New Nonprofit Formation Statistics (2026)

The nonprofit sector remains a cornerstone of American civic infrastructure. In Fiscal Year 2024, the Internal Revenue Service (IRS) recognized 1.5 million charitable, religious , and other tax-exempt organizations. Understanding the landscape of nonprofit formation—how fast organizations are growing, where they're concentrated, and the operational challenges they face—is essential for nonprofit leaders planning screening programs and volunteer vetting. This report draws from IRS data, Bureau of Labor Statistics, Independent Sector research, and the Urban Institute's National Center for Charitable Statistics to provide you with the most current, authoritative figures on nonprofit formation trends. It's part of our nonprofit industry statistics hub.

Key takeaways

The Scale of the Sector: 1.5 Million and Growing

In Fiscal Year 2024, the Internal Revenue Service (IRS) recognized 1.5 million charitable, religious , and tax-exempt organizations operating in the United States. This represents the most complete picture of active nonprofits available, though the total number of organizations—including unincorporated associations and those below the IRS reporting threshold—is likely higher.

Over the past two decades, the number of nonprofit organizations has grown at a steady rate of 1.4% annually . While this growth is steady, it reflects a sector in expansion but facing significant operational pressures. Over $1.5 trillion contributed by nonprofits to the economy in 2024 , demonstrating the sector's outsized economic impact relative to its employment share.

Nonprofit Employment: A Major Workforce Segment

In 2022, over 300,000 nonprofit establishments accounted for 12.8 million jobs, or 9.9 percent of all private-sector jobs . This makes the nonprofit sector the third-largest employment segment in America, behind only retail and accommodation/food services. The sector has shown remarkable resilience despite pandemic-era challenges.

Between 2019 and 2020, when the COVID-19 pandemic began, nonprofit employment fell by 4.5 percent, followed by over-the-year employment increases in the subsequent two years. In 2022, nonprofit employment was below its 2019 level by 1.4 percent . Recovery continues, though workforce challenges—particularly around retention and burnout—remain acute.

Nonprofit Size Distribution: The Majority Are Very Small

The nonprofit sector is heavily skewed toward small organizations. The majority (59%) of U.S. nonprofits are "very small" with annual budgets less than $50,000, and 97% have budgets of less than $5 million . This creates a two-tier sector: a small number of large, well-resourced organizations and a vast ecosystem of grassroots groups operating on shoestring budgets.

For small nonprofits, this size distribution has direct implications for volunteer management and screening. Organizations with limited budgets often lack formal HR infrastructure and rely heavily on volunteers—making proper identity verification and compliance-ready screening essential but challenging to implement.

Geographic Concentration: Nonprofit Hotspots

In 2022, Washington D.C. had the largest rate of nonprofit employment as a share of total employment, with 25 percent, followed by Vermont (20 percent) and Massachusetts (18 percent) . These geographies reflect historical philanthropic infrastructure, concentrations of educational and health institutions, and regional policy environments that support nonprofit growth.

Understanding regional density matters for organizations planning expansion or comparing operational benchmarks. States with higher nonprofit employment concentrations also tend to have more developed nonprofit infrastructure, including legal support, fundraising networks, and volunteer recruitment ecosystems.

Tax-Exempt Status Applications: IRS Form 1023 & 1024

For new organizations seeking federal tax-exempt recognition, the IRS requires submission of either Form 1023 (for Section 501(c)(3) charities) or Form 1024 (for other 501(c) subsections). Form 1023 application user fee for the long form is $600, and the Form 1023-EZ is $275 respectively . Both forms must now be filed electronically through Pay.gov portal , streamlining the application workflow.

Even though the IRS approved 90 percent of applications, 10 percent were delayed, rejected, withdrawn, or otherwise viewed as problematic . Nonprofit founders should invest time in careful application preparation to avoid costly delays. For nonprofits managing volunteers, maintaining clear governance documentation and organized volunteer screening practices strengthens both IRS credibility and donor trust.

Funding Pressures & Operational Challenges

In 2025, 81% of organizations surveyed struggled to raise enough funds to cover all of their costs, and 36% ended their most recent fiscal year with an operating deficit . This funding crisis—coupled with rising operational costs and staff burnout—is reshaping how nonprofits approach mission delivery and volunteer management.

One-third of US nonprofits had some type of government funding disruption in 2025, according to Smart Cities Dive. About 34% of nonprofits have experienced or anticipate a funding loss from the federal government and 29% from state and local government . These disruptions force nonprofits to diversify revenue streams and rely even more heavily on volunteers.

Even as demand grows, nonprofits are stretched thin. Most nonprofits (68%) expect demand for their services to increase in 2026, but only 31% of organizations said they are expanding how many people they serve . In this environment, having a compliant, efficient volunteer screening process—including character reference verification—becomes a competitive advantage and a risk mitigation necessity.

Growth Outlook: 2026–2030 Forecast

Looking ahead, nonprofit industry revenue is forecast to increase at a 5.46% compounded annual rate from 2026 to 2030, faster than the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc. This favorable long-term trajectory suggests that while near-term funding pressures are real, the sector's fundamental demand remains strong.

