There are 22 types of tax exemptions for non-profit organizations by the IRS.
There are more than 1.5 million non-profit organizations in America. They are organized under individual state law and must be designated as non-profit from the moment they are set up.
Types
Private foundations and public charities are two main types of NPO. Foundations are run by trustees with endowments from a founder. Public charities, also known as 501(C)(3)s, are more common because of favorable contributor benefits. Up to 50 percent of gross income may be donated as opposed to only 30 percent to a foundation.
Guidelines
Each NPO must adhere to state laws on employment and health and safety. Although organized like a business, no one person or group must benefit financially from an NPO. They must be set up for charitable, religious, literary, scientific or educational reasons. A board of directors and officers must be elected and the non-profit status has to be clear from the start.
Tax
Non-profit organizations are exempt from federal tax if they're run exclusively for the reasons listed. A number of states offer local tax exemptions depending on the purpose of the organization. Some, for example, only allow exemption to charity-based groups while other non-profit bodies such as trade groups and social clubs must pay tax.
