Choosing the right classification for your nonprofit is crucial for its legal status, operations, and ability to fulfill its mission effectively. The Internal Revenue Service (IRS) recognizes 32 distinct types of nonprofit organizations, each with its own purpose and regulations.
This comprehensive guide explains the diverse types of nonprofits, helping you understand their roles, tax statuses, and operational focuses. Whether you're looking to start a nonprofit, donate to a cause, or expand your professional knowledge, this guide will help you understand the nonprofit landscape.
By the end, you'll have a clearer picture of where your mission or interests align within the nonprofit sector.
Table of Contents
The 32 different types of nonprofits
How do you decide which type of nonprofit organization is right for you?
Wrapping up on different nonprofit types
FAQs on types of nonprofit organizations
What is a nonprofit?
Nonprofits focus on advancing specific causes or social benefits rather than generating profit. They serve the public, their members, or specific beneficiary groups.
Nonprofits operate under a unique financial structure. While they can earn revenue through various means — such as selling goods and services, receiving donations, or securing grants — they must reinvest this income into their mission, rather than distribute it to its owners or shareholders.
The IRS grants qualifying organizations a status, exempting nonprofits from federal income taxes. This status comes with strict guidelines: nonprofits must avoid private inurement — meaning no part of the organization's net earnings can benefit an individual or private shareholder.
Nonprofit funding sources are diverse. They may include:
- Donations from individuals or corporations
- Membership dues
- Sales of mission-related goods or services
- Investment income
- Government or private grants
This financial model allows nonprofits to focus on their core mission, whether it's providing community services, advancing education, supporting the arts, or addressing social issues. The nonprofit sector plays a crucial role in society, often filling gaps where government services or for-profit businesses fall short.
32 different types of nonprofit organizations
The IRS grants tax-exempt status to many nonprofit organizations, including charities and private foundations, pension funds, and trade associations.
Most of these nonprofits often fall under Section 501(c), while the remaining fit into the other categories defined under Section 501 of the US tax code.
1. 501(c)(1): Corporations organized under Acts of Congress
As the name suggests, these types of organizations are created through an Act of Congress. They are not required to apply for tax-exempt status or file annual tax returns.
Examples of these types of nonprofits include Federal Credit Unions, Federal Reserve Banks, Federal Home Loan Banks, and Federal National Mortgage Associations.
2. 501(c)(2): Titleholders for single parent corporations
These corporations are organized to hold titles to property on behalf of other tax-exempt organizations. This type of 501(c) nonprofit only qualifies for tax exemption when it turns over the entire income of the property, minus expenses, to the tax-exempt organization.
3. 501(c)(3): Public charities and private foundations
The most popular type of nonprofit, 501(c)(3), is a charitable organization organized and operated exclusively for charitable, religious, literary, scientific, or educational purposes.
It also includes nonprofits with the mission to advance national and international sports competitions, prevent cruelty to animals or children, and test for public safety.
Some examples of 501(c)(3) charitable organizations are Make-a-Wish Foundation, Habitat for Humanity, Healthcare for the Homeless, Nomi Network, Word on Fire Catholic Ministries, and many more.
4. 501(c)(4): Community social welfare organizations and civic leagues
A 501(c)(4) is a tax-exempt nonprofit organization that operates to benefit the community, as opposed to a private group, employees, or corporation.
The organization must benefit the community as a whole and not select groups or populations within the community. It can remain tax-exempt through its goals of “educating the population on special social welfare issues.”
Some examples include homeowner associations, volunteer fire departments, and civic associations.
5. 501(c)(5): Labor, agricultural and horticultural organizations
Labor, agricultural, and horticultural organizations fall under 501(c)(5) nonprofits. These organizations aim to improve working conditions, increase efficiency, or enhance products in their respective fields.
Labor organizations are formed by a group of people working in a specific industry or trade. They collectively bargain with their employees to secure better working conditions and higher wages.
