What Is a Nonprofit Agency?

Nonprofit agencies help communities and people who live in them. Nonprofits, for example, assist the poor, provide arts venues, educate children and work for clean water. Some nonprofits provide services for those with certain occupations or backgrounds. Approximately 2 million nonprofits are registered with the IRS, according to a 2009 report by the National Center for Charitable Statistics. Many nonprofits are not registered with the IRS because their annual revenues are less than $5,000.

Definition of "Agency"

The word "agency" is from the Latin agere, meaning "to do." The "World English Dictionary" defines agency as a "business or other organization providing a specific service: an employment agency." Although nonprofits are often thought of as or called agencies, they are more often referred to as "nonprofit organizations, " "nonprofit groups," "public charities" or simply "nonprofits."

General Description

According to Cornell University Law School Legal Information Institute, a nonprofit organization is "a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members, directors or officers. Nonprofit organizations must be designated as nonprofit when created and may only pursue purposes permitted by statutes for nonprofit organizations. Nonprofit organizations include churches, public schools, public charities, public clinics and hospitals, political organizations, legal aid societies, volunteer services organizations, labor unions, professional associations, research institutes, museums and some governmental agencies."

Four Functions

In "America's Nonprofit Sector -- A Primer," published in 1999, author Lester Salamon says nonprofits serve four functions. Nonprofits are service providers that provide services to the community sometimes quickly, before the government is able to respond, and without waiting for agreement from a majority of citizens. Nonprofits are "value guardians" that provide mechanisms for promoting individual initiatives for the public good. Nonprofits provide advocacy and problem identification, serving as a means for drawing public attention to societal issues. Nonprofits also provide "social capital" by acting as a bridge between capitalism and democracy and developing a sense of community among individuals by providing a way for them to engage in social-welfare issues.

IRS Definition of Public Charity

Nonprofits that are tax-exempt and provide tax deduction for charitable donations fall under section 501(c)(3) of the IRS's classification system. The IRS considers these groups to be "public charities." According to IRS rules, a 501(c)(3) nonprofit must be organized and operated for purposes that are "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals."

References

• National Center for Charitable Statistics: Quick Facts About Noprofits
• Dictionary.com: World English Dictionary --- Agency
• Cornell University Law School Legal Information Institute: Nonprofit Organizations
• America's Nonprofit Sector --- A Primer: Lester M. Salamon; 1999
• IRS: Exempt Purposes --- Internal Revenue Code Section 501(c)(3)

Resources

• National Council of Nonprofits
• Independent Sector