Nonprofit Organization

There are 27 types of nonprofits defined in the Internal Revenue Code (IRC). Nonprofits include churches, public schools, professional associations, research institutes, labor unions, cemetery associations, and veteran organizations. These organizations, although disparate, are all tax exempt. Therefore, if these organizations make a profit, they do not have to pay income taxes. However, most often when we speak or think of nonprofits, we are referring to 501(c)(3)s. These nonprofits are also tax deductible; thus, donations are considered as federal tax deductions.

Nonprofits are permitted to educate the public on the issues; however, most nonprofits categorized as 501(c)(3) cannot advocate for a specific bill or conduct activities that influence elections to public office and are limited in the amount of time and money they can put into lobbying. In contrast, 501(c)(4)s are not limited to lobbying but will not be able to receive federal grants. They can also engage in political campaign activity, and unlike a 501(c)(3), donations are not tax deductible. Nonprofits are also considered the administrative arm of government; they provide a venue for government to efficiently deliver services and aid in keeping govern ment small. They are perceived as efficient, low-cost deliverers of services in local communities and contract with government to provide services. Their links to the local community make it possible to more effectively tailor programs and service delivery structures to local needs. Nonprofits deliver a large array of services, including job training, residential care, and health services. For more information, see Berry (2005).