Letter to the editor: Meaning of ‘nonprofit’ is misunderstood

A reader explains the meaning of "nonprofit" as it applies to hospitals.

Craig Wax, DO’s letter about the tax-exempt status of many hospitals reveals a common misunderstanding of the term “nonprofit.”  (“Hospitals should not be exempt from taxes," January 10, 2014.) This status describes those entities who do not have shareholders or owners who receive profits or dividends from the revenues of the business. 

A nonprofit organization is allowed to generate surplus revenues above expenses as long as those revenues are used or saved for the purposes outlined in the organization’s application for not-for-profit status. The money saved by being tax-exempt can be legitimately used for the goals of the organization.

Marlene A. Harvey, DO

Williamstown, Michigan