Do Non Profit Groups Pay Income Taxes ?
Non profit organizations are companies working for both, public and private interests. Non profit organizations target goals which commonly involve public interest. They can also serve the private sector organizations and thus, can be categorized as one too. Due to this reason, these organizations are not classified as governmental agencies. |
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Generally, non profit organizations are exempted from paying income tax and other taxes. Non profit organizations need to apply for tax-exempt status in order to operate and not be penalized for not paying taxes.
A company seeking profit-for-individual interest is known as a private enterprise; for example, private limited companies. Company seeking goals related to public interests are known as public enterprise; for example, charities. Generally, private sector companies are not exempted from any taxes; while public sector companies are recognized as governmental agencies and organizations. Non profit organizations are a blend of public and private sectors. They are exempted from paying income taxes, but they do pay employee taxes.
Non profit groups are eligible to engage themselves in any kind of business. In case, where their goals are related to private sectors, and there is a certain amount of income generated, then that particular income generated is taxable. This is due to the fact that the income has not been generated from public oriented goals. The non profit groups will have to pay income tax over such profits. But, when there is income generated through public interests, like donation and charities, then these non profit groups do not have to pay for that income. So, the process of non profit groups is complicated but generally they are tax exempted.
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