There are those who argue that everything should be for-profit, and that the IRS created nonprofits in effect. This is not accurate. There have always been nonprofits such as religious institutions, universities, hospitals, shelters, orphanages, etc. Rather, the government â€“ through its regulation and taxation policies â€” has distorted the market to the point where business organization and motives became ever changing in order to stave off the negative effects of massive theft and bureaucracy.
And thus the IRS, in an attempt to soften the damaging consequences upon the sector that engaged in philanthropic ideals, offered up the nonprofit status, or tax escape. Like the “enterprise zone” hoax and other tax incentives, the tax-exempt status is an attempt at social engineering through “kinder and gentler” theft policies. So the IRS did create the tax status effect of nonprofits, but not the concept itself.