23 Tax-exempt Organizations Flashcards
What are the general filing requirements for an exempt organization?
It must file an information return (Form 990) if gross receipts exceed $50,000.
Most exempt organizations not required to file an information return must file an annual electronic notice with the IRS (Form 990-N).
What is a private foundation?
A tax-exempt organization that receives less than one-third of its annual support from its members and the general public
True or False: Recognition of tax-exempt status is not automatic.
True. Recognition of tax-exempt status is not automatic. It is instead granted to a qualifying entity upon submission of an application with the IRS (i.e. Form 1023).
Describe a feeder organization.
An organization does not qualify as an exempt charity if it is merely a feeder organization. A feeder organization is an organization operated as a business for profit but that transfers all its net earnings to charitable organizations.
True or False: Organizations that are publicly supported (i.e. public charities) normally receive at least one-third of their support from the general public and/or governmental entities.
True. Organizations that are publicly supported (i.e. public charities) normally receive at least one-third of their support from the general public and/or governmental entities. The donations must be used exclusively for carrying out their exempt purpose.
Describe a Section 501(c)(3) organization.
Section 501(c)(3) tax-exempt organizations are established to benefit the public interest and are classified by their funding as private foundations or public charities.
True or False? Tax-exempt entities cannot have a partnership tax classification.
True. Among the classifications to which an exempt entity must belong are a corporation, community chest, fund, foundation (private and exempt operating), labor organization, social club, pension and profit-sharing trust, or a private foundation. Partnerships, because they are pass-through entities, cannot be treated as tax-exempt organizations.
Which organizations are eligible to file Form 990-N (e-Postcard)?
Small exempt organizations whose gross receipts are $50,000 or less are generally eligible to annually file an electronic Form 990-N (e-Postcard) listing the organization’s legal name, mailing address, and employer identification number.
Can a tax-exempt organization engage in lobbying activities?
An exempt organization may, on a limited basis, engage in lobbying activities if directly related to their tax-exempt purpose. However, organizations (other than churches) are subject to an excise tax for excessive lobbying activities.
Can a community savings and loan association that issues stock qualify as a tax-exempt organization?
No, a community savings and loan association that issues stock (ie, third-party ownership interests) is a for-profit entity and therefore does not qualify as a tax-exempt organization.
What is the correct code section and subsection to describe an organization given exempt status from federal income tax once approved by the IRS?
Certain organizations are designated 501(c) organizations and given exempt status from federal income tax once approved by the IRS.
Which of the following is not considered a IRC 501(c) organization?
a. Religious organization
b. Amateur sports organization
c. Homeowners association
d. Tiedye partnership
d. Tiedye partnership - The entity must be operating as a corporation, community chest, fund, charity, labor organization, social club, pension and profit-sharing trust, or private foundation. Partnerships cannot be treated as tax-exempt
Which of the following is considered a IRC Section 501(c)(3) organization?
a. Religious organizations
b. Educational organizations
c. Private foundation
d. All of the above
d. All of the above. Section 501(c)(3) tax-exempt organizations are established to benefit the public interest and are classified by their funding as private foundations or public charities. IRC §501(c)(3) includes “Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition…, or for the prevention of cruelty to children or animals…”;
True or False: A church can hold a fundraiser for a candidate who is running for mayor.
False: Section 501(c)(3) organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign. However, nonpartisan voter education and registration activities are allowed.
What is the general tax rule concerning a contribution to a 501(c)(3) organization?
Generally, with few exceptions, only contributions made to organizations that qualify for 501(c)(3) status are tax deductible by the donor.