Agricultural or horticultural organizations work with animals or vegetables, including raising livestock, harvesting crops, cultivating land, or managing aquatic resources.
6. 501(c)(6): Business leagues
The 501(c)(6) nonprofits are made up of business leagues, including:
- Chambers of commerce
- Boards of trade
- Professional football leagues
- Real estate boards
These organizations are either engaged in the same business line or situated in the same city. These organizations focus on improving business practices and standards. They rely on membership dues and income from activities related to their tax-exempt purpose.
7. 501(c)(7): Social and recreational clubs
Social and recreational clubs organized for pleasure, recreation, and other nonprofitable purposes fall under 501(c)(7). Some examples include college fraternities, hobby clubs, athletic leagues, country clubs, and alumni groups.
To qualify for tax-exempt status, 501(c)(7) organizations should:
- Not discriminate against any caste, gender, or race
- Have limited membership
- Secure funding only from membership fees, dues, and assessments
- Not sell real estate, products, or services
8. 501(c)(8): Fraternal beneficiary societies
Fraternal beneficiary societies are membership organizations that operate under a 'lodge' system. This system involves local chapters (lodges) governed by a larger parent organization. These societies provide various benefits to their members, such as life insurance or other forms of financial support.
The primary purpose of these nonprofits is to offer financial support for life, sickness, accidents, and other benefits to their members. Some examples of 501(c)(8) organizations include the Knights of Columbus, the Freemasons, and the Elks Lodge.
9. 501(c)(9): Voluntary employees beneficiary associations
501(c)(9) organizations are also referred to as voluntary employees’ beneficiary associations (VEBAs). They fund the payment of life, accident, sickness, or other benefits to its voluntary members. These benefits can also extend to its members, beneficiaries, and dependents.
VEBA includes employees connected through a union, common employer, or collective bargaining agreement. A 501(c)(9) VEBA provides a tax-efficient way for employers to offer valuable benefits to their employees.
It requires a non-discrimination clause, and benefits are equal for all employees regardless of their compensation. A labor union is an example of a 501(c)(9) organization.
10. 501(c)(10): Domestic fraternal societies
Domestic fraternal societies operate using a 'lodge' system, which consists of local chapters (lodges) overseen by a parent organization. Unlike 501(c)(8) organizations, 501(c)(10) societies don't provide insurance benefits to members but focus on charitable, religious, or educational activities within their community.
Within a lodge system, they collect funds to support charitable, religious, literary, educational, or fraternal goals, among other things.
11. 501(c)(11): Teachers’ retirement fund associations
501(c)(11) nonprofits are locally organized associations that manage retirement funds for teachers and other school employees.
Its purpose is to offer retirement benefits to teachers and other school employees, like librarians. These organizations are funded through member donations, investment revenue, and taxes.
12. 501(c)(12): Local benevolent life insurance associations, mutual irrigation, telephone companies, and like organizations
501(c)(12) organizations aim to offer life insurance, irrigation services, telephone company services, and other similar organizations. These nonprofits must collect approximately 85% of their income from their members.
13. 501(c)(13): Cemetery companies created to provide burial services to members
501(c)(13) organizations are specifically for cemeteries or burial services. While they can sell related items like flowers or monuments, they're distinct from mortuaries, which handle funeral preparations. They can, instead, sell flowers, monuments, vaults, and markers for the cemetery.
14. 501(c)(14): State-chartered credit unions and mutual reserve funds
501(c)(14) includes state-chartered credit unions operated under the Federal Credit Union Act. They also include mutual reserve funds and other cooperative financial organizations, such as credit unions serving specific communities. These must be corporations, not have capital stock, and have existed before September 1, 1957.
This kind of nonprofit organization offers credit for low-to-moderate-income members. These credit unions serve members who share a common bond, such as living in the same community or working for the same employer.
15. 501(c)(15): Mutual insurance companies
501(c)(15) nonprofits are small, community-based insurance companies that operate on a mutual basis, meaning policyholders are also owners, sharing risks and benefits.
These organizations offer insurance to members at a reasonable cost. They cover expenses for property damage, funerals, and burials.
16. 501(c)(16): Cooperative organizations to finance crop organizations
The 501(c)(16) designation is for cooperative associations created to support the operations of its members. These operations include crop cultivation, warehouse, farm equipment, shipping, and marketing.
Examples of 501(c)(16) organizations include a farmers' cooperative association or local livestock credit corporation.
17. 501(c)(17): Supplemental unemployment benefit trusts
A 501(c)(17) organization is a supplemental unemployment benefit trust. Its purpose is to help individuals who have been permanently or temporarily laid off. The trust must provide supplementary compensation to all members without discrimination.
18. 501(c)(18): Employee-funded pension trusts created before 1959
501(c)(18) organizations are pension trusts established before June 25, 1959. These are employee-funded trusts that provide pension benefits to their members.
19. 501(c)(19): Veterans’ organizations
A 501(c)(19) is a tax-exempt organization that serves veterans of the United States Armed Forces. They focus solely on improving the lives of present and past veterans of the Army, Navy, Marine Corps, Air Force, Coast Guard, or Space Force. The organization's benefits extend to veterans' dependents, including spouses and children.
To secure tax-exempt status, at least 75% of members must be or have been part of the armed forces. Examples of 501(c)(19) organizations include the Wounded Warrior Project, Veterans of Foreign Wars, and Disabled American Veterans Charity.
20. 501(c)(21): Black lung benefit trusts
The 501(c)(21) designation is held by black lung benefit trusts, which were designed to pay benefits under the Black Lung Benefits Act of 1969. The Act states that coal miners who are disabled because of black lung disease after being exposed to coal dust will be given monthly compensation.
Congress amended the law in 1977 to put these funds into a trust. Coal mine operators support these trusts and pay premiums for insurance, accident, and health benefits for miners and their spouses and dependents.
21. 501(c)(22): Withdrawal liability payment fund
This type of nonprofit is designed to help cover the liability of employers withdrawing funds from multi-employer pension plans.
22. 501(c)(23): Veterans’ organizations (Before 1880)
A 501(c)(23) organization was created before 1880 and provides insurance and other benefits to veterans and their dependents. Like 501(c)(19) veteran organizations, this type of nonprofit also requires more than 75% of its members to be past or present armed forces members.
23. 501(c)(25): Title-holding corporations or trusts for multiple parent corporations
A 501(c)(25) is a type of nonprofit organization that must be a trust or corporation and can have a maximum of 35 shareholders. They hold title to real property, such as land or buildings, on behalf of tax-exempt charitable organizations.
24. 501(c)(26): State-sponsored high-risk health coverage organizations
501(c)(26) is a state-sponsored health coverage organization serving high-risk individuals who lack access to proper healthcare. This kind of organization offers insurance or enters arrangements with a Health Maintenance Organization (HMO) to offer necessary services.
25. 501(c)(27): Qualified state-sponsored workers’ compensation organizations
Under 501(C)(27) Internal Revenue Code, two kinds of these organizations exist:
- 501(C)(27)(a): This section offers tax exemption to organizations formed before June 1996. These organizations exclusively reimburse their members. The members should be made up of people and government entities that issue workers' compensation insurance.
- 501(c)(27)(b): This section consists of organizations formed after December 1997. These are created by state law and offer workers compensation.
26. 501(c)(28): National Railroad Retirement Investment Trust
501(c)(28) applies to the National Railroad Retirement Investment Trust. It's a tax-exempt organization created by the Railroad Retirement and Survivors’ Improvement Act of 2001.
Its purpose is to fund railroad workers' retirement benefits and dependents' retirement benefits. As a pay-as-you-go pension system, railroad retirement assets are invested to secure members' retirement benefits.
27. 501(c)(29): Nonprofit health insurance issuers
501(c)(29) organizations are part of the Affordable Care Act, which offers tax-exempt status to all nonprofit health insurance issuers. These issuers receive a grant or loan under the Medicare and Medicaid services co-op program.
