Non Profit organizations
are exempt from certain taxes.
Section 501 of the Internal Revenue Code lists several
circumstances under which corporations are exempt from
these taxes.
Section 501(c)(3) -- the famous one --
describes corporations (1) serving charitable,
religious, scientific or educational purposes (2) no
part of the income of which "inures to the benefit of"
anyone.
There are some specialized
tax rules and accounting practices that apply to
nonprofit corporations.
If they are of a certain size,
they are required to disclose many details of their
operations to the general public and to state regulators
and watchdog agencies using IRS form 990.
This form
shows any salaries paid to officers or directors and to
the five highest-paid employees and contracts if any
receive over $50,000 in the tax year (at the time of
this writing in 1998).
The form also requires the
organization to divide its expenses into "functional
categories" -- program, administration and fund-raising
-- and report the totals for each along with the amounts
expended on each program activity.
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