In order for an organization to be considered non-profit, the government has to agree that they are, in fact, non-profit. In order for an organization to be non-profit, then it cannot be owned privately; instead, the organization has to be run by a board of directors or multiple members of the organization. In some non-profits, these are elected, in others, they are assigned. Contrary to popular belief, an NPO can actually get money for things like scientific equipment repair, but instead of being a profit, it’s a surplus, and has to be used to further benefit the organization and preserve it into the future.
NPO’s also have to be incorporated in the state they are based. Incorporation essentially allows an organization to acquire property, be involved in contracts, and to receive moneys through sales and/or donations. Without incorporation from the state, an organization can go no further in becoming an NPO.
Some well known non-profit organizations in the United States include:
- The Salvation Army
- Habitat for Humanity.
- Girl Scouts of the USA and the Boy Scouts of America
- American Red Cross
NPO’s get a special taxation break, known as a 501(c)(3), named after the code where you find the criteria for non-profit status. Basically, to be eligible, the organization has to be charitable, religious, scientific, or educational, or the organization can be helping with amateur sports competitions, involved with testing in regards to public safety, or preventing cruelty to animals or other human beings. There are other organizations in the 501(c) code that can receive tax-exempt status, but NPO’s are in this category. Every year, the IRS publicizes a list of organizations that are under the 501(c)(3) tax-exemption. This is referred to as Publication 78. If you are looking to donate to any charity, you will be able to find them on this list.