28. 501(d): Religious and apostolic associations
501(d) tax-exempt status applies to religious organizations or apostolic groups that operate with a communal treasury. These entities follow principles of apostolic Christianity, often tracing their practices back to the teachings of Jesus Christ's apostles.
Key features of 501(d) organizations include:
- Members pool their earnings into a common fund
- They typically operate as tight-knit communities
- Many support their members in farming, manufacturing, or other commercial activities
- The community usually owns all property collectively
- Unlike some other nonprofit types, they can participate in political activities
While similar to monasteries or convents, 501(d) organizations differ in their ability to conduct for-profit activities. This unique structure allows them to maintain their religious practices while also supporting their community's economic needs.
29. 501(e): Cooperative hospital service organizations
501(e) covers cooperative hospital service organizations that offer one or more of these services to two or more tax-exempt hospitals:
- Data processing
- Billing
- Purchasing
- Collecting
- Warehousing
- Clinic
- Food
- Laboratory
- Printing
- Personnel
- Industrial engineering
- Communications
- Record keeping
This type of organization either exists as part of a larger medical complex or is operated and owned by a qualifying government entity.
30. 501(f): Cooperative service organizations of operating educational organizations
501(f) nonprofits are cooperative service organizations that exclusively serve educational organizations.
They pool members' money and invest it in stocks and securities. They then distribute the earnings from these investments back to the same members of educational organizations.
31. 501(k): Childcare organizations
A 501(k) is a publicly available childcare organization that provides care to children outside of their homes, enabling their parents to work.
This kind of nonprofit secures a tax-exempt status because it’s doing a public good by giving parents the opportunity to work. At least 85% of its services should be provided to working parents in the general population, rather than specific employers.
32. 501(n): Charitable risk pools
501(n) organizations are charitable risk pools that allow multiple nonprofits to collectively manage their insurance needs, potentially reducing costs and improving coverage.
These organizations not only pool insurance risks but also offer valuable risk management and loss control services. Income generated by 501(n) organizations from their operations is usually exempt from federal income tax under section 501(n) of the Internal Revenue Code.
How do you decide which type of nonprofit organization to start?
1. What is your reason for starting a nonprofit?
You must have a specific reason for wanting to start your own nonprofit. Whether you want to work on a charitable cause, advocate for social justice, or create a new trade association, there's a nonprofit type that's right for you.
With a clear purpose or mission in mind, you can easily identify the type of nonprofit that aligns with your vision.
2. Who will you be serving with your nonprofit?
Some tax-exempt statuses restrict who the nonprofit can serve. For instance, 501(c)(9), also called VEBAs, can only represent a group of individuals who have a common employer or are connected through a collective bargaining agreement.
Beneficiary restrictions can vary across different types of tax-exempt organizations. For example, 501(c)(3) organizations (charitable, religious, educational, scientific, etc.) generally have more flexibility in whom they can serve, as long as they operate only for charitable purposes. Likewise, 501(c)(19) veterans' organizations only support present and past armed forces members.
3. Who is starting the nonprofit?
When deciding which nonprofit to start, consider who will establish the organization. Most nonprofit statuses limit who can form such organizations.
For example, a 501(c)(1) organization can only be established by an Act of Congress. A private citizen cannot attempt to apply for this nonprofit status.
Wrapping up on different nonprofit types
Understanding the different types of nonprofits can help you become a better nonprofit leader and position your organization to hit the ground running.
Once you've determined which type of nonprofit makes the most sense for you, check its specific rules and regulations in your state.
As you start your nonprofit journey, consider using Zeffy's 100% free fundraising software. It's particularly well-suited for new organizations, allowing you to focus your resources on your mission rather than operational costs.
With Zeffy, you can manage donations, create campaigns, and engage supporters without worrying about fees or hidden charges, giving your new nonprofit a strong financial foundation from day one.
FAQs on types of nonprofit organizations