What this means for your volunteer program

Nonprofit formation continues at a steady pace, and the 1.5+ million organizations in the sector are increasingly reliant on volunteers to bridge funding gaps and extend impact. As volunteer demographics shift and regulatory scrutiny intensifies, screening nonprofits of all sizes—especially small organizations with <$50K budgets—must prioritize volunteer screening as a core operational practice, not an afterthought.

Nonprofit failures are often rooted in governance lapses and reputational damage. A single unvetted volunteer involved in misconduct can devastate an organization's donor base, staff morale, and public trust. More importantly, it exposes vulnerable populations—children, seniors, the disabled—to preventable harm.

VolunteerBadge makes compliance achievable and affordable. Our $5 FCRA-compliant background checks include identity verification with no monthly fees—perfect for the 97% of nonprofits running lean budgets. Whether you're a newly formed organization building screening infrastructure from scratch or an established nonprofit scaling a volunteer database, our platform integrates seamlessly with your operations and audit trails, keeping you audit-ready and donor-confident.

Download the data

All statistics from this report—including source URLs, publication years, and methodology notes—are available for download in our structured data export.

Frequently asked questions

Q: How many nonprofits are in the United States?
A: As of Fiscal Year 2024, the IRS recognized 1.5 million charitable, religious, and other tax-exempt organizations. The total number of unincorporated associations and entities below the IRS reporting threshold is likely higher, but 1.5 million is the most reliable, verified figure.

Q: How fast is the nonprofit sector growing?
A: Over the past two decades, nonprofits have grown at a steady 1.4% annually. Looking ahead, nonprofit industry revenue is forecast to grow at 5.46% compounded annually from 2026 to 2030, faster than overall GDP growth.

Q: What percentage of the U.S. workforce works in nonprofits?
A: Approximately 9–10% of the private-sector workforce is employed by nonprofits. In 2022, nonprofits accounted for 12.8 million jobs across 300,000+ establishments, making the sector the third-largest employment segment after retail and accommodation/food services.

Q: What are the funding pressures facing nonprofits in 2026?
A: In 2025, 81% of nonprofits struggled to raise enough funds to cover costs, 36% ended the year with an operating deficit, and 33% experienced government funding disruptions. Despite this, 68% expect demand for services to increase in 2026.

Q: What's the approval rate for IRS Form 1023 (tax-exempt) applications?
A: The IRS approves approximately 90% of Form 1023 applications; 10% are delayed, rejected, withdrawn, or problematic. Careful preparation and complete documentation significantly improve approval odds.

Q: Why does volunteer screening matter for new nonprofits?
A: New nonprofits are particularly vulnerable to reputational and legal risk. A single unvetted volunteer involved in misconduct can damage donor trust, trigger lawsuits, and harm vulnerable populations. FCRA-compliant screening with identity verification builds credibility with funders and protects mission delivery.

Sources & references

1. National Council of Nonprofits — About the Nonprofit Sector (2025)
2. Independent Sector — Health of the U.S. Nonprofit Sector (December 2025)
3. Independent Sector — Nonprofits Squeezed by Growing Need and Fewer Resources (December 2025)
4. U.S. Bureau of Labor Statistics — Nonprofit Sector Research Data
5. USA Facts — How Many Nonprofits Are There in the U.S.?
6. Zippia — 26 Incredible Nonprofit Statistics [2026]
7. Vertical IQ — US Nonprofit Sector Industry Profile
8. Wikipedia — Form 1023
9. Wagemaker Law — IRS Form 1023 Application Guide
10. Internal Revenue Service — Instructions for Form 1023 (12/2024)
11. SVA Accountants — Choosing the Right IRS Form for Nonprofits: 1023 vs. 1024
12. Baker Tilly — Tax-Exempt Not-for-Profit Organizations via IRS Form 1024
13. Candid — Where Can I Find a Nonprofit's Form 1023?
14. Wikipedia — Form 1024
15. Exempt Nexus — Form 1024 Explained: Noncharitable Tax Exemption Guide
16. Davis Law Group — Form 1023: What You Need to Know About Applying for Tax-Exempt Status
17. Library of Congress — Statistics and Datasets: The Nonprofit Sector in the United States
18. Funraise — The State of the Nonprofit Sector (2026)
19. NonProfit PRO — 12 Revealing Nonprofit Stats From 2025
20. Center for Non-Profit Coaching — Nonprofit Leadership Development Statistics 2026
21. Keiter CPA — US Nonprofit Sector Industry Report 2024
22. George Mason University Nonprofit Center — 2024 Nonprofit Employment Report
23. Business Initiative — Number of Nonprofits in the U.S. (2025)
24. Statista — Nonprofit Organizations in the U.S. — Statistics & Facts
25. Firstep Business Solutions — Nonprofit Organizations: Complete Guide to Structure, Types, and Operations
26. Philanthropy Roundtable — Growth of the Nonprofit Sector: More Charities, Better Solutions
27. VolunteerBadge — Number of Nonprofits by Country (2026)