And Tax-Exempt Organization Facts

The term “non-profit” is misleading.  It does not mean that a non-profit organization cannot earn profits.   A non-profit organization is “a organization no part of the income or profit of which is distributable to its members, directors or officers.”

Notice that the definition does not prohibit the making of a profit; it only disallows the distribution of profit or income to organization principals. For instance, non-profit organizations do not have owners. Behind this is the notion that a non-profit organization is like a for profit organization in almost all aspects; that is, its structure, management scheme, and operations are similar.  Nonprofit organizations are creatures of state law and formed for the benefit of its members or for the public.

Defining A Tax-Exempt Organization

A “tax-exempt organization” is a type of non-profit organization exempt from federal income taxes under Section 501 of the Internal Revenue Code. Although tax-exempt organizations are normally equated with charitable organizations, the two are not synonymous.

The purposes for which organizations may be exempt under IRC Section 501 are broader than charitable purposes. Charitable organizations exempt under IRC Section 501(c)(3) encompass the bulk of all exempt organizations, by a wide margin, and probably are the most important and controversial exempt organization.

However, influential organizations are also exempt under other provisions of IRC Section 501. For example, fraternal organizations, and social and recreational clubs are tax-exempt organizations. Such tax-exempt organizations are popular and widespread.

Give Our Firm A Call Today

Whether you are in the early stages of planning a non-profit/tax-exempt organization or have been in existence for a number of years, The Wilson Firm can help you successfully navigate the daunting amount of regulation that exists at the state and federal levels.  We have the expertise and passion to be a valuable contributor to your organization. Give us a call at 470-223-8271 or contact us online.