Tax exempt Flashcards
What must a tax exempt organization file
990
What is the 990
Its an informational return
Who must file the 990 -
a tax exempt other than a church with receipt of greater than 50K
What must you include on the form
- The name of the contributors
- The amounts contributed
- All distributions
No - names of members
What is you have UBI and elect to be taxed as a corporation
Any UBI is taxed at corporate rates
It you elect trust - then you are taxed at trust rates
What is included in UBI
this is any unrelated business income - not part of your main mission
What is not included in UBI
- Intermittent event - bake sale
- Royalty iconen, Interest, and dividends
- If bulk of merchandise is donated
- If book of services are donated
Bingo, cafeteria, bookstore, carnival
When will you lose your exempt status
A tax exempt organization that attempts to influence political legislation or support a specific candidate
When is extra money not UBI
1) it is intermittent
2) not conducted with the competitive and promotional efforts typical of commercial endeavors
What is related income
This is income that is directly associated with an organizations exempt purpose.
This income is NOT table as UBI
Examples - running a business to provide therapeutic employment
selling goods made by people as part if their rehabilitation
What is the organizational test to a tax exempt organization
- the articles of incorporation specifically must state that the the purpose of the organization is limited to the charitable purpose
- they are limited to those that fit the classification of tax exempt by the IRS
What two types of organizations qualify as tex exempt
a corporation or a trust
Can a foreign corporation be tax exempt
Yes an exempt organization must be a corporation or trust, but doe NOT need to be incorporated in eh US
What is the difference between a private foundation and a public foundation
- Private foundation must receive less than 1/3 of its support from the general public - 2/3 from private - like foundations
- A public charity receives more than 1/3 of its support from the general public
If a private gets more than 1/3 from public they violate their operating requirement of a private foundation - they will then lose their status as an exempt organization
Do churches need to file a return
No - separation of church and state
Can a savings and loan association be exempt
No
Yes - fraternities and country clubs yes - credit unions yes - condo associations -yes labor unions
Will Unrelated business income tax not be imposed if profits from the unrelated business are used to support the exempt organization’s charitable activities.
he fact that income will be used to support an organization’s purpose does not exempt it from being considered UBI if the source of the income is unrelated to that purpose.
How do you get exempt status
You must file a written application that is approve by the IRS
Can an exempt organization incorporate and issue capital stock
Yes - can be eater a corporation or a trust
If you provide sick benefits to your members will you lose your tax exempt status
no - it does not prevent an organization from qualifying as exempt
What is the lodge system
This is an organization that operates through local branches
What is a foreign subsidiary and a foreign branch and what is the difference between them and tax implications
A foreign branch is part of a US entity. It therefore will pay US federal taxes.
It will also take the benefits such as using losses to offset income, use the foreign tax credit, and DRD
A foreign subsidiary is a separate company
It is NOT consolidated with its US parent - it therefore it doesn’t get the tax breaks available
when will a tax preparer get a penalty
- if they do not sign a tax return as the preparer
- don’t provide a copy of the tax return
- don’t keep a copy of the tax return
How long do you need to retain the record of a tax return
- 3 years
do you need to retain work papers
no
How long do you have to respond after you received a notice of deficiency
you have 90 days to file a petition with the Tax Court
How long do you have if you are outside of the US
you have 150 days
When does disclosure of a tax return position reduce an accuracy related penalty
If the position does NOT involve a tax shelter, is NOT frivolous, has YES a reasonable basis, and is YES properly substantiated
How do you establish nexus with anoretic state
- a state can impose tax on a company that is doing business in there state- if they establish nexus
nexus is created when your company gets income other than through sale of goods, have employees doing thing OTHER than solicitation, or has capital property
Do these provide nexus:
sale of goods
hiring sales employee
purchasing raw materials
No not 1 does
but buying an office building would yes!
If you have a position that is more than 50% - what is that called
more likely than not
If you have a position that is more than 1/2
realistic possibility
If you have a position the is 20%
reasonable basis
What is nexus
Nexus is a connection, such as a physical presence or other economic connection, between a company and a state that is sufficient for the state to tax the company.
When can you disclose information
information may be provided in order to enable a tax processor to compute the taxpayer’s liability,
as a result of an administrative order by a state agency that registers tax return preparers,
and for peer review.
What do you need in a tax shelter return to avoid a penalty
if you have reason to believe that the position would be >50% of more likely than not be upheld
when you use the UDIPTA - what do you measure
the Uniform Division of Income for Tax Purposes Act requires that business income be allocated among the states using a combination of ratios involving the value of real estate occupied, compensation to employees, and sales.
Rents and royalties from tangible personal property is generally taxed in the State in which the property is used.
Rents and royalties from tangible personal property are generally allocated to the state in which the property is used. When the company is not subject to income tax in the state in which the property is used, the income is then allocated to the state in which the company is domiciled.
What are the three sets of original jurisdiction courts
U.S. Tax Court,
the U.S. district courts,
and the U.S. Court of Federal Claims.
What is apportionment
Apportionment is the division of business income earned by an entity to avoid the taxation of the same income by multiple jurisdictions.
