Nonprofit refers to groups whose purposes are to benefit the public. A nonprofit is exempt from income tax under Sections 501(c)(3) or 501(c)(4) of the federal Internal Revenue Code. There are actually 20 categores of tax-exampt organizations under Section 501 of the tax code. All of these are considered "nonprofit" organizations.
Charities are classified as 501(c)(3) tax-exempt organizations. These include organizations whose purposes are:
- testing for public safety
- fostering national or international amateur athletic competition
- preventing cruelty to children or animals.
Furthermore, "charitable purposes" are defined as activities beneficial to the public interest and serving an open class of people, not a limited number of identified people. Examples of charitable purposes include:
- relieving the poor, distressed or underprivileged
- advancing education or science (distinct from instruction which would be an educational purpose)
- erecting or maintaining public buildings, monuments or works
- lessening the burdens of government
- eliminating prejudice and discrimination
- promoting and developing the arts
- defending human and civil rights that are secured by law
When you apply for 501(c)(3) status, your "charitable purpose" might fit into one or several of these categories.
501(c)(4) tax-exempt organizations are those that often pursue changes in public policy and seek to influence the legislative process.