A non-profit corporation is a corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. An entity of this nature does not pay federal or state income taxes on profits it earns from activities in which it engages to fulfill its objectives. This is due to the belief of the IRS and state tax agencies that the benefits the public derives from these organizations’ activities entitle them to a special tax-exempt status.
The most common federal tax exemption for nonprofits comes from Section 501(c)(3) of the Internal Revenue Code, which is why nonprofits are sometimes referred to as 501(c)(3) corporations.
Leave a Reply