Which characteristic can be used to distinguish a nongovernmental not-for-profit from a governmental not-for-profit?

Which characteristic can be used to distinguish a nongovernmental not-for-profit from a governmental not-for-profit?

• A. Ability to impose taxes on citizens
• B. Governing board exists
• C. Valuable endowment
• D. Access to private donations

Answer: (A)

The key idea is that taxing authority is what sets governmental not-for-profits apart from nongovernmental ones. Governmental not-for-profits can levy taxes on citizens to fund operations, a power that comes from their role as part of the government. Nongovernmental not-for-profits do not have this authority and must rely on private donations, fees for services, and grants. Governing boards, endowments, and private donations can exist in both types, so they don’t reliably distinguish the two. Therefore, the ability to impose taxes is the defining characteristic.

The key idea is that taxing authority is what sets governmental not-for-profits apart from nongovernmental ones. Governmental not-for-profits can levy taxes on citizens to fund operations, a power that comes from their role as part of the government. Nongovernmental not-for-profits do not have this authority and must rely on private donations, fees for services, and grants.

Governing boards, endowments, and private donations can exist in both types, so they don’t reliably distinguish the two. Therefore, the ability to impose taxes is the defining characteristic.