The term “nonprofit,” as well as “not-for-profit” and “non-stock,” describe the way an organization incorporates under state law. These terms all describe organizations that are not organized to make a profit, and that typically do not issue stock.
The term “tax exempt” refers to the status granted by the IRS to qualifying organizations. To receive tax-exempt status, an organization must meet a specific description and, for 501(c)(3) status, complete and submit an application. 501(c)(3) tax exemption applies to Federal income
tax and Federal unemployment tax. States also grant tax exemption, but the process and types of exemption vary from state to state.
The term “charitable” refers to a type of organization that is recognized as tax exempt under section 501(c)(3) of the Code. 501(c)(3)s, which also include religious and educational organizations, receive certain benefits not conferred on other tax-exempt organizations; for example, contributions to them are tax deductible by the donor.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.
