IRS.gov can be valuable resource for non-profits

Posted on 26. Nov, 2013 by in Nonprofit, Tax, Tax Reminders

Internal_Revenue_Service_loThe IRS provides extensive and useful information at its IRS.gov website to help educate staff and Boards on the requirements and pitfalls of starting, maintaining and running a tax exempt organization. The following excerpt is a good primer or refresher. You will find this article, among others, on the IRS website under EO (exempt organizations). The links will move you to publications that provide more in-depth information. Remember all tax exempt organizations must file a 990 annually even if it is just a post card form to say that our revenues were less than $50,000. Failure to do so will result in loss of tax exempt status if not filed for 3 consecutive years. Filings are due on the 15th of the 5thmonth following the end of the fiscal year.

Exemption Requirements – Section 501(c)(3) Organizations

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.

The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.

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