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The Background of Nonprofit Organizations in the United States

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Nonprofit organizations in the U.S. can be broadly categorized into two types :
• Non-Profit Organizations (NPOs) are established with a social purpose or for some other public
benefit rather than for the pursuit of profit. They do not distribute dividends to shareholders;
instead, any revenue is reinvested back into the organization to further its mission. These
organizations are classified under Section 501(c)(3) of the U.S. Internal Revenue Code, granting
them exemption from income tax. Additionally, donors who contribute money or assets to these
organizations are eligible for tax deductions. Examples of prominent NPOs include National

Geographic, the Alzheimer’s Association, Big Brothers Big Sisters of America, the American Red
Cross, PBS, and the U.S. Chamber of Commerce.
• Not-for-Profit Organizations (NFPOs) are similar to NPOs in that they do not aim to generate profit,
but their primary purpose is to benefit their members, rather than society at large. Examples
include parent-teacher associations, homeowners associations, and university student clubs.
NFPOs fall under Section 501(c) or 501(c)(7) of the U.S. Internal Revenue Code. While they are
eligible to apply for income tax exemption, donors to NFPOs cannot claim tax deductions for their
donations. This report will focus specifically on NPOs, particularly foundations, which have played

a critical role in addressing social issues since the late 19th century and have been influential in
the development of social enterprises in the United States. The growth of social enterprises in
the U.S. has largely not been driven by public-sector support, but rather through the efforts of
private-sector organizations.

The emergence of philanthropic or charity organizations dates back to the late 1800s, and the
establishment of formal foundations followed in the early 20th century. Early foundations were
created by allocating personal wealth from industrial magnates, beginning with the founding of
The Carnegie Foundation by Andrew Carnegie in 1905 in Princeton, New Jersey, and the

Rockefeller Foundation, established by John D. Rockefeller in 1913 in New York State.

Carnegie donated his assets to build libraries and museums, eventually transferring all his wealth
to The Carnegie Foundation and the Carnegie Corporation of New York. Rockefeller, similarly,
funded the construction of the University of Chicago and donated nearly half of his fortune to
establish The Rockefeller Foundation. Foundations established in this manner are known as
private foundations, as they are funded by individuals, families, or corporations, with full control
over their governance and asset allocation resting with the original donors or their successors.
Other well-known examples of private foundations include the Bill and Melinda Gates Foundation,

the Walton Family Foundation, and the Coca-Cola Foundation. The primary activity of private

53 U.S. Chamber of Commerce, Nonprofit vs. Not-for-Profit vs. For-Profit: What’s the Difference? Source:
https://www.uschamber.com/co/start/strategy/nonprofit-vs-not-for-profit-vs-for-profit, สืบค้นเมื่อ 19 มกราคม 2568.
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