990 Tax Return + IRS Compliance + Legal Issues + Nonprofit Law

What is a Nonprofit Organization?

• There are approximately 1.5 million nonprofit organizations in the United States. In most other countries, these organizations are generally referred to as NGOs (Non Governmental Organizations)
• Almost a million of these are charitable nonprofits [usually with a 501( c )( 3 ) designation from the IRS.]
• Other nonprofit organizations include business and trade organizations, fraternal organizations, etc. Contributions to these organizations are not tax deductible as a charitable donation for the donor. (For example Chamber of Commerce membership dues may be deducted as a business expense, but are not considered a charitable donation).
• Contrary to popular opinion, being a nonprofit has nothing to do with the amount of assets an organization has, nor the amount of excess revenue generated each year. (Most major colleges and universities are nonprofit organizations, yet may have billions of dollars in endowment funds).
• One of the most significant differences between a for-profit company and a nonprofit organization is that no person or persons may profit from the operations of a nonprofit (private inurnment). For example, board members are generally not paid for their service, and "excess income" to the nonprofit must be used in the fulfillment of its mission.
• Nonprofits may, and often do, have for-profit subsidiaries or revenue streams; however these may be subject to UBIT laws (unrelated business income tax). For example, a hospital may operate a snack bar and gift shop for the benefit of its patients or a museum may operate a gift shop if the merchandise sold there relates to the mission of the museum-books, collection-related items, etc. These would generally not be considered taxable enterprises.