Sep. 12—While nonprofits and not-for-profits might seem like the same thing, the terms can have diverse impacts on organizations.
Attorney Kathy Tibbits, who is also a co-op secretary and artist at Tahlequah Creates, said there are two key steps for an organization to be considered a nonprofit.
"The reason there are two steps is because you have to qualify with the IRS for being just a certain kind of operation with certain business practices in order to meet that standard," Tibbits said.
Once the appropriate standard is met, Tibbits said, people can then donate and take tax deductions those items. When it comes to a not-for-profit status, Tibbits said, it will not have the same perk in terms of tax deductions.
"To be a not-for-profit, [the law] just says, 'Hey, this isn't about making money or not. It's not a business; we're just trying to accomplish a different goal.' and it's not tax-deductible to have that kind of business, but it does often have a different reason," Tibbits said.
When it comes to a nonprofit, Tibbits said, there are specific rules that prohibit it from becoming involved with politics, unless the project is considered a campaign, which will then fall under different rules.
Some examples of a not-for-profit in Tahlequah would be Tahlequah Creates, while a nonprofit would be an organization like the Tahlequah Area Chamber of Commerce.
"Tahlequah Creates is a not-for-profit. The gallery itself has shareholders — [a] membership doesn't entitle you to a share of dividends. But we also have a flow-through status because the money we make we set aside enough to match our expenses for the gallery, and everything else goes to the artists and the individual artists report their own income, so it doesn't get taxed at the Tahlequah Creates level. It gets taxed at the level of each of the artists who report their own art income," Tibbits said.
To become a not-for-profit, Tibbits said, establishing that group is a corporation is the first step, with the next being able to show the money will not be made at the corporate level; rather, it will be for the employees.
"First, it's like, what kind of corporation do you want? Do you want to be able to make money and put it into your pocket, or do you want to not pay tax on that money? If you don't pay tax, you're either a nonprofit or a not-for-profit," Tibbits said. "You can be a nonprofit or a not-for-profit, but still maybe not get tax-deductible contributions; that depends on your charity."