Tax-Exempt Organizations Flashcards
What are examples of tax-exempt organizations?
Charities, labor organizations, social clubs, pension and profit-sharing trusts, political organizations, private foundations.
It may be in the form of corporations or trust.
What must an organization do to be tax-exempt?
Must apply and receive an exemption from taxation.
Which form must be submitted?
Form 1023 or Form 1024.
What is a private foundation?
A tax-exempt organization which receives less than 1/3 of its annual support from the general public, governmental units, churches, charitable organizations, etc.
What must Exempt organization (EO) do annually? Criteria?
Must file an information return if gross receipts exceed $50,000.
What form must EO use to file a return?
Form 990.
What does form 990 report?
Income, expenses, substantial contributors and their amounts.
Do all EO do the same re: file info?
No.
Churches (and auxiliaries of churches) do not file Form 990.
Private foundations file Form 990-PF.
For what purpose EO must operate in order to qualify as an EO?
Exclusively for a tax-exempt purpose.
Is influencing legislation or political parties an acceptable purpose for EO?
No. EO must be careful re: speakers they invite and so on.
Which organizations can participate in lobbying efforts? Criteria?
Section 501(c)(3) organizations (ie. private foundations). If an election is made and lobbying expenditures do not exceed certain ceilings.
When can EO be taxed, but without losing its tax-exempt status?
When it generates unrelated business income.
What are 2 criteria to be “unrelated business income”?
- Income must be from a business regularly carried on.
2. Not be substantially related to the EO exempt purpose.
What are related income?
- 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
Is income from advertising in journal UBI or not?
UBI.
Is qualified corporate sponsorship income UBI or not?
Not UBI.
When is UBI taxed? At what rate?
When exceeds $1,000.
At regular corporate rates if the EO is a corporation. At trust rates if it is a trust.
Which EOs must to file Form 990-N (e-filing) - most of them?
Small exempt organizations whose gross receipts are $50,000 or less.
What system must a fraternal benefit society operate under?
A lodge system.
What is a lodge system?
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.
When is UBI non-taxed?
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
When must UBI tax liability paid?
Installment pmts (quarterly) when it’s estimated to be more than $500.
Can EO lose status if involved in insubstantial nonexempt activities?
No.
