What is the difference between a nonprofit and IRS tax-exempt status?
Typically, a nonprofit is incorporated with the state where its headquarters is located. Bring incorporated as a nonprofit does NOT automatically mean that contributions made to the organization are tax deductible on a donor’s federal income tax return. In order for donors to receive the benefit of a charitable deduction, the nonprofit corporation must apply to the IRS for recognition, and be granted recognition, as a tax-exempt organization under Federal (US) law. The application form is called a Form 1023. Recognition by the IRS allows a qualifying nonprofit organization to inform donors that charitable gifts made to it may qualify for deduction from the donor’s taxable income. NOTE: neither nonprofit status not tax-exempt recognition mean that a nonprofit organization never pays taxes. Some nonprofits and 501(c)3’s pay federal income taxes as well as various state and local taxes.
