Tax Exempt Orgs

Question 1

How to be Tax- Exempt

Answer 1

• Corp or Trust
• File form 1023 or 1023ez with IRS
• Not for benefit of owners
• Identified as: religious, educational, scientific, amateur sports, preventing cruelty to children or animals
• allowed to issue stock, but generally don’t
• contributors get tax-exempt deduction

Form 1023 EZ:
- for Assets of $250,000 or less - Annual Gross Receipts less then $50,000
- not for churches, hospitals, schools, private foundation or foreign org

Private Foundation:
- Opposite of the public charity
- most (2/3) of support comes from specific sources other than general public (i.e. Bill Gates Foundation)

Question 2

Annual Filing Requirements

Answer 2

Form 990 - filed within 4.5 months after close of tax year

• if more than $50,000 informational return: income, major contributors and highest employee salaries

Churches: Form 990-PF

Question 3

Limits on Activities

Answer 3

Acceptable Activities:
- election and participate in lobbying expenditures up to $1,000,000
- churches and private foundations CANNOT BE involved in lobbying efforts

Question 4

Unrelated Business Income

Answer 4

• No tax on income from it’s mission specific activities
• may pay corporate tax (21% unless trust) on “unrelated business income” in excess of $1000 (unrelated to the purpose of the charity)
• generally won’t lose status but will have to pay tax

Revenues Exempted from “unrelated business income”:
- operations run by volunteers or patients
- church bingo
- occasional sales of merchandise received from contributors
- corp sponsorship of athletic events is NOT taxable

Would Include:
- selling daily advertising in college newspaper
- not for profit museum collecting ad revenue on website