The origins of favorable tax treatment for nonprofit and not-for-profit organizations in the United States were based on the admirable ideals promoting community service and public good.
However, today the United States’ federally tax-exempt economy makes up 15% of gross domestic output (GDP) and spans 1.8 million organizations. A total of $3.3 trillion dollars of economic output falls into tax exempt status, usually by way of non-profit status. Most of these tax-exempt organizations are “business-like,” including credit unions, hospitals, utilities, insurance companies, universities, and clubs. They manage over $8 trillion in assets.
The 501(c)(3) section of federal code describes the non-profit entities that are organized and operated exclusively for charitable tax-exempt purposes. These entities are commonly referred to as charitable organizations and cannot be organized or operated for private interests or private shareholders.
For many of these nonprofits, tax-exempt status is everything. Not only does this exemption allow nonprofits to avoid federal corporate taxes, but it allows donors to write off their contributions at the end of the year. Moreover, this IRS-granted tax-exempt status can open doors to other exemptions on property taxes and sales tax in many states.
To read the full report on Nebraska’s treatment of non-profit organizations, click here.
