U.S. law: nonprofit vs. not-for-profit

[Satisfying Andy Licious]

In U.S. law, is there a difference between a nonprofit group and a not-for-profit group?

[Walloon]

Yes, especially as concerns the Internal Revenue Service and the Postal Service. For instance, Credit Unions are exempt from federal taxes because they are not-for-profit. And special postal rates are available for not-for-profit organizations. In all, 97 sections of the U.S. Code mention not-for-profits.

[Walloon]

Oh wait, I see the distinction you are making in your OP. In the U.S. Code, "nonprofit" is used in 1,723 sections, vs. 97 sections using "not-for-profit". A quick glance through the definitions of those terms shows no difference in their definition. Although, I myself prefer to use "not-for-profit" to show the basic intention of the organization. A business intended to make profit can be "nonprofit" if it's doing badly.

[Satisfying Andy Licious]

Thanks, Walloon. I see hospitals and such referred to as "not-for-profit" groups, while I had usually associated "nonprofit" with charitable organizations, foundations, etc. But the terms are actually synonymous?

[Walloon]

Religious, educational, and charitable organizations are a sub-group of not-for-profits (or nonprofits) that have special privileges and exemptions under U.S. and state laws. Examples of not-for-profits that are not religious, educational, or charitable are political parties or advocacy groups.

[RealityChuck]

There is no legal difference between "nonprofit" and "not-for-profit" in the US. Any organization that it set up on a nonprofit basis (which primarily means the organization does not have stockholders or a paid board of directors and that it is engaged in educational, religious, or charitable activities).

Nonprofits get benefits under tax law -- mostly they don't pay taxes and for certain types of nonprofits, donations are tax deductable. There are regulations that define what type of nonprofit you are. A political party, for instance, gets no tax breaks. A professional organization pays not taxes, but donations aren't tax-deductible.

But the two terms are interchangeable.

[MLS]

I'm not a lawyer or tax accountant, but:

There ARE different kinds of classifications of organizations that are not commercial (for-profit). There is the type of organization that is not run for the purpose of making a profit, such as a social organization. It's not a business, uses funds for the purpose of continuing the organization only, but it's not a charity. I believe such an organization doesn't have to pay income tax on funds taken in since it's not a real business. However, when it buys something, it still has to pay sales tax, and donations to it are not deductible on your federal tax return.

On the other hand, there's the tax-exempt non-profit organization, such as a religious, charitable, or educational group. If you give money to a church or tax-exempt charity, you can use that donation as a deduction on your federal income tax. These organizations are also exempt from paying certain sales taxes.

I believe that a business that is trying (but failing) to make a profit qualifies for neither of these categories.

So the Saint Whatever's Fund for Widows and Orphans is probably tax exempt non-profit. Your contribution is not taxable and they don't pay sales tax. The Whatsville Ladies' Garden Club and Tea Society is probably not-for-profit. You can't deduct your dues and they pay sales tax just like everyone else. The Whatsville Garden Supply Company sells rakes and shovels. They have a whole bunch of forms they have to fill out and taxes they have to pay, even if they operated at a loss this year, that the WLGC doesn't have to be concerned about.

I've worked with a couple of not-for-profit organizations and this was the distinction that was made to me by the lawyers who were giving advice. Anyone who's planning to organize either type, of course, should contact a real lawyer and a real tax accountant.

[TaxGuy]

Ok, jesus, here we go again. Here's the deal:

The OP and repliers are discussing "U.S. law" as if one could curl up in a nice armchair and read a big book that says "U.S. law" on the cover. This is not the case.

The United States has lots and lots of different bodies of law, and each state has lots and lots of different bodies of law. Any one of these bodies of law may use the both the term "not-for-profit" and "nonprofit" and mean something different by them. The question asked in the OP therefore is absolutely devoid of meaning UNLESS you specify which body of law you are talking about.

If you are talking about U.S. federal income tax law, then I believe (although I am no expert in this area) that there is no meaningful distinction between the two terms.

Special note for MLS's post: dude, you're painting things with a really broad brush and treating the law of your favorit jurisdiction as if it were "U.S. law." The laws about exactly which entities are exempt from sales tax (etc.) are highly variable by state. Please people, don't rely on anything in MLS's post without checking out the actual situation yourself.