Types of Tax-Exempt Nonprofit Organizations

The most common type of tax-exempt organization is 501(c)(3), which we shorten to 501c3. This number refers to section 501c3 of the Internal Revenue Code and means the organization meets the IRS tax-exempt requirements. Namely, the organization operates exclusively for an exempt purpose and no one will profit from the organization’s activities (otherwise known as an inurnment). These requirements are part of the language required in the Articles of Incorporation and Bylaws discussed earlier.

501c3 is the most common classification of nonprofit organizations, but it is not the only one. There are over 14 different types of tax-exempt organizations as defined by IRS section 501c. Each one has a unique tax designation and fulfills a specific purpose. Here is a quick explanation of some of the more common tax-exempt organization types:

• 501c3: A nonprofit organization organized for charitable, religious, educational, or scientific purposes. Donations are tax-deductible.
• 501c4: A nonprofit organization organized to influence legislation or support a candidate for political office. Donations are generally not tax-deductible.
• 501c6: A nonprofit organization organized as a business league, chamber of commerce, or another type of membership-driven organization. Donations are generally not tax-deductible.
• 501c7: A social club relying on membership dues for funding. Donations are not tax-deductible.
• 501c8 and 501c10: These are both fraternal societies or orders. Both of these are membership-driven organizations. The main difference between the two is that 501c8 organizations provide insurance to its membership while 501c10 organizations do not. Generally, donations are not tax-deductible unless given for a specific purpose as defined by the IRS.

While 501c3 is the most common type of tax-exempt organization, the IRS requires organizations file for the appropriate classification. In many cases, the application and documentation necessary are different depending on the 501c variety.

The information available in this guide is relevant to all nonprofit organizations, regardless of their classification. Though, because 501c3 organizations are the most common, it is written with those organizations in mind. BryteBridge specialists help our clients discern the proper 501c classification based on the organization’s purpose and planned activities.