The terms “nonprofit” and “not-for-profit” are often used interchangeably, but there are subtle differences between them, especially in the eyes of the IRS. Here’s a breakdown:
Nonprofit:
- Mission: Focused on serving the public good and advancing a social cause. Often involved in charitable activities, education, healthcare, environmental protection, etc.
- Revenue: Can earn revenue through various means, like selling goods or services, fundraising, or receiving grants. However, all profits must be reinvested back into the organization’s mission, not distributed to individuals or owners.
- Tax exemption: Can qualify for tax-exempt status under specific IRS sections, most commonly 501(c)(3). This grants significant tax benefits, such as exemption from federal income tax and some state and local taxes.
- Regulations: Subject to stricter oversight and regulations by the IRS, including mandatory public disclosure of financial information.
Not-for-profit:
- Mission: Not restricted to serving the public good. Can exist for the benefit of its members, like professional associations, sports clubs, or social groups.
- Revenue: Similar to nonprofits, cannot distribute profits to individuals or owners. However, earning revenue isn’t necessarily their primary focus, and it might not be related to any specific social cause.
- Tax exemption: Can also apply for tax-exempt status under various IRS sections, but the requirements and benefits are often less generous than for nonprofits. Some may not qualify for exemption at all.
- Regulations: Subject to less stringent regulations compared to nonprofits, although specific requirements vary depending on the organization’s structure and tax status.
In short, both types of organizations don’t distribute profits to individuals, but the key difference lies in their mission and target audience:
- Nonprofits: Serve the public good and address social causes.
- Not-for-profits: Serve the interests of their members, which may or may not involve a broader social benefit.
Foundations:
- A specific type of nonprofit funded by donations or endowments.
- Primarily focused on grantmaking to other charitable organizations or individuals aligned with their mission.
- Subject to additional regulations under the Tax Reform Act of 1969.
It’s important to note that these are general distinctions, and specific details can vary depending on the organization’s structure and chosen tax-exempt status. For further information, it’s always best to consult with a tax professional or refer to the IRS website for specific regulations.
There isn’t one specific webpage on the IRS website that encompasses all regulations about nonprofits. Instead, the information is spread across various sections depending on the specific aspect you’re interested in. Here are some key resources:
General information about nonprofits:
- IRS Charities & Nonprofits page: This is a good starting point to get an overview of different types of nonprofits, their tax-exempt status, and filing requirements. You’ll find links to various resources: https://www.irs.gov/charities-and-nonprofits
- Private Foundations: This page offers a clear overview of private foundations, their characteristics, and how they differ from public charities. https://www.irs.gov/charities-non-profits/eo-operational-requirements-private-foundati
- Publication 557, Tax-Exempt Status for Your Organization: This comprehensive publication guides organizations through the process of obtaining and maintaining tax-exempt status. It goes into detail about different sections of the tax code relevant to nonprofits: https://www.irs.gov/pub/irs-pdf/p557.pdf
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David Robert Lambert 
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