First and foremost, nonprofits (in this case 501(c)3 organizations) are organized around the principle of community benefit. They exist to meet needs and improve the community. Nonprofits serve people in need, work to improve the environment, shape public policy, and advocate for change.

In most instances, nonprofits are incorporated businesses in the state. The Maryland Department of Assessment and Taxation incorporates nonprofit organizations as tax exempt, non-stock corporations. This specifc type of corporation has "members" as opposed to stock holders/owners and is governed by a board of directors.

• Frequently Asked Questions about Corporations and Taxes

According to the IRS, organizations that meet certain criteria related to community benefit can recieve exemptions from federal corporate taxes. These organizations must comply with certain governance models and and purposes. For more details, see the IRS's definition of a 501(c)3 organization.

• Six Important Facts about Tax-Exempt Organizations (from the IRS)

Potential tax exemptions

• State corporate income tax
• State sales tax
• State property taxes (if property use meets criteria)
• Federal corporate income tax

Taxes that are not exempted

• Payroll taxes (employee withholdeing and employer liability)
• Collection of sales taxes on products sold

For 501(c)3 organizations, donors may be eligible to claim personal or business deducations for donations given to the organization.