NonProfit, Non Profit, Not For Profit or NPO
An organization formed and managed for the purpose of promoting activities that benefit the public in general or specific classes or individuals without any commercial or profit motive. The organization is constitutionally recognized at the state level. Unlike a For Profit business, no stock may be issued for a NonProfit organization.
NonProfits are often run by volunteers, although compensated employees are appropriate in many circumstances. NonProfits are distinguishable by the presence of a beneficiary class- in some cases the general public (e.g. Save The Planet) or a class of individuals (Katrina Relief Fund). Where a For Profit business has customers, the NonProfit organization has donors and beneficiaries. The properly managed For Profit business will derive a profit while the properly managed NonProfit will instead produce a surplus.
Tax Exempt, Tax Exemption
Tax Exempt is a status granted an organization or individual by a state or the federal government whereby they are excused from taxes that would otherwise be mandatory for the general business community or population. Removal of the tax burden is done to promote the activities of an organization deemed beneficial in some way by the state or federal government for a purpose they have established as appropriate for exemption from taxes.
Charitable Organization, Charity
A Charitable Organization, or Charity, is a NonProfit organization involved in generous acts for often underprivileged or specially challenged segments or members of society. A Charity also has broad support from a spectrum of donors. The I.R.S. includes Churches, Schools, Hospitals and Medical Research Organizations among the organizations it classifies as Charitable organizations.
Foundation
A Foundation is a NonProfit organization that has a more limited base of donors than a Charity. While the Foundation performs similar generous acts to a Charity, it has a lesser reliance on public support. The I.R.S. has tax regulations specific to Foundations that are more restrictive in many areas from those that apply to Charities, and very specifically in the area of the deductibility of donations. Whereas the Charity donor may deduct their donations, the Foundation donor is not offered the same deduction.
Tax Deductible
Tax Deductible refers to a reduction of a taxpayer’s gross taxable income by the amount of a donation made to a Non Profit organization eligible to offer a Tax Deduction.