Tax-Exempt vs. Nonprofit in Virginia

Most people use the terms “nonprofit” and “tax-exempt” interchangeably. Legally speaking, however, the terms have different meanings. The term “nonprofit” generally refers to provisions of state law that authorize the formation of nonprofit or nonstock corporations. In this context, the term “nonprofit” indicates a specific organizational structure recognized under state law. The term “tax-exempt” relates to certain provisions of the Internal Revenue Code of 1986, as amended (the “Code”), which describe the requirements for obtaining and maintaining exempt status. It is important to note that not all nonprofit organizations qualify for tax-exempt status. Further, not all tax-exempt organizations are nonprofit.