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More About This Title Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition: Rules, Checklists, Procedures
English
This book is an indispensable guide to navigating the complex maze of nonprofit tax rules and regulations. A clear and fully cited description of the requirements for the various categories of tax-exempt entities from public charities, private foundations, civic associations, business leagues, and social clubs to title-holding companies and governmental entities can be found. Practical guidance on potential for income tax on revenue-producing enterprises along with explanations of many exceptions to taxability is provided. Issues raised by Internet activity, advertising, publishing, providing services, and much more are explained.
This useful guide covers the many significant issues facing nonprofit organizations, including compensation and possible private inurement, affiliation, separations and mergers, donor disclosures, lobbying and electioneering, and employment taxes.
- Offers a supplemental, annual update to keep subscribers current on relevant changes in IRS forms, requirements, and related tax procedures
- Includes easy-to-use checklists highlighting such critical concerns as tax-exempt eligibility, reporting to the IRS, and comprehensive tax compliance issues
- Features a variety of sample documents for private foundations, including penalty abatement requests and sharing space agreements
- Provides helpful practice aids, such as a comparison of the differences between public and private charities, charts reflecting lobbying limits for different types of entities, and listings of rulings and cases that illustrate permissible activity for each type of organizations compared to impermissible activity
Filled with practical tips and suggestions for handling such critical situations as preparing for and surviving an IRS examination, Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition provides guidance for the significant issues facing nonprofit organizations.
English
Amanda Adams is a partner in Blazek & Vetterling. She has coauthored (with Jody Blazek) Revised Form 990: A Line-by-Line Preparation Guide (Wiley). She is an associate member of the AICPA's Exempt Organizations Tax Technical Resource Panel. She has a wealth of knowledge about the impact of partnerships, hedge funds, and other alternative investments owned by nonprofits, private foundations, and supporting organizations.
English
Preface xvii
About the Authors xxiii
Acknowledgments xxv
PART I QUALIFICATIONS OF TAX-EXEMPT ORGANIZATIONS 1
CHAPTER 1 Distinguishing Characteristics of Tax-Exempt Organizations 3
1.1 Differences between Exempt and Nonexempt Organizations 10
1.2 Nomenclature 13
1.3 Ownership and Control 13
1.4 Role of the Internal Revenue Service 14
1.5 Suitability as an Exempt Organization 15
1.6 Start-Up Tax and Financial Considerations 18
1.7 Choosing the Best Form of Organization 22
CHAPTER 2 Qualifying Under IRC §501(c)(3) 27
2.1 Organizational Test 29
2.2 Operational Test 35
CHAPTER 3 Religious Organizations 59
3.1 Types of Religious Organizations 59
3.2 Churches 64
3.3 Religious Orders 72
3.4 Religious and Apostolic Associations 72
CHAPTER 4 Charitable Organizations 75
4.1 Relief of the Poor 77
4.2 Promotion of Social Welfare 79
4.3 Lessening the Burdens of Government 88
4.4 Advancement of Religion 90
4.5 Advancement of Education and Science 90
4.6 Promotion of Health 91
4.7 Cooperative Hospital Service Organizations 110
CHAPTER 5 Educational, Scientific, and Literary Purposes and Prevention of Cruelty to Children and Animals 111
5.1 Educational Purposes 111
5.2 Literary Purposes 126
5.3 Scientific Purposes 127
5.4 Testing for Public Safety 132
5.5 Fostering National or International Amateur Sports Competition (But Only If No Part of Its Activities Involves the Provision of Athletic Facilities or Equipment) 133
5.6 Prevention of Cruelty to Children or Animals 134
CHAPTER 6 Civic Leagues and Local Associations of Employees: §501(c)(4) 135
6.1 Comparison of (c)(3) and (c)(4) Organizations 137
6.2 Qualifying and Nonqualifying Civic Organizations 141
6.3 Local Associations of Employees 143
6.4 Neighborhood and Homeowner’s Associations 145
6.5 Disclosures of Nondeductibility 148
CHAPTER 7 Labor, Agricultural, and Horticultural Organizations: §501(c)(5) 157
7.1 Labor Unions 158
7.2 Agricultural Groups 163
7.3 Horticultural Groups 166
7.4 Disclosures of Nondeductibility 166
CHAPTER 8 Business Leagues: §501(c)(6) 169
8.1 Basic Characteristics 170
8.2 Meaning of "Common Business Interest" 170
8.3 Line of Business 172
8.4 Rendering Services for Members 174
8.5 Sources of Revenue 180
8.6 Membership Categories 180
8.7 Member Inurement 182
8.8 Chambers of Commerce and Boards of Trade 183
8.9 Comparison to §501(c)(5) 183
8.10 Recognition of Exempt Status 184
8.11 Formation of a Related Charitable Organization 185
8.12 Disclosures for Lobbying and Nondeductibility 186
CHAPTER 9 Social Clubs: §501(c)(7) 189
9.1 Organizational Requirements and Characteristics 190
9.2 Member Inurement Prohibited 193
9.3 Membership Requirements 194
9.4 Revenue Tests 196
9.5 Unrelated Business Income Tax 198
9.6 Filing and Disclosure Requirements 203
CHAPTER 10 Instrumentalities of Government and Title-Holding Corporations 205
10.1 §501(c)(1) Instrumentalities of the United States 205
10.2 Governmental Units 206
10.3 Qualifying for §501(c)(3) Status 210
10.4 §501(c)(2) Title-Holding Corporations 220
10.5 §501(c)(25) Title-Holding Corporations 225
CHAPTER 11 Public Charities 227
11.1 Distinctions between Public and Private Charities 228
11.2 "Inherently Public Activity" and Broad Public Support: §509(a)(1) 232
11.3 Community Foundations 243
11.4 Service-Providing Organizations: §509(a)(2) 250
11.5 Difference between §509(a)(1) and §509(a)(2) 253
11.6 Supporting Organizations: §509(a)(3) 260
11.7 Testing for Public Safety: §509(a)(4) 271
PART II STANDARDS FOR PRIVATE FOUNDATIONS 273
CHAPTER 12 Private Foundations—General Concepts 275
12.1 Why Private Foundations Are Special 275
12.2 Special Rules Pertaining to Private Foundations 278
12.3 Application of Taxes to Certain Nonexempt Trusts 285
12.4 Termination of Private Foundation Status 286
CHAPTER 13 Excise Tax Based on Investment Income: IRC §4940 311
13.1 Formula for Taxable Income 312
13.2 Capital Gains 319
13.3 Ponzi Scheme Losses 324
13.4 Deductions from Gross Investment Income 325
13.5 Tax-Planning Ideas 330
13.6 Foreign Foundations 334
13.7 Timely Payment of Excise Tax 336
13.8 Exempt Operating Foundations 337
CHAPTER 14 Self-Dealing: IRC §4941 339
14.1 Definition of Self-Dealing 340
14.2 Sale, Exchange, or Lease of Property 343
14.3 Loans 350
14.4 Compensation 352
14.5 Transactions That Benefit Disqualified Persons 363
14.6 Payments to Government Officials 369
14.7 Sharing Space, People, and Expenses 370
14.8 Indirect Deals 374
14.9 Property Held by Fiduciaries 375
14.10 Issues Once Self-Dealing Occurs 379
