A nonprofit has a _____ status.

A nonprofit has a _____ status.

• A. tax liable
• B. low-tax
• C. tax-exempt
• D. non-exempt

Answer: (C)

Nonprofits typically qualify for tax-exempt status, which means they don’t owe federal income tax on income related to their mission. This status helps the organization devote more resources to its programs, and it often allows donors to deduct contributions on their own tax returns. The other terms don’t describe the usual state of a nonprofit: being tax liable would imply paying taxes; “low-tax” isn’t a formal designation; and “non-exempt” would mean they don’t have tax relief. So, tax-exempt status is the defining status for a nonprofit.

Nonprofits typically qualify for tax-exempt status, which means they don’t owe federal income tax on income related to their mission. This status helps the organization devote more resources to its programs, and it often allows donors to deduct contributions on their own tax returns. The other terms don’t describe the usual state of a nonprofit: being tax liable would imply paying taxes; “low-tax” isn’t a formal designation; and “non-exempt” would mean they don’t have tax relief. So, tax-exempt status is the defining status for a nonprofit.