Glossary of Nonprofit Terms
Trying to make sense of nonprofit terminology and industry jargon? At BryteBridge Nonprofit Solutions, we’re committed to making sure our clients have a solid understanding of nonprofit organizations by helping them grow and maintain their nonprofit operations. We help our clients work through the “nitty-gritty” so that they can focus on their cause more effectively.
We’ve composed a glossary of just some of the most common you’ll come across when working in the nonprofit sector. Not only will these terms assist you in understanding what constitutes a nonprofit, but they will point you in the appropriate direction on your journey to launching your own nonprofit startup.
When you’re ready to get started or have questions about nonprofit startup, compliance, strategy, and growth, we’re here to help. Contact us today for a free initial consultation.
501(c)(3): This is a section of the Internal Revenue Code dedicated to organizations that are tax exempt. Organizations that receive these tax exempt status are religious, educational, charitable, scientific, literary, or amateur athletic groups. Donations made to 501(c)(3) organizations are also tax deductible.
501(c)(4): This type of nonprofit is a social welfare organization. Donations to these organizations are not tax-deductible, but they are still exempt from federal income taxes. 501(c)(4)s promotes social welfare issues and activities, such as voter education or public health initiatives. These organizations can also endorse candidates – one of the largest distinctions between 501(c)(3)s and 501(c)(4)s.
501(c)(6): This is a section of the Internal Revenue Code dedicated to associations such as chambers of commerce and real estate boards. These associations promote business; however, they do not gain profit.
Annual Revenue: A nonprofit’s annual revenue is based on the amount of cash it accrues.
Annual Report: Published each year by a nonprofit, annual reports highlight the organization’s accomplishments. It also thanks donors for their contributions, and is a form of advertising to entice new donors, motivate recurring donations, and allow a wider audience understand the nonprofit organization better.
Board of Trustees: The governing body of a nonprofit organization. Members oversee the organization’s activities and meet at intervals throughout the year.
Bylaws: The governing document for a nonprofit organization. They equip people with an understanding of how the nonprofit organization operates.
Charitable Donation: A gift often in the form of cash to a nonprofit organization with the intention to assist the nonprofit in its expansion and conducting activities/holding events. The donor receives nothing in return but the donor is able to deduct the donation from federal tax returns.
Conflict of Interest: Nonprofits adopt a conflict of interest policy in order to resolve problems that may occur. A Conflict of Interest policy is required by IRS Form 990.
Corporate Sponsorship: This is a form of payment provided by a business or company to a nonprofit to assist in fulfilling their mission and vision. The nonprofit would then recognize the business for their donation at the sponsored event or via a different platform.
Donor: The personal or entity that makes the gift to the nonprofit organization.
Donor Database: A working list of individuals and entities that have given to the nonprofit organization. The database will include contact information, amount donated, if donations were recurring, etc.
EIN: A nonprofit employer identification number is assigned to nonprofits by the IRS. It is a nine digit tax identification number and its purpose is to track a nonprofit’s annual returns and tax accounts.
Financial Report: A document detailing the nonprofit’s income, assets, sponsorship history, expenses, and more. A financial report is often requested by donors in the grant application process.
Funding Cycle: Donor organizations often review and award grants in a cycle. This cycle can be quarterly or semi-annually.
Grants: Opportunities for nonprofits to obtain funding that will support their growth. They benefit nonprofits because this money does not need to be paid back; therefore, the organization can use it to conduct activities, host events, and grow.
Pledge: A promise made to nonprofits that donations will be provided. For example, some grantors will make a two-year pledge that funds will be provided for that set term.
Press Release: Nonprofits compose short news stories and distribute them to various media outlets with the motivation for news coverage and exposure.
Program Officer: Employed by a nonprofit organization and sometimes referred to as a community affairs officer/public affairs officer, these individuals review budgets, write grant applications, and manage projects.
Proposal: Written application for a grant that includes a budget, project plan, and list of who will execute the project.
Public Charity: A nonprofit that the IRS has designated as a tax-exempt organization under section 501(c)(3). Public charities are usually supported by many different sources of income, including government grants, individual donors, and corporate sponsorships.
Private Foundation: A 501(c)(3) private foundation gets most of its money from a single source, such as an individual or family. They are not eligible for government assistance like public charities are, but they are still tax-exempt. Private foundations frequently contribute to other NGOs with money.
Strategic Plan: An official process designed by the nonprofit that outlines nonprofit goals and objectives for a defined period of time.
Tax Exempt Status: The right to exclude parts of income from being taxed. Nonprofits that achieve tax exempt status do not pay taxes at the federal level.
Working with BryteBridge Nonprofit Solutions to Make Running Your Nonprofit Easier
The above list is by no means an exhaustive list of every term in the nonprofit sector, but serves as an introduction to the language you’ll come across most often. BryteBridge Nonprofit Solutions helps simplify the understanding of nonprofit organizations, what it takes to launch a nonprofit, and what it takes to make it thrive. Not only do we have professionals who can answer your questions about nonprofits and their regulatory requirements, but our website is a tool designed to equip you with the basic information about what to know about nonprofits!
Contact us today for a consultation in order to get a better understanding of what constitutes a nonprofit and what the next steps are for your goals. Not only do we teach our clients about the process, but we work with them every step of the way.