Types of Tax-Exempt Organizations

While most are already familiar with charitable organizations, there are other types of tax-exempt organizations that all have certain obligations. Read more to learn about other types of nonprofit organizations that are classified by the IRS.ExemptMeNow hosted a webinar with nonprofit tax expert Philip Hackney that covered a variety of important topics including the various types of tax-exempt organizations. Watch the video to see nonprofit categories recognized by the IRS._________________________________________________________________________

There are many different types of tax-exempt organizations out there. The most acknowledged are charitable organizations, but, be aware that there are other types of tax-exempt organizations you might be associated with, and those have certain obligations that come along with them.You probably have some involvement with a number of these, one way or another. You probably don’t have involvement with a title-holding company. That’s going to be for much more sophisticated organizations.Charitable organizations are classified as (c)(3) whereas, social welfare organizations are classified as (c)(4). The NRA, for instance, is a social welfare organization. The difference between the social welfare and the charitable organization is that the social welfare organization is not able to allow its donors to deduct their contributions from taxes. The others are business leagues and social clubs. If you go to a country club, it’s probably a social club. A swimming pool: that’s also probably a social club.So, how does this relate to your nonprofit as a business? Consider what kind of money is in the nonprofit sector. In 2016, there were about 2.3 million total nonprofits out there; 1.57 million of those were registered with the IRS. They produced about 5.3% of GDP but made up almost 10% of all wages in the U.S. The business that is happening within the nonprofit sector is not small. It’s a real sector to operate within and there are real ways to make it in this world.

If you’re not making a profit, you’ve got a problem

You are actually running a business. If you start up your nonprofit, it’s just as intensive as running your own business. You are running your own business.Total revenue to charitable organizations in 2013 was $1.73 trillion. It’s not an amount to sneeze at. There are $3.22 trillion in assets out there in this sector. Once you start getting into that larger range of nonprofits out there, it’s not a small pool.Overall, the most common type of tax-exempt organization that I think folks will run into are the social welfare organizations. If you’re thinking about advocating for a candidate, or you are thinking about lobbying, you might want to be thinking about forming a 501(c)(4).If you’re belonging to a business association, the business league is probably what it is operating as.Hopefully, this helped clear up some of your questions about the different types of tax-exempt organizations… stay tuned for more insights from nonprofit tax expert Philip Hackney, coming soon!