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  4. What is a “non-profit?”

The term “non-profit” broadly refers to an organization or trust that is organized and operated for purposes other than making and distributing profits. The term often is used to mean an “exempt organization,” that is, one that is exempt from having to pay income taxes.

A non-profit is an entity created under the laws of a given state for not-for-profit purposes. The simple act of creating a non-profit entity, however, does not make it an exempt organization, though doing so is a necessary requirement for tax exemption. Whether an organization is tax-exempt is a determination made by the IRS after the organization submits an appropriate exemption application. (Some states also require a separate state exemption application.)

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