Module 8: Tax-Exempt Organizations

Question 1

Which organization does not have to make an application for exempt status?

Answer 1

Section 501(c)(1) organization

Question 2

Section 501(c)(2) Org.

Answer 2

Organized for the exclusive purpose of holding title to property, collecting income from that property, and turning over the NI to an exempt org.

Question 3

How would a Sec. 501(c)(2) org become tax exempt?

Answer 3

By filing form 1024 and including the org’s articles of incorporation and bylaws in application

Question 4

What org’s are examples as a Section 501(c)(3) org?

Answer 4

Public charities and Private foundations

Question 5

What is included as a Sec. 501(c)(3) org?

Answer 5

• community chest
• community fund
• foundation organized and operated exclusively for religious, charitable, scientific, public safety testing, literary, or educational purposes
• foundation organized to foster national/international amateur sports competitions or to prevent cruelty to children/animals

Question 6

How does a sec. 501(c)(3) org become tax exempt?

Answer 6

Must apply for tax exempt status using form 1023 and be approved by the IRS to be listed as a exempt org

Question 7

What are the requirements for a 501(c)(3) org to be tax exempt?

Answer 7

1. No part of net earnings benefit any private shareholder/indiv
2. No substantial part of activities may be nonexempt activities
3. May not directly participate or intervene in any political campaign

Question 8

What categories are not considered section 509 private foundations?

Answer 8

1. Max (50%-type) charitable deduction donees
2. Broadly publicly supported orgs. receiving more than 1/3 of their annual support from members of public & < 1/3 from investment income/unrelated business income
3. Supporting orgs.
4. Public safety testing orgs.

Question 9

What annual return must a 509 private foundation file?

Answer 9

Form 990-PF that discloses substantial contributors and amounts of contributions received

Question 10

How can a 509 private foundation be terminated?

Answer 10

1. Involuntary - becomes a public charity; repeated violations
2. Voluntary

Question 11

Unrelated business income (UBI)

Answer 11

Gross income from an unrelated trade or business “regularly” carried on, minus business deductions directly connected there with

Question 12

What is the UBI deduction amount?

Answer 12

$1,000

Question 13

What types of income are excluded from tax on UBI?

Answer 13

• royalties, dividends, interest, and annuities
• rents from real property and rents from personal property leased with real property
• gains/losses on sale/exchange of property not held primarily for sale
• income from research of college or hospital
• income from labor unions used to establish retirement home, hospital, or similar exclusive -use facilities
• activities limited to exempt orgs. by state law
• value of securities loaned to broker and income rec’v by lender
• income from exchange/rental of membership list of tax exempt charitable orgs

Question 14

Feeder organization

Answer 14

Org. operated primarily for purpose of carrying on a trade or business for profit

Question 15

What annual information return must be filed and when?

Answer 15

Form 990 by May 15th

Question 16

Which orgs must also include a Schedule A - Supplementary Info?

Answer 16

501(c)(3) orgs

Question 17

What orgs can file a Form 990-EZ?

Answer 17

Exempt orgs with gross receipts less than $200,000 and total year-end assets less than $500,000

Question 18

What exempt orgs do not have an annual filing requirement of the information return with the IRS?

Answer 18

• 501(c)(1) orgs
• Religious or internally supported orgs
• Certain orgs that normally have less than $5,000 in gross receipts
• Organizations that normally have less than $50,000 in gross receipts

Question 19

Form 990-N

Answer 19

simple electronic “postcard” filed by org. that normally has less than $50K in gross receipts

requires:

1. tax ID #
2. tax year of org
3. legal name, physical address, internet address
4. name/address of principal officer of org.
5. statement that annual gross receipts of org. regularly do not exceed the $50,000 limit

Question 20

Not required to file form 990

Less than $50K and CHRIST

Answer 20

Churches
High school - religious
Religious orders
Internal support auxiliaries
Societies - missionary related
Tax-exempt - organized by congress

Question 21

To qualify as an exempt org. other than a church or an employee’s qualified pension or profit sharing trust, what must the applicant do?

Answer 21

File a written application with the IRS

Question 22

What must the articles of organization do in order for a public service charitable entity to qualify as tax exempt?

Answer 22

It must limit the purpose of the entity to the charitable purpose