When you listen to the news, you will hear politicians arguing about whether the economy is growing at a sufficient pace. Perhaps the accusation is that the economy is worsening, or the economy is growing but too slowly, or the economy is fine today but will take a major downturn in the future. The truth is, if we knew exactly what the economy would do, more people would become more active in the market. But when there is a lack of confidence in the market, people are hesitant to risk major investments in business. This is the type of economic talk we have heard from the pundits for the last several years. And, like it or not, that discourse will continue for as long as we have an economy.
But while some may have hesitated to risk starting a small for-profit business in the last decade, the world of nonprofit organizations has expanded at an astounding rate. In Indiana, the number of 501(c)(3) tax exempt public charities increased by 39.8% between 2003 and 2013. Now Indiana has at least 23,963 501(c)(3) tax exempt nonprofit organizations. Nationally, during the same time period the number of 501(c)(3) tax exempt public charities increased by 35% so that there are now at least 1,056,912 such organizations. To say the least, Hoosiers, and Americans in general, are becoming more community focused through charitable organizations.
The benefits of forming a nonprofit organization for charitable work are tremendous. From a tax standpoint, a nonprofit organization—if it is planned strategically—will be eligible for tax exempt status. Tax exempt status means that the organization will not have to pay federal or state income tax. In addition, the nonprofit organization may apply for an exemption from state sales tax. Moreover, the contributions to the nonprofit organization may be tax deductible under IRC § 170. Simply stated, the Indiana Code and the Internal Revenue Code are written so as to encourage community members to start non-profits.
And that’s merely the tax benefits.
Think about how much good a non-profit organization can do in the community. Charitable organizations might provide scholarships to those who cannot afford to attend college. Other organizations may conduct scientific research to find a cure for cancer. Still others might provide a safe place for students to escape the violence on the streets. Indeed, the possibilities are endless.