Defining the Nonprofit

What exactly is a nonprofit corporation? Black's Law Dictionary (Sixth Ed.) defines a nonprofit corporation as an organization that does not produce profits for its members, officers, or board of directors. The nonprofit organization (NPO) does not pay any federal income tax for income generated to support its exemption-related purpose, but does have to file Form 990 annually. (www.irs.gov) The company has been organized to provide a service that for-profit companies cannot or will not provide for the public, its members, or a specific group. The NPO can have a board of directors, accountants, and marketing personnel, and have regular expenditures like a regular business.


Well-known examples of nonprofit corporations are low-income medical clinics like St. Jude Children's Research Hospital; literary and educational programs such as the Sloan Foundation; and scientific research programs --think The National Geographic Society-- that benefit the public. Other common NPOs are charities, churches, animal shelters, chambers of commerce, parent-teacher associations, schools, Red Cross chapters, Odd Fellow-Rebekah and Masonic old age homes, and Boys and Girls clubs. (legal zoom.com; Non-profits Education Center and Fritz, Joanne; How the IRS Classifies Nonprofit Organizations; about.com)


The NPO has to fall under the guidelines the IRS has established to be a 501(c) corporation. There are two categories: private foundations and public charities. Private foundations are usually funded by one source and make grants and loans available to other charitable organizations. Public charities seek revenue from a variety of avenues- tax-deductible donations, grants, trusts, low-interest loans from charitable foundations, federal, state, and local government loans and grants and so on. (Fritz, Joanne; How the IRS Classifies Nonprofit Organizations) Some nonprofits raise money by selling products: Girl Scout troops sell cookies to fund activities. Other organizations supplement their income by charging sliding scale fees for their services (Planned Parenthood).

The IRS website has information for donors. The website describes disclosure requirements, operating a 501(c), answers questions about tax forms NPOs use, and even has a search engine to find charities.