What is a ‘Nonprofit Organization?
A nonprofit organization is a business granted tax-exempt status by the Internal Revenue Service(IRS). Donations made to a nonprofit organization are typically tax deductible to individuals or businesses that make them, but the nonprofits must make financial and operating information public so that donors are certain their contributions have been used effectively. Nonprofits pay no income tax on the donations they receive or any money they earn through fundraising activities. Nonprofit organizations are sometimes called NPOs or 501(c)(3) organizations based on the section of the tax code that permits them to operate.
BREAKING DOWN ‘Nonprofit Organization’
For an organization to receive a “nonprofit” designation and to qualify for the tax-exempt status, it must further religious, scientific, charitable, educational, literary, public safety or cruelty prevention causes or purposes. It must generate some public benefit also.