What is the social sector?

The social sector is the domain of private action for public good.  

While we think of the social sector as distinct from business and government, the borders among the sectors seem to get blurrier by the day. Organizations in the social sector represent a wide range of structures and strategies but are generally self-governing and primarily focused on a social mission. While the social sector is a global ecosystem, this dashboard focuses on its activity in the U.S. 

What kinds of organizations make up the social sector in the United States?

The social sector is a global ecosystem though legal frameworks vary by country. In the United States, the largest number of organizations included in the social sector are tax exempt nonprofits registered with the Internal Revenue Service (IRS), the most common of which is the 501(c)(3) charitable organization. The social sector also includes social businesses, political organizations, religious organizations, unincorporated community groups, and other institutions.

This graphic illustrates the range of organizations that make up the social sector in the United States. Each circle represents a distinct type of organization, with registered nonprofits shown in dark yellow. Intersecting circles indicate the overlap between organization types and across the social, business, and government sectors. Definitions for each organization type appear below. 

Charitable organizations

Most people think of charitable organizations when they hear the word nonprofit. Also sometimes referred to as public charities or 501(c)(3)s (the subsection of the IRS Code under which they’re tax exempt) in the United States, these organizations primarily administer programs to advance social well-being and occasionally make grants. Per the IRS Code, they may not engage in partisan political activities. Examples include the American Red Cross, a local food pantry, donor-advised fund (DAF) providers, and nonprofit hospitals. 

Foundations

We use this term to combine two distinct types of U.S. charitable organizations that exist primarily to make grants. Private foundations are a distinct subset of 501(c)(3) organization that is typically founded by and receives support from a small number of individuals or corporations. Community foundations are public charities that receive support from the general public to award grants to the geographic community where it’s based. Examples include the Ford Foundation, Tulsa Community Foundation, and the California Endowment. 

Social welfare groups

Also known as 501(c)(4)s, these groups are organized to promote the common good (as opposed to primarily focusing on the organization’s members or a select group of individuals). Unlike charitable organizations, these groups can engage in unlimited lobbying and attempt to influence elections if it’s not their primary focus. Additionally, donations to social welfare groups are not tax deductible. Examples include the National Rifle Association, American Civil Liberties Union, and AARP (American Association of Retired People). 

Business associations

501(c)(6) organizations are business leagues organized to promote common business interests among a community. These may not be focused on performing services for its members, only for the community as a whole. They may also engage in some political activities. Examples include the American Board of Ophthalmology, California City Chamber of Commerce, and LGBTQ Real Estate Alliance. 

Social and recreation clubs

Social and recreation clubs—501(c)(7)s—are typically membership organizations like sororities/fraternities, hobby clubs, or country clubs. They don’t have to support a charitable cause, but they must be organized for social and recreational purposes and may not generate a profit in order to maintain their tax-exempt status. Examples include Alpha Gamma Delta Fraternity, Maryland Geocaching Society, and New York Athletic Club. 

Labor unions, etc.

Subsection 501(c)(5) provides tax-exempt status to labor, agricultural, or horticultural organizations to improve working conditions, product quality, or efficiency. These organizations may engage in some political activity. Examples include United Steelworkers, Maryland Soybean Board, and Writers Guild of America West. 

Fraternal societies

Fraternal societies are tax exempt under 501(c)(8) or 501(c)(10) of the IRS code, and they operate under a “lodge” system wherein a parent organization oversees local branches. 501(c)(8) organizations provide insurance benefits to their members, whereas 501(c)(10) organizations donate their proceeds to charity. Examples include Knights of Columbus, Croatian Fraternal Union of America, and Catholic Life Insurance. 

Unincorporated community groups

These are groups that have not gone through the process of being formally recognized as nonprofits, but play an important role in the civic life of their communities nonetheless. Examples include mutual aid societies, neighborhood associations, and informal music clubs. 

Co-ops

The IRS doesn’t have a formal definition of cooperatives, but in the United States, these companies are typically governed democratically on a one-member/one-vote basis, and any remaining revenue after expenses are paid goes back to its members. This ownership structure extends to companies in every industry in the United States, and the National Cooperative Business Association helpfully distinguishes between four main types: worker co-ops, producer co-ops, consumer co-ops, and purchasing co-ops. Examples include food co-ops, agricultural co-ops like Land O’Lakes, and insurance cooperatives like Liberty Mutual. 

Social businesses

As defined by Nobel Peace Prize laureate Professor Muhammad Yunus, social businesses are enterprises created and designed to solve a social problem. These businesses are financially self-sustaining, but primarily exist to produce social impact so profits are reinvested in the business rather than paid to shareholders. Examples include Grameen Bank, Solar Sister, and TOMS shoes. 

Political organizations

These groups include political parties, candidates, committees, or associations aiming to influence a policy or an election. These organizations are tax exempt under Section 527 of the IRS code; a subset, such as political action committees (PACs), may accept unlimited donations and are not subject to spending limits. Examples include the Democratic and Republican National Committees, National Association of Realtors PAC, and Save America PAC. 

Quasi-governmental organizations

Quasi-governmental organizations (QGOs) are organizations that don’t fit neatly into either nonprofit or government sectors. One type of QGO is an organization that’s a registered nonprofit and is run by a board of government officials or has board seats appointed by a branch of government. In some cases, QGOs may not be considered part of the social sector. Examples include the National Park Foundation, many utility companies, and Fannie Mae. 

About

The U.S. social sector plays a critical role in advancing social good. But understanding what is happening in the social sector (or even, what is the social sector) can be complicated and confusing. At Candid, we often get questions about the sector as a whole—partly because of the role that we play, and partly because high-level and holistic information about the sector is hard to find. Candid’s U.S. Social Sector Dashboard is designed to address this need by sharing up-to-date data and key facts about the organizations, financial flows, and people that make up the sector. It is one of many ways Candid gets you the information you need to do good.  Please direct questions and feedback – as well as suggestions for data and analyses to include in future versions of the dashboard – to researchteam@candid.org.

Candid thanks the following sponsors for their support of the U.S. Social Sector dashboard: