why do nonprofit organizations not pay taxes 
nonprofit organizations do not pay taxes because they are engaged in public or private interests the purpose of a nonprofit is to further extend the benefit to a community for this reason the irs recognizes and awards these entities tax exempt as any collected taxes would be used for a similar purpose i e would be redistributed to benefit the community can a tax exempt organization make money yes tax exempt organizations such as nonprofits are often encouraged and expected to make money or earn more money than what they spend for the financial health and longevity of the organization these entities must build reserves and have excess cash reside in bank accounts the purpose of being tax exempt is to have this net profit not be taxed by the irs the bottom linea tax exempt organization is a type of entity that is recognized by the irs as being exempt from paying federal income taxes on its earnings to be considered tax exempt an organization must meet certain requirements set forth by the irs and must apply for tax exempt status taxpayers can be exempt from paying certain amounts of ordinary income or capital gains 