Until the mid-1990s, the IRS asked new organizations to select up to three "activity codes" to describe their activities. A lengthy list of these codes was provided in the IRS Form 1023 that new organizations seeking recognition of their exempt status filed with the IRS. When the organization was added to the IRS Business Master File, these codes would be included.
NCCS (then based at Independent Sector) found that these codes were often inaccurate and worked with the IRS to eliminate self-coding. Instead, IRS "determination specialists," the staff responsible for ruling on whether or not an organization qualified as tax-exempt, would add a NTEE code at the completion of the determination process. This code would eventually be added to the IRS Business Master File.
Why are the Activity Codes often wrong? Sometimes, organizations' activities change after they have been created. As far as we know, there was no simple method for them to update their Activity Codes on the IRS files and they may well have been unaware of the fact that the codes were public. Second, self-classification, especially when based on a long paper list of terms lacking definitions, is often fraught with problems. Users may not take the time to review their options or may lack the expertise to understand the intended meaning of the terms. Finally, there appear to be pockets of records that the IRS simply miscoded. (E.g., a large number were listed as scouting organizations even though they could not possibly have self-identified as such.)
The first Activity code is far more reliable than the 2nd or 3rd.
A list of the codes is available on our website.