Nonprofit
organizations are created to fulfill certain benefits to society, such as
providing health care services, and services that benefit the less fortunate.
For profit organizations are created with the goal of making the biggest profit
by selling goods or services. Nonprofits are registered as 501(C)(3)
organizations which allows them to provide their services without having to pay
back taxes at the end of the year and everyone that contributes to a nonprofit
organization is able to write it off as non-taxable (Grace College, 2017). For
profit organizations are not tax exempt and are required to pay taxes. For
profit organizations consist of mostly paid employees and interns, and
nonprofits usually rely on volunteers. Surplus income from for profit
organizations is distributed among stockholders. The profits that are received from
nonprofit organizations are used to pay reasonable salaries, and pay for the
activities and expenses that help accomplish the mission of the organization.
Another big difference between the two is their funding. Nonprofits rely on
donations of time and money, as well as government grants. For profit funding
comes mostly from investors and the revenue that is generated from sales
(Norwich University, 2017).

In
many states, it has been proposed that a non-for-profit must meet a minimum for
the amount of charity care provided. Texas has already made minimum
requirements. Texas not-for-profit hospitals need to be accountable to the
public for the tax exemptions that they receive. Four tests are used in Texas
to prove if a hospital is meeting the minimum requirements and one of them has
to be met. The most common test is to ensure that at least 4% of net patient
service is spent on charity care. Any not-for-profit hospital that doesn’t meet
standards could be up for possible taxation. The American Hospital Association
has published guidelines for what can be considered charity care (Gapenski
& Reiter).