{"id":4611,"date":"2021-08-04T09:29:22","date_gmt":"2021-08-04T14:29:22","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-taxes\/do-nonprofits-pay-taxes.html"},"modified":"2025-02-11T23:46:00","modified_gmt":"2025-02-12T04:46:00","slug":"do-nonprofits-pay-taxes","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-taxes\/do-nonprofits-pay-taxes.html","title":{"rendered":"Do Nonprofits Pay Taxes?"},"content":{"rendered":"\n
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Do Nonprofits Pay Taxes?<\/h1>\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Tim Kelly, J.D.<\/a>\n | Last updated\n
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Most U.S. organizations granted nonprofit status<\/a> by the Internal Revenue Service (IRS) are generally exempt from tax. Yet, they must pay some types of taxes under certain circumstances.<\/p>\r\n

In most cases, when they are taxed, nonprofits must pay the unrelated business income tax (UBIT). This tax applies to income that doesn’t substantially relate to the organization’s exempt purpose<\/a>.<\/p>\r\n

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What Is a Tax-Exempt Nonprofit?<\/h2>\r\n

A nonprofit gains federal tax-exempt status if it meets IRS criteria, applies with the government<\/a>, and receives approval. An organization can meet these requirements<\/a> through both its initial formation and ongoing activities. State laws may set separate qualifying criteria for getting tax-exempt status at the state level.<\/p>\r\n

The nonprofit must be established for a tax-exempt purpose. Nonprofit organizations use their income, funds, or other resources to further the purposes for which they were formed<\/a>.<\/p>\r\n

There is no requirement that the exempt organization incorporates<\/a>. However, most choose to do so if they plan to seek tax-exempt status from the IRS.<\/p>\r\n

For the IRS to grant a nonprofit a tax exemption, its articles of incorporation must state that it was formed for a charitable purpose or limit its activities to those permissible under the Tax Code. Section 501(c)<\/a> of the U.S. Internal Revenue Code lists 27 types of nonprofit organizations exempt from tax.<\/p>\r\n

Still, most are exempt under Section 501(c)3<\/a>. This category gives an exemption to charitable organizations and lets donors deduct their charitable contributions.<\/p>\r\n

Nontaxable Activities<\/h3>\r\n

Common activities that are usually not taxable because they are related to a nonprofit’s purpose include:<\/p>\r\n