Tax exempt organizations Flashcards
Unrelated business income is generally taxable unless:
*hint: 6
- Activity where substantially all of the work is performed without compensations.
- Business carried on for convenience of member of the organization.
- The same of merchandise as gifts/contributions
- Passive income
- Rental income derived from renting real property
- Bingo games
Most organizations exempt from tax under Sec. 501(a) must file an annual information return on Form 990, Return of Organization Exempt from Income Tax. Those excepted from the requirement are
- A church or church-affiliated organization
- An exclusively religious activity or religious order
- An organization (other than a private foundation) having annual gross receipts that are not more than $50,000
- A stock bonus, pension, or profit-sharing trust that qualified under Sec. 401
- A Keogh plan whose total assets are less than $100,000
Which will cause an exempt organization to lose its exempt status? 2
An attempt to influence legislation
or
DIRECTLY participate to any extent in a political campaign for or against any candidate for public office.
Certain employee trusts lose exempt status if they engage in prohibited transactions such as:
lending without adequate security or reasonable interest, or paying unreasonable compensation for personal services.
An unrelated business income (UBI) tax return (Form 990-T) will not be required for the current tax year of the organization if the organization
Has less than $1,000 of gross income used in computing unrelated business taxable income for the tax year.
What entities may not qualify as a tax exempt organization? PIE
A partnership
An individual
An estate
When is form 990 due?
15th day of the 5th month.
An exempt organization is not taxed on unrelated business income of less than:
$1,000
What is UBI?
Unrelated business income (UBI) is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose constituting the basis for an organization’s tax-exempt status. Income is not subject to tax as UBI if substantially all the work is performed for the organization by unpaid volunteers.
Which organization must file a written application using Form 1024?
Religious, charitable, scientific, educational, etc., organizations (public charities) use Form 1023. Form 1024 is used by most others (Labor)
Donations to the following organizations are tax deductible:
- Corporations organized under an Act of Congress
- All 501(c)(3) organizations except those testing for public safety
- Cemetery companies
- Cooperative hospital service organizations
- Cooperative service organizations of operating educational organizations
- Child-care organizations
What is the maximum amount of time allowed from the creation of an organization for submission of exemption if the status is to be effective from the date of organization?
If filed within 15 months of organization, retroactive treatment is available.
Which of the following will cause a social club to lose exempt status?
The exempt status of an otherwise qualified social club is lost if more than 35% of its receipts are from sources other than membership fees, dues, and assessments.
To qualify for tax-exempt status, an organization must be
a corporation, community chest fund, or foundation. An individual or a partnership cannot qualify.
A charitable, religious, or scientific organization is presumed to be a private foundation unless it either
- Is a church or has annual gross receipts under $5,000, or
- Notifies the IRS that it is not a private foundation (on Form 1023) within 15 months from the end of the month in which it was organized.
Which of the following may file Form 990-EZ?
Form 990-EZ is a shortened version of Form 990. It is designed for use by small exempt organizations and nonexempt charitable trusts. An organization may file Form 990-EZ instead of Form 990 if it meets both of the following requirements:Gross receipts are less than $200,000, and
Total assets are less than $500,000.
Exempt organizations subject to tax on UBI are required to comply with the Code provisions regarding
installment payments of estimated income tax by corporations
The private foundation status of an exempt organization will terminate if it
Becomes a public charity.
Each domestic or foreign exempt organization is a private foundation unless
unless it generally receives more than a third of its support (annually) from its members and the general public. In this case, the private foundation status terminates, and the organization becomes a public charity.
Tax exempt organization must meet the following tests?
Organizational and operational tests.
Describe organizational and operational tests?
Organizational: requires articles of organization which limits purpose to one or more exempt purposes.
Operational: organization may be operated exclusively for an exempt purpose.
What form must be filed to obtain tax exempt status?
Must file form 1023 within 15 months from the end of the month in which they were organized.
