Nonprofit vs. Not-for-Profit: Why The Difference Matters

Most people use the terms “nonprofit” and “not-for-profit” interchangeably. In casual conversation, that may not matter. Legally and for tax purposes, however, the distinction can affect how an organization operates, who it is intended to benefit, whether contributions are tax-deductible, and how the IRS regulates it.

This confusion arises because no single legal definition of “nonprofit” and “not-for-profit” applies nationwide. Additionally, State corporation laws, federal tax law, and common usage use these terms somewhat differently.

The Common Goal

Both nonprofit and not-for-profit organizations usually pursue purposes whose objective is not principally to generate profits for their owners or shareholders. Many, like a shared surgery center or a jointly owned public airport fueling center, while not principally operated to generate profits, may operate to assist the business of professionals or airline carriers.