Basic Knowledge About Non-Profit Organization and Philanthropy that You Need to Know. Are you here because of trying to look for a simple understanding of non-profit organizations? or you may be planning to be a donor to a nonprofit organization? Here you will find basic knowledge about the non-profit organization and philanthropy to help you understand what non-profit organization is.
What is it?
A Non-Profit Organization and philanthropy or usually also called philanthropic organizations are nongovernmental and nonprofit entities that use donated income and assets to provide useful and social services. When the organization is organized properly and also dedicated for specific purposes. This type of organization will be exempted from federal income tax and the donations to this non-profit organization will also become tax-deductible.
We may have heard that nonprofit organizations are also often called philanthropic organizations. However the IRS or Internal Revenue Service does not prefer the word “philanthropic” in their process of seeking the status of tax exemption. IRS code 501(c)(3) stated that a philanthropic organization should meet some specific requirements or else it is categorized as a private foundation. it is also announced that any non-profit organization looking for tax exemption should state that it is formed for charity. Gaining basic knowledge about non-profit organizations and philanthropy means we can not leave this topic behind.
The History Non-Profit organization
This kind of organization has been known to exist since a long time ago. Statute of Charitable Uses is one of the earliest laws that defined charitable organization and it was passed by English parliament way back in the year 1601.
Non-profit and charitable organizations in the US have benefitted from tax exemptions from the earliest federal income tax. The tax exemption status is given to this type of organization,because of its purpose of providing services or benefit the society and relieve the government in some sense. Another reason is that the organization is under the protection of the church and separated from the state.
Types of non-profit organizations
The types of philanthropic organizations are depending on what specific purposes which qualified for tax exemption they are made for. Those purposes are religious, charitable, scientific, literary, public safety, animal cruelty prevention, educational and also fostering amateur sports competition.
Non-profit Income and requirements for the organization
The income source for non-profit organizations comes mainly from donations and fundraising. Donations will make up about 10 % of the non-profits’ income. The income received is also from the product sales, interest, return on investments. Fees for services provided as well as the government grants.
One important basic knowledge about non-profit organizations and philanthropy is the requirements of the organizations. This topic particularly will be crucial if you want to start your non-profit organization. while the organization should be made for specific purposes. These non-profit organizations are also subject to specific tax provisions made for private foundations. The organization should also have rules to regulate the deal between organizations and contributors. The organization will have limits in terms of holding in investments as well as how it should distribute income for charity purposes every year.