Tax-Exempt Organizations Flashcards

1
Q

What are examples of tax-exempt organizations?

A

Charities, labor organizations, social clubs, pension and profit-sharing trusts, political organizations, private foundations.
It may be in the form of corporations or trust.

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2
Q

What must an organization do to be tax-exempt?

A

Must apply and receive an exemption from taxation.

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3
Q

Which form must be submitted?

A

Form 1023 or Form 1024.

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4
Q

What is a private foundation?

A

A tax-exempt organization which receives less than 1/3 of its annual support from the general public, governmental units, churches, charitable organizations, etc.

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5
Q

What must Exempt organization (EO) do annually? Criteria?

A

Must file an information return if gross receipts exceed $50,000.

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6
Q

What form must EO use to file a return?

A

Form 990.

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7
Q

What does form 990 report?

A

Income, expenses, substantial contributors and their amounts.

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8
Q

Do all EO do the same re: file info?

A

No.
Churches (and auxiliaries of churches) do not file Form 990.
Private foundations file Form 990-PF.

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9
Q

For what purpose EO must operate in order to qualify as an EO?

A

Exclusively for a tax-exempt purpose.

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10
Q

Is influencing legislation or political parties an acceptable purpose for EO?

A

No. EO must be careful re: speakers they invite and so on.

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11
Q

Which organizations can participate in lobbying efforts? Criteria?

A
Section 501(c)(3) organizations (ie. private foundations).
If an election is made and lobbying expenditures do not exceed certain ceilings.
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12
Q

When can EO be taxed, but without losing its tax-exempt status?

A

When it generates unrelated business income.

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13
Q

What are 2 criteria to be “unrelated business income”?

A
  1. Income must be from a business regularly carried on.

2. Not be substantially related to the EO exempt purpose.

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14
Q

What are related income?

A
  • An activity where substantially all work is performed for no compensation
  • A business carried on for the convenience of students or members of a charitable, religious, or scientific organization
  • Sale of merchandise received as contributions
  • In general, investment income
  • Rents from real property
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15
Q

Is income from advertising in journal UBI or not?

A

UBI.

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16
Q

Is qualified corporate sponsorship income UBI or not?

A

Not UBI.

17
Q

When is UBI taxed? At what rate?

A

When exceeds $1,000.

At regular corporate rates if the EO is a corporation. At trust rates if it is a trust.

18
Q

Which EOs must to file Form 990-N (e-filing) - most of them?

A

Small exempt organizations whose gross receipts are $50,000 or less.

19
Q

What system must a fraternal benefit society operate under?

A

A lodge system.

20
Q

What is a lodge system?

A

An organization operating under the lodge system carries on its activities under a form of organization that comprises local branches chartered by a parent organization and can be established to provide its members with sick benefits.

21
Q

When is UBI non-taxed?

A

When an exempt organization derives income from conducting bingo games, in a locality where such activity is legal, and in a state that confines such activity to nonprofit organizations

22
Q

When must UBI tax liability paid?

A

Installment pmts (quarterly) when it’s estimated to be more than $500.

23
Q

Can EO lose status if involved in insubstantial nonexempt activities?

A

No.