CHAPTER 15 Minimum Distribution Requirements: IRC §4942 385
15.1 Assets Used to Calculate Minimum Investment Return 386
15.2 Measuring Fair Market Value 393
15.3 Distributable Amount 398
15.4 Qualifying Distributions 401
15.5 Private Operating Foundations 413
15.6 Satisfying the Distribution Test 422
CHAPTER 16 Excess Business Holdings and Jeopardizing Investments: IRC §§4943 and 4944 427
16.1 Excess Business Holdings 427
16.2 Jeopardizing Investments 435
16.3 Program-Related Investments 440
16.4 Penalty Taxes 444
CHAPTER 17 Taxable Expenditures: IRC §4945 449
17.1 Lobbying 451
17.2 Voter Registration Drives 456
17.3 Grants to Individuals 457
17.4 Grants to Public Charities 470
17.5 Grants to Foreign Organizations 482
17.6 Expenditure Responsibility Grants 487
17.7 Noncharitable Expenditures 500
17.8 Excise Taxes Payable 501
PART III OBTAINING AND MAINTAINING TAX-EXEMPT STATUS 531
CHAPTER 18 IRS Filings, Procedures, and Policies 533
18.1 IRS Determination Process 535
18.2 Annual Filing of Forms 990 543
18.3 Reporting Organizational Changes to the IRS 553
18.4 Weathering an IRS Examination 559
18.5 When Organization Loses Its Tax-Exempt Status 564
CHAPTER 19 Maintaining Exempt Status 565
19.1 Checklists 565
CHAPTER 20 Private Inurement and Intermediate Sanctions 587
20.1 Defining Inurement 589
20.2 Salaries and Other Compensation 591
20.3 Finding Salary Statistics 593
20.4 Housing and Meals 597
20.5 Purchase, Lease, or Sale of Property or Services 598
20.6 Loans and Guarantees 600
20.7 For-Profit to Nonprofit and Vice Versa 601
20.8 Services Rendered for Individuals 602
20.9 Joint Ventures 604
20.10 Intermediate Sanctions 605
CHAPTER 21 Unrelated Business Income 621
21.1 IRS Scrutiny of Unrelated Business Income 623
21.2 History of the Unrelated Business Income Tax 624
21.3 Consequences of Receiving UBI 625
21.4 Definition of Trade or Business 627
21.5 What Is Unrelated Business Income? 629
21.6 "Regularly Carried On" 630
21.7 "Substantially Related" 632
21.8 Unrelated Activities 637
21.9 The Exceptions 655
21.10 Income Modifications 662
21.11 Calculating and Minimizing Taxable Income 672
21.12 Debt-Financed Property 676
21.13 Museums 682
21.14 Travel Tours 684
21.15 Publishing 685
CHAPTER 22 Relationships with Other Organizations and Businesses 689
22.1 Creation of (c)(3) by (c)(4), (5), or (6) 690
22.2 Alliances with Investors 694
22.3 Creation of a For-Profit Corporate Subsidiary 700
22.4 Active Business Relationships 703
CHAPTER 23 Electioneering and Lobbying 707
23.1 Election Campaign Involvement 708
23.2 Voter Education versus Candidate Promotion 714
23.3 Tax on Political Expenditures 719
23.4 Lobbying Activity of §501(c)(3) Organizations 732
23.5 Permissible Amounts of Lobbying 739
23.6 Lobbying Limits for §501(c)(4), (5), (6), and Other Exempt Organizations 742
23.7 Advocacy and Nonpartisan Analysis 743
CHAPTER 24 Deductibility and Disclosures 747
24.1 Overview of Deductibility 747
24.2 The Substantiation and Quid Pro Quo Rules 759
24.3 Valuing Donor Benefits 769
24.4 Unrelated Business Income Aspects of Fund-Raising 773
24.5 State and Local Regulations 774
CHAPTER 25 Employment Taxes 777
25.1 Distinctions Between Employees and Independent Contractors 778
25.2 Ministers 786
25.3 Reporting Requirements 790
CHAPTER 26 Mergers, Bankruptcies, and Terminations 795
26.1 Mergers and Other Combinations 795
26.2 Bankruptcy 800
26.3 Terminations 803
Table of Cases 805
Table of IRS Revenue Rulings 817
Table of IRS Revenue Procedures 823
Index 825
