What organization type is exempt from federal income tax?

Non-profit organizations are established primarily for purposes other than generating profit. They can be focused on charitable, educational, religious, literary, or scientific objectives. Under the Internal Revenue Code, most non-profit organizations can qualify for tax-exempt status, meaning they do not pay federal income tax on the revenue they receive, provided that they adhere to specific regulations and use their resources towards their mission.

This tax-exempt status allows non-profit organizations to allocate more of their resources towards their programs and services, ultimately enabling them to better fulfill their missions. It is a key feature that distinguishes non-profits from other organization types, such as for-profit businesses and private corporations, which are primarily oriented towards generating profit for shareholders and are subject to corporate income taxes.

This distinction highlights the importance of the mission-driven approach of non-profit organizations and reinforces their role in serving the public good without the burden of federal income taxation.