The ‘invisible majority’: What we know about very small nonprofits

Did you know? The majority of U.S. 501(c)(3) nonprofits are very small organizations with annual budgets below $50,000. That’s less than the median U.S. household income ($80,610 in 2023). These very small organizations are often overlooked both by donors and research about the sector, in part because we know much less about them than about other nonprofits. Data about larger nonprofits tends to come from their annual filings with the IRS (Forms 990-EZ or 990). Very small nonprofits, however, are eligible to complete a much shorter Form 990-N (“e-Postcard”), which contains only basic information like organization name, mailing address, and website URL.     

Candid’s new fact sheet Key Facts About Very Small U.S. Nonprofits summarizes what we do know about these organizations, based on IRS and Candid data. We define “very small nonprofits” as 501(c)(3) organizations with a Form 990-N filing requirement per the 2023 IRS Business Master Files that also filed a Form 990-N in 2022 or later.ⁱ “Other nonprofits” represents 501(c)(3) organizations that filed a Form 990 or 990-EZ in 2022 or later. By this criteria, nearly 60% of U.S. nonprofits are very small. 

Here’s what we learned about the sector’s “invisible majority”: 

Very small nonprofits tend to be younger than other nonprofits

Among 501(c)(3) organizations with budgets below $50,000, 26% received tax-exempt status in the last five years, compared with only 8% of all other organizations. More than half (58%) of very small nonprofits received tax-exempt status in the last 15 years, compared with 30% of other nonprofits.  

While 4% of very small nonprofits have been around for more than 75 years, they’re primarily state or local chapters of large umbrella organizations such as 4-H clubs or Toastmasters International. 

Note: Based on an organization’s ruling year per the IRS Business Master File.   

Very small nonprofits are engaged in every subsector

These organizations are active in many local, community-based, grassroots efforts across issue areas. For example, in the area of human services, very small nonprofits include youth clubs, sports groups, and local parks and recreation associations. In the education subsector, they include booster clubs, parent-teacher organizations, and alumni associations. 

Note: Based on an organization’s National Taxonomy of Exempt Entities code per the IRS Business Master File. Excludes organizations categorized as mutual benefit or unknown. 

We found interesting differences when examining very small nonprofits by subsector and age. Very small education organizations tend to be older, with 14% receiving tax-exempt status more than 55 years ago. By contrast, only 1% to 2% of very small religious, health, international/foreign affairs, and environmental nonprofits received tax-exempt status before 1970. 

Very small nonprofits have more diverse leadership

Among organizations that shared demographic data with Candid, 46% of very small nonprofits are led by CEOs of color, compared with 24% of other nonprofits. 

Note: Based on Candid’s demographic data for 6,845 very small nonprofits and 35,257 other nonprofits. Excludes organizations with co-leadership models. 

Very small nonprofits also have more diverse boards. They’re more likely to have majority BIPOC (Black, Indigenous, and people of color) boards and majority female boards compared with other nonprofits.  

Very small nonprofits are far less likely to receive foundation funding

Among the nonprofits in our sample that had tax-exempt status between 2019 and 2023, 22% of very small nonprofits received at least one foundation grant, compared with 72% of other nonprofits. 

Although very small nonprofits represented 60% of the nonprofit organizations in this subset, they received only 0.4% of funding between 2019 and 2023. There are several reasons why very small nonprofits may not receive foundation support: They have limited resources and capacity to look for and apply for foundation grants. They may also lack connections or access to foundation representatives. 

Very small nonprofits with budgets below $50,000 make up the majority of the U.S. nonprofit sector. They contribute to the vitality and well-being of communities across the country but are often overlooked and undervalued in the sector. What small nonprofit do you know that does good work in your neighborhood? Learn more about very small U.S. nonprofits in this fact sheet.  

Photo credit: Ryan McVay via Getty Images

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ⁱ The analyses exclude private foundations, organizations with no U.S. state location, non-501(c)(3) organizations, and those with a Form 990-N filing requirement that elected to file a Form 990 or 990-EZ. Demographic and foundation funding data were drawn from Candid’s database.