The Different Types of Tax-Exempt Entities

The most common type of nonprofits are 501(c)(3) organizations.  These entities qualify for exemption from federal income tax under section 501(c)(3) of the IRS Code and are organized for one or more of the following purposes.

• Religious
• Charitable
• Scientific
• Testing for public safety
• Literary           
• Educational
• Fostering national or international amateur sports competition     
• The prevention of cruelty to children or animals

Churches, charitable hospitals, schools, Boys & Girls Clubs, the Red Cross, Habitat for Humanity, and YMCAs are all 501(c)(3) organizations.  These are the likely the organizations that you think of when you think “nonprofit.”  But did you know there is a whole list of other types of organizations that are tax-exempt?

501(c)(4) – Civic Leagues and Social Welfare Organizations

These organizations are operated primarily to promote social welfare to benefit the community.  They operate primarily to further the common good and general welfare of the people of the community. 

Examples – Civic associations, some homeowners’ associations, volunteer fire companies

501(c)(5) – Labor, Agricultural and Horticultural Organizations

A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions, wages, and similar benefits. 

Agricultural and horticultural organizations are connected with raising livestock, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits.

Examples – United Steelworkers, State Teachers Association, Pork Producers

501(c)(6) – Business Leagues, etc.

A business league is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. 

Examples – Chamber of commerce, board of trade, real estate board, professional football leagues

501(c)(7) – Social and Recreation Clubs

These entities are organized for pleasure, recreation, and other similar nonprofitable purposes.

Examples – Some college alumni associations, country clubs, amateur hunting or tennis clubs, hobby clubs, garden clubs

501(c)(8) and 501(c)(10) – Fraternal Beneficiary Societies and Domestic Fraternal Societies

Fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents while domestic fraternal societies don’t provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. purposes. 

Examples – Knights of Columbus, Shriners

501(c)(13) – Cemetery Companies

Cemetery companies or corporations charted solely for the purpose of the disposal of human bodies by burial or cremation. 

501(c)(14) – Credit Unions and Other Mutual Financial Organizations

Credit unions without capital stock, organized and operated under state law for mutual purposes and without profit. 

501(c)(19) – Veterans’ Organizations

Veterans’ organizations are a group of past or present members of the Armed Forces of the United States. 

Examples – American Legion, Veterans of Foreign Wars

Not all tax-exempt organizations have the same benefits.  For example, contributions to 501(c)(3) organizations are deductible as charitable contributions on an individual’s tax return; however, contributions to most of the other types of organizations are not. 

It is important to know what type of tax-exempt entity your organization is

• If you are applying for tax-exempt status to be sure you select the correct section
• If you are an existing organization so that you know the rules specific to that section and what annual form to file with the IRS
• If you are donating to an organization so that you know if your gift is tax- deductible

To see a full list of the different types of tax-exempt organization, see the IRS Organization Reference Chart.

Contributed by Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors