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1040ez.com1040ez. 1040ez.com com 3. 1040ez.com Section 501(c)(3) Organizations Table of Contents IntroductionChild care organizations. 1040ez.com Topics - This chapter discusses: Useful Items - You may want to see: Contributions to 501(c)(3) OrganizationsCertain annuity contracts. 1040ez.com Certain contracts held by a charitable remainder trust. 1040ez.com Excise Taxes. 1040ez.com Indoor tanning services. 1040ez.com Application for Recognition of ExemptionPolitical activity. 1040ez.com Private delivery service. 1040ez.com Amendments to organizing documents required. 1040ez.com How to show reasonable action and good faith. 1040ez.com Not acting reasonably and in good faith. 1040ez.com Prejudicing the interest of the Government. 1040ez.com Procedure for requesting extension. 1040ez.com More information. 1040ez.com Organizations Not Required To File Form 1023 Articles of OrganizationOrganizational Test Dedication and Distribution of Assets Educational Organizations and Private SchoolsEducational Organizations Private Schools Organizations Providing InsuranceCharitable Risk Pools Other Section 501(c)(3) OrganizationsCharitable Organizations Religious Organizations Scientific Organizations Literary Organizations Amateur Athletic Organizations Prevention of Cruelty to Children or Animals Private Foundations and Public CharitiesPrivate Foundations Public Charities Private Operating Foundations Lobbying ExpendituresLobbying expenditures. 1040ez.com Grass roots expenditures. 1040ez.com Lobbying nontaxable amount. 1040ez.com Grass roots nontaxable amount. 1040ez.com Organization that no longer qualifies. 1040ez.com Tax on organization. 1040ez.com Tax on managers. 1040ez.com Taxes on organizations. 1040ez.com Taxes on managers. 1040ez.com Political expenditures. 1040ez.com Correction of expenditure. 1040ez.com Introduction An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes. 1040ez.com Religious. 1040ez.com Charitable. 1040ez.com Scientific. 1040ez.com Testing for public safety. 1040ez.com Literary. 1040ez.com Educational. 1040ez.com Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment; however, see Amateur Athletic Organizations , later in this chapter). 1040ez.com The prevention of cruelty to children or animals. 1040ez.com To qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. 1040ez.com A trust is a fund or foundation and will qualify. 1040ez.com However, an individual or a partnership will not qualify. 1040ez.com Examples. 1040ez.com Qualifying organizations include: Nonprofit old-age homes, Parent-teacher associations, Charitable hospitals or other charitable organizations, Alumni associations, Schools, Chapters of the Red Cross, Boys' or Girls' Clubs, and Churches. 1040ez.com Child care organizations. 1040ez.com The term educational purposes includes providing for care of children away from their homes if substantially all the care provided is to enable individuals (the parents) to be gainfully employed and the services are available to the general public. 1040ez.com Instrumentalities. 1040ez.com A state or municipal instrumentality may qualify under section 501(c)(3) if it is organized as a separate entity from the governmental unit that created it and if it otherwise meets the organizational and operational tests of section 501(c)(3). 1040ez.com Examples of a qualifying instrumentality might include state schools, universities, or hospitals. 1040ez.com However, if an organization is an integral part of the local government or possesses governmental powers, it does not qualify for exemption. 1040ez.com A state or municipality itself does not qualify for exemption. 1040ez.com Topics - This chapter discusses: Contributions to 501(c)(3) organizations, Applications for recognition of exemption, Articles of Organization, Educational organizations and private schools, Organizations providing insurance, Other section 501(c)(3) organizations, Private foundations and public charities, and Lobbying expenditures. 1040ez.com Useful Items - You may want to see: Forms (and Instructions) 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code See chapter 6 for information about getting publications and forms. 1040ez.com Contributions to 501(c)(3) Organizations Contributions to domestic organizations described in this chapter, except organizations testing for public safety, are deductible as charitable contributions on the donor's federal income tax return. 1040ez.com Fundraising events. 1040ez.com If the donor receives something of value in return for the contribution, a common occurrence with fundraising efforts, part or all of the contribution may not be deductible. 1040ez.com This may apply to fundraising activities such as charity balls, bazaars, banquets, auctions, concerts, athletic events, and solicitations for membership or contributions when merchandise or benefits are given in return for payment of a specified minimum contribution. 1040ez.com If the donor receives or expects to receive goods or services in return for a contribution to your organization, the donor cannot deduct any part of the contribution unless the donor intends to, and does, make a payment greater than the fair market value of the goods or services. 1040ez.com If a deduction is allowed, the donor can deduct only the part of the contribution, if any, that is more than the fair market value of the goods or services received. 1040ez.com You should determine in advance the fair market value of any goods or services to be given to contributors and tell them, when you publicize the fundraising event or solicit their contributions, how much is deductible and how much is for the goods or services. 1040ez.com See Disclosure of Quid Pro Quo Contributions in chapter 2. 1040ez.com Exemption application not filed. 1040ez.com Donors cannot deduct any charitable contribution to an organization that is required to apply for recognition of exemption but has not done so. 1040ez.com Separate fund—contributions that are deductible. 1040ez.com An organization that is exempt from federal income tax other than as an organization described in section 501(c)(3) can, if it desires, establish a fund, separate and apart from its other funds, exclusively for religious, charitable, scientific, literary, or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. 1040ez.com If the fund is organized and operated exclusively for these purposes, it may qualify for exemption as an organization described in section 501(c)(3), and contributions made to it will be deductible as provided by section 170. 1040ez.com A fund with these characteristics must be organized in such a manner as to prohibit the use of its funds upon dissolution, or otherwise, for the general purposes of the organization creating it. 1040ez.com Personal benefit contracts. 1040ez.com Generally, charitable deductions will not be allowed for a transfer to, or for the use of, a section 501(c)(3) or (c)(4) organization if in connection with the transfer: The organization directly or indirectly pays, or previously paid, a premium on a personal benefit contract for the transferor, or There is an understanding or expectation that anyone will directly or indirectly pay a premium on a personal benefit contract for the transferor. 1040ez.com A personal benefit contract with respect to the transferor is any life insurance, annuity, or endowment contract, if any direct or indirect beneficiary under the contract is the transferor, any member of the transferor's family, or any other person designated by the transferor. 1040ez.com Certain annuity contracts. 1040ez.com If an organization incurs an obligation to pay a charitable gift annuity, and the organization purchases an annuity contract to fund the obligation, individuals receiving payments under the charitable gift annuity will not be treated as indirect beneficiaries if the organization owns all of the incidents of ownership under the contract, is entitled to all payments under the contract, and the timing and amount of the payments are substantially the same as the timing and amount of payments to each person under the obligation (as such obligation is in effect at the time of the transfer). 1040ez.com Certain contracts held by a charitable remainder trust. 1040ez.com An individual will not be considered an indirect beneficiary under a life insurance, annuity, or endowment contract held by a charitable remainder annuity trust or a charitable remainder unitrust solely by reason of being entitled to the payment if the trust owns all of the incidents of ownership under the contract, and the trust is entitled to all payments under the contract. 1040ez.com Excise tax. 1040ez.com If the premiums are paid in connection with a transfer for which a deduction is not allowable under the deduction denial rule, without regard to when the transfer to the charitable organization was made, an excise tax will be applied that is equal to the amount of the premiums paid by the organization on any life insurance, annuity, or endowment contract. 1040ez.com The excise tax does not apply if all of the direct and indirect beneficiaries under the contract are organizations. 1040ez.com Excise Taxes. 1040ez.com A charitable organization liable for excise taxes must file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. 1040ez.com Generally, the due date for filing Form 4720 occurs on the fifteenth day of the fifth month following the close of the organization's tax year. 1040ez.com Indoor tanning services. 1040ez.com If your organization provides an indoor tanning bed service, the ACA imposed a 10% excise tax on services provided after June 30, 2010. 1040ez.com For more information, go to IRS. 1040ez.com gov and select Affordable Care Act Tax Provisions. 1040ez.com Application for Recognition of Exemption This discussion describes certain information to be provided upon application for recognition of exemption by all organizations created for any of the purposes described earlier in this chapter. 1040ez.com For example, the application must include a conformed copy of the organization's articles of incorporation, as discussed under Articles of Organization , later in this chapter. 1040ez.com See the organization headings that follow for specific information your organization may need to provide. 1040ez.com Form 1023. 1040ez.com Your organization must file its application for recognition of exemption on Form 1023. 1040ez.com See chapter 1 and the instructions accompanying Form 1023 for the procedures to follow in applying. 1040ez.com Some organizations are not required to file Form 1023. 1040ez.com See Organizations Not Required To File Form 1023, later. 1040ez.com Additional information to help you complete your application can be found online. 1040ez.com Go to Exemption Requirement – Section 501(c)(3) Organizations and select the link at the bottom of the Web page for step by step help with the application process. 1040ez.com See Exemption Requirements - Section 501(c)(3) Organizations. 1040ez.com Form 1023 and accompanying statements must show that all of the following are true. 1040ez.com The organization is organized exclusively for, and will be operated exclusively for, one or more of the purposes (religious, charitable, etc. 1040ez.com ) specified in the introduction to this chapter. 1040ez.com No part of the organization's net earnings will inure to the benefit of private shareholders or individuals. 1040ez.com You must establish that your organization will not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. 1040ez.com The organization will not, as a substantial part of its activities, attempt to influence legislation (unless it elects to come under the provisions allowing certain lobbying expenditures) or participate to any extent in a political campaign for or against any candidate for public office. 1040ez.com See Political activity, next, and Lobbying Expenditures , near the end of this chapter. 1040ez.com Political activity. 1040ez.com If any of the activities (whether or not substantial) of your organization consist of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office, your organization will not qualify for tax-exempt status under section 501(c)(3). 1040ez.com Such participation or intervention includes the publishing or distributing of statements. 1040ez.com Whether your organization is participating or intervening, directly or indirectly, in any political campaign on behalf of (or in opposition to) any candidate for public office depends upon all of the facts and circumstances of each case. 1040ez.com Certain voter education activities or public forums conducted in a nonpartisan manner may not be prohibited political activity under section 501(c)(3), while other so-called voter education activities may be prohibited. 1040ez.com Effective date of exemption. 1040ez.com Most organizations described in this chapter that were organized after October 9, 1969, will not be treated as tax exempt unless they apply for recognition of exemption by filing Form 1023. 1040ez.com These organizations will not be treated as tax exempt for any period before they file Form 1023, unless they file the form within 27 months from the end of the month in which they were organized. 1040ez.com If the organization files the application within this 27-month period, the organization's exemption will be recognized retroactively to the date it was organized. 1040ez.com Otherwise, exemption will be recognized only from the date of receipt. 1040ez.com The date of receipt is the date of the U. 1040ez.com S. 1040ez.com postmark on the cover in which an exemption application is mailed or, if no postmark appears on the cover, the date the application is stamped as received by the IRS. 1040ez.com Private delivery service. 1040ez.com If a private delivery service designated by the IRS, rather than the U. 1040ez.com S. 1040ez.com Postal Service, is used to deliver the application, the date of receipt is the date recorded or marked by the private delivery service. 1040ez.com The following private delivery services have been designated by the IRS. 1040ez.com DHL Express (DHL): DHL “Same Day” Service. 1040ez.com Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 1040ez.com United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 1040ez.com M. 1040ez.com , UPS Worldwide Express Plus, and UPS Worldwide Express. 1040ez.com Amendments to organizing documents required. 1040ez.com If an organization is required to alter its activities or to make substantive amendments to its organizing document, the ruling or determination letter recognizing its exempt status will be effective as of the date the changes are made. 1040ez.com If only a nonsubstantive amendment is made, exempt status will be effective as of the date it was organized, if the application was filed within the 15-month period, or the date the application was filed. 1040ez.com Extensions of time for filing. 1040ez.com There are two ways organizations seeking exemption can receive an extension of time for filing Form 1023. 1040ez.com Automatic 12-month extension. 1040ez.com Organizations will receive an automatic 12-month extension if they file an application for recognition of exemption with the IRS within 12 months of the original deadline. 1040ez.com To get this extension, an organization must add the following statement at the top of its application: “Filed Pursuant to Section 301. 1040ez.com 9100-2. 1040ez.com ” Discretionary extensions. 1040ez.com An organization that fails to file a Form 1023 within the extended 12-month period will be granted an extension to file if it submits evidence (including affidavits) to establish that: It acted reasonably and in good faith, and Granting a discretionary extension will not prejudice the interests of the government. 1040ez.com How to show reasonable action and good faith. 1040ez.com An organization acted reasonably and showed good faith if at least one of the following is true. 1040ez.com The organization requests relief before its failure to file is discovered by the IRS. 1040ez.com The organization failed to file because of intervening events beyond its control. 1040ez.com The organization exercised reasonable diligence (taking into account the complexity of the return or issue and the organization's experience in these matters) but was not aware of the filing requirement. 1040ez.com The organization reasonably relied upon the written advice of the IRS. 1040ez.com The organization reasonably relied upon the advice of a qualified tax professional who failed to file or advise the organization to file Form 1023. 1040ez.com An organization cannot rely on the advice of a tax professional if it knows or should know that he or she is not competent to render advice on filing exemption applications or is not aware of all the relevant facts. 1040ez.com Not acting reasonably and in good faith. 1040ez.com An organization has not acted reasonably and in good faith under the following circumstances. 1040ez.com It seeks to change a return position for which an accuracy-related penalty has been or could be imposed at the time the relief is requested. 1040ez.com It was informed of the requirement to file and related tax consequences, but chose not to file. 1040ez.com It uses hindsight in requesting relief. 1040ez.com The IRS will not ordinarily grant an extension if specific facts have changed since the due date that makes filing an application advantageous to an organization. 1040ez.com Prejudicing the interest of the Government. 1040ez.com Prejudice to the interest of the Government results if granting an extension of time to file to an organization results in a lower total tax liability for the years to which the filing applies than would have been the case if the organization had filed on time. 1040ez.com Before granting an extension, the IRS can require the organization requesting it to submit a statement from an independent auditor certifying that no prejudice will result if the extension is granted. 1040ez.com The interests of the Government are ordinarily prejudiced if the tax year in which the application should have been filed (or any tax year that would have been affected had the filing been timely) are closed by the statute of limitations before relief is granted. 1040ez.com The IRS can condition a grant of relief on the organization providing the IRS with a statement from an independent auditor certifying that the interests of the Government are not prejudiced. 1040ez.com Procedure for requesting extension. 1040ez.com To request a discretionary extension, an organization must submit (to the IRS address shown on Form 1023 and Notice 1382) the following. 1040ez.com A statement showing the date Form 1023 was required to have been filed and the date it was actually filed. 1040ez.com Any documents relevant to the application. 1040ez.com An affidavit describing in detail the events that led to the failure to apply and to the discovery of that failure. 1040ez.com If the organization relied on a tax professional's advice, the affidavit must describe the engagement and responsibilities of the professional and the extent to which the organization relied on him or her. 1040ez.com This affidavit must be accompanied by a dated declaration, signed by an individual who has personal knowledge of the facts and circumstances, who is authorized to act for the organization, which states, “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. 1040ez.com ” Detailed affidavits from individuals having knowledge or information about the events that led to the failure to make the application and to the discovery of that failure. 1040ez.com This includes the organization's return preparer, and any accountant or attorney, knowledgeable in tax matters, who advised the taxpayer on the application. 1040ez.com The affidavits must describe the engagement and responsibilities of the individual and the advice that he or she provided. 1040ez.com These affidavits must include the name, current address, and taxpayer identification number of the individual, and be accompanied by a dated declaration, signed by the individual, which states: “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. 1040ez.com ” The organization must state whether the returns for the tax year in which the application should have been filed or any tax years that would have been affected by the application had it been timely made are being examined by the IRS, an appeals office, or a federal court. 1040ez.com The organization must notify the IRS office considering the request for relief if the IRS starts an examination of any such return while the organization's request for relief is pending. 1040ez.com The organization, if requested, has to submit copies of its tax returns, and copies of the returns of other affected taxpayers. 1040ez.com A request for this relief in connection with an application for exemption does not require payment of an additional user fee. 1040ez.com Also, a request for relief under the automatic 12-month extension does not require payment of a user fee. 1040ez.com More information. 1040ez.com For more information about these procedures, see Regulations sections 301. 1040ez.com 9100-1, 301. 1040ez.com 9100-2, 301. 1040ez.com 9100-3, Revenue Procedure 2013-4, section 6. 1040ez.com 04, 2013-1 I. 1040ez.com R. 1040ez.com B. 1040ez.com 126, and Revenue Procedure 2013-8, 2013-1 I. 1040ez.com R. 1040ez.com B. 1040ez.com 237. 1040ez.com See Revenue Procedure 2013-4 and Revenue Procedure 2013-8. 1040ez.com Notification from the IRS. 1040ez.com Organizations filing Form 1023 and satisfying all requirements of section 501(c)(3) will be notified of their exempt status in writing. 1040ez.com Organizations Not Required To File Form 1023 Some organizations are not required to file Form 1023. 1040ez.com These include: Churches, interchurch organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of a church, such as a men's or women's organization, religious school, mission society, or youth group. 1040ez.com Any organization (other than a private foundation) normally having annual gross receipts of not more than $5,000 (see Gross receipts test, later). 1040ez.com These organizations are exempt automatically if they meet the requirements of section 501(c)(3). 1040ez.com Filing Form 1023 to establish exemption. 1040ez.com If the organization wants to establish its exemption with the IRS and receive a ruling or determination letter recognizing its exempt status, it should file Form 1023. 1040ez.com By establishing its exemption, potential contributors are assured by the IRS that contributions will be deductible. 1040ez.com A subordinate organization (other than a private foundation) covered by a group exemption letter does not have to submit a Form 1023 for itself. 1040ez.com Private foundations. 1040ez.com See Private Foundations and Public Charities, later in this chapter, for more information about the additional notice required from an organization in order for it not to be presumed to be a private foundation and for the additional information required from a private foundation claiming to be an operating foundation. 1040ez.com Gross receipts test. 1040ez.com For purposes of the gross receipts test, an organization normally does not have more than $5,000 annually in gross receipts if: During its first tax year the organization received gross receipts of $7,500 or less, During its first 2 years the organization had a total of $12,000 or less in gross receipts, and In the case of an organization that has been in existence for at least 3 years, the total gross receipts received by the organization during the immediately preceding 2 years, plus the current year, are $15,000 or less. 1040ez.com An organization with gross receipts more than the amounts in the gross receipts test, unless otherwise exempt from filing Form 1023, must file a Form 1023 within 90 days after the end of the period in which the amounts are exceeded. 1040ez.com For example, an organization's gross receipts for its first tax year were less than $7,500, but at the end of its second tax year its gross receipts for the 2-year period were more than $12,000. 1040ez.com The organization must file Form 1023 within 90 days after the end of its second tax year. 1040ez.com If the organization had existed for at least 3 tax years and had met the gross receipts test for all prior tax years but fails to meet the requirement for the current tax year, its tax-exempt status for the prior years will not be lost even if Form 1023 is not filed within 90 days after the close of the current tax year. 1040ez.com However, the organization will not be treated as a section 501(c)(3) organization for the period beginning with the current tax year and ending with the filing of Form 1023. 1040ez.com Example. 1040ez.com An organization is organized and operated exclusively for charitable purposes and is not a private foundation. 1040ez.com It was incorporated on January 1, 2009, and files returns on a calendar-year basis. 1040ez.com It did not file a Form 1023. 1040ez.com The organization's gross receipts during the years 2009 through 2012 were as follows: 2009 $3,600 2010 2,900 2011 400 2012 12,600 The organization's total gross receipts for 2009, 2010, and 2011 were $6,900. 1040ez.com Therefore, it did not have to file Form 1023 and is exempt for those years. 1040ez.com However, for 2010, 2011, and 2012 the total gross receipts were $15,900. 1040ez.com Therefore, the organization must file Form 1023 within 90 days after the end of its 2012 tax year. 1040ez.com If it does not file within this time period, it will not be exempt under section 501(c)(3) for the period beginning with tax year 2012 ending when the Form 1023 is received by the IRS. 1040ez.com The organization, however, will not lose its exempt status for the tax years ending before January 1, 2012. 1040ez.com The IRS will consider applying the Commissioner's discretionary authority to extend the time for filing Form 1023. 1040ez.com See the procedures for this extension discussed earlier. 1040ez.com Articles of Organization Your organization must include a conformed copy of its articles of organization with the application for recognition of exemption. 1040ez.com This may be its trust instrument, corporate charter, articles of association, or any other written instrument by which it is created. 1040ez.com Organizational Test The articles of organization must limit the organization's purposes to one or more of those described at the beginning of this chapter and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further one or more of those purposes. 1040ez.com These conditions for exemption are referred to as the organizational test. 1040ez.com Section 501(c)(3) is the provision of law that grants exemption to the organizations described in this chapter. 1040ez.com Therefore, the organizational test may be met if the purposes stated in the articles of organization are limited in some way by reference to section 501(c)(3). 1040ez.com The requirement that your organization's purposes and powers must be limited by the articles of organization is not satisfied if the limit is contained only in the bylaws or other rules or regulations. 1040ez.com Moreover, the organizational test is not satisfied by statements of your organization's officers that you intend to operate only for exempt purposes. 1040ez.com Also, the test is not satisfied by the fact that your actual operations are for exempt purposes. 1040ez.com In interpreting an organization's articles, the law of the state where the organization was created is controlling. 1040ez.com If an organization contends that the terms of its articles have a different meaning under state law than their generally accepted meaning, such meaning must be established by a clear and convincing reference to relevant court decisions, opinions of the state attorney general, or other appropriate state authorities. 1040ez.com The following are examples illustrating the organizational test. 1040ez.com Example 1. 1040ez.com Articles of organization state that an organization is formed exclusively for literary and scientific purposes within the meaning of section 501(c)(3). 1040ez.com These articles appropriately limit the organization's purposes. 1040ez.com The organization meets the organizational test. 1040ez.com Example 2. 1040ez.com An organization, by the terms of its articles, is formed to engage in research without any further description or limitation. 1040ez.com The organization will not be properly limited as to its purposes since all research is not scientific. 1040ez.com The organization does not meet the organizational test. 1040ez.com Example 3. 1040ez.com An organization's articles state that its purpose is to receive contributions and pay them over to organizations that are described in section 501(c)(3) and exempt from taxation under section 501(a). 1040ez.com The organization meets the organizational test. 1040ez.com Example 4. 1040ez.com If a stated purpose in the articles is the conduct of a school of adult education and its manner of operation is described in detail, such a purpose will be satisfactorily limited. 1040ez.com Example 5. 1040ez.com If the articles state the organization is formed for charitable purposes, without any further description, such language ordinarily will be sufficient since the term charitable has a generally accepted legal meaning. 1040ez.com On the other hand, if the purposes are stated to be charitable, philanthropic, and benevolent, the organizational requirement will not be met since the terms philanthropic and benevolent have no generally accepted legal meaning and, therefore, the stated purposes may, under the laws of the state, permit activities that are broader than those intended by the exemption law. 1040ez.com Example 6. 1040ez.com If the articles state an organization is formed to promote American ideals, or to foster the best interests of the people, or to further the common welfare and well-being of the community, without any limitation or provision restricting such purposes to accomplishment only in a charitable manner, the purposes will not be sufficiently limited. 1040ez.com Such purposes are vague and may be accomplished other than in an exempt manner. 1040ez.com Example 7. 1040ez.com A stated purpose to operate a hospital does not meet the organizational test since it is not necessarily charitable. 1040ez.com A hospital may or may not be exempt depending on the manner in which it is operated. 1040ez.com Example 8. 1040ez.com An organization that is expressly empowered by its articles to carry on social activities will not be sufficiently limited as to its power, even if its articles state that it is organized and will be operated exclusively for charitable purposes. 1040ez.com Dedication and Distribution of Assets Assets of an organization must be permanently dedicated to an exempt purpose. 1040ez.com This means that should an organization dissolve, its assets must be distributed for an exempt purpose described in this chapter, or to the Federal Government or to a state or local government for a public purpose. 1040ez.com If the assets could be distributed to members or private individuals or for any other purpose, the organizational test is not met. 1040ez.com Dedication. 1040ez.com To establish that your organization's assets will be permanently dedicated to an exempt purpose, the articles of organization should contain a provision ensuring their distribution for an exempt purpose in the event of dissolution. 1040ez.com Although reliance can be placed upon state law to establish permanent dedication of assets for exempt purposes, your organization's application probably can be processed much more rapidly if its articles of organization include a provision ensuring permanent dedication of assets for exempt purposes. 1040ez.com Distribution. 1040ez.com Revenue Procedure 82-2, 1982-1 C. 1040ez.com B. 1040ez.com 367, identifies the states and circumstances in which the IRS will not require an express provision for the distribution of assets upon dissolution in the articles of organization. 1040ez.com The procedure also provides a sample of an acceptable dissolution provision for organizations required to have one. 1040ez.com If a named beneficiary is to be the distributee, it must be one that would qualify and would be exempt within the meaning of section 501(c)(3) at the time the dissolution takes place. 1040ez.com Since the named beneficiary at the time of dissolution may not be qualified, may not be in existence, or may be unwilling or unable to accept the assets of the dissolving organization, a provision should be made for distribution of the assets for one or more of the purposes specified in this chapter in the event of any such contingency. 1040ez.com Sample articles of organization. 1040ez.com See sample articles of organization in the Appendix in the back of this publication. 1040ez.com Educational Organizations and Private Schools If your organization wants to obtain recognition of exemption as an educational organization, you must submit complete information as to how your organization carries on or plans to carry on its educational activities, such as by conducting a school, by panels, discussions, lectures, forums, radio and television programs, or through various cultural media such as museums, symphony orchestras, or art exhibits. 1040ez.com In each instance, you must explain by whom and where these activities are or will be conducted and the amount of admission fees, if any. 1040ez.com You must submit a copy of the pertinent contracts, agreements, publications, programs, etc. 1040ez.com If you are organized to conduct a school, you must submit full information regarding your tuition charges, number of faculty members, number of full-time and part-time students enrolled, courses of study and degrees conferred, together with a copy of your school catalog. 1040ez.com See also Private Schools , discussed later. 1040ez.com Educational Organizations The term educational relates to: The instruction or training of individuals for the purpose of improving or developing their capabilities, or The instruction of the public on subjects useful to individuals and beneficial to the community. 1040ez.com Advocacy of a position. 1040ez.com Advocacy of a particular position or viewpoint may be educational if there is a sufficiently full and fair exposition of pertinent facts to permit an individual or the public to form an independent opinion or conclusion. 1040ez.com The mere presentation of unsupported opinion is not educational. 1040ez.com Method not educational. 1040ez.com The method used by an organization to develop and present its views is a factor in determining if an organization qualifies as educational within the meaning of section 501(c)(3). 1040ez.com The following factors may indicate that the method is not educational. 1040ez.com The presentation of viewpoints unsupported by facts is a significant part of the organization's communications. 1040ez.com The facts that purport to support the viewpoint are distorted. 1040ez.com The organization's presentations make substantial use of inflammatory and disparaging terms and express conclusions more on the basis of emotion than of objective evaluations. 1040ez.com The approach used is not aimed at developing an understanding on the part of the audience because it does not consider their background or training. 1040ez.com Exceptional circumstances, however, may exist where an organization's advocacy may be educational even if one or more of the factors listed above are present. 1040ez.com Qualifying organizations. 1040ez.com The following types of organizations may qualify as educational: An organization, such as a primary or secondary school, a college, or a professional or trade school, that has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled student body in attendance at a place where the educational activities are regularly carried on, An organization whose activities consist of conducting public discussion groups, forums, panels, lectures, or other similar programs, An organization that presents a course of instruction by correspondence or through the use of television or radio, A museum, zoo, planetarium, symphony orchestra, or other similar organization, A nonprofit children's day-care center, and A credit counseling organization. 1040ez.com College book stores, cafeterias, restaurants, etc. 1040ez.com These and other on-campus organizations should submit information to show that they are controlled by and operated for the convenience of the faculty and student body or by whom they are controlled and whom they serve. 1040ez.com Alumni association. 1040ez.com An alumni association should establish that it is organized to promote the welfare of the university with which it is affiliated, is subject to the control of the university as to its policies and destination of funds, and is operated as an integral part of the university or is otherwise organized to promote the welfare of the college or university. 1040ez.com If your association does not have these characteristics, it may still be exempt as a social club if it meets the requirements described in chapter 4, under 501(c)(7) - Social and Recreation Clubs . 1040ez.com Athletic organization. 1040ez.com This type of organization must submit evidence that it is engaged in activities such as directing and controlling interscholastic athletic competitions, conducting tournaments, and prescribing eligibility rules for contestants. 1040ez.com If it is not so engaged, your organization may be exempt as a social club described in chapter 4. 1040ez.com Raising funds to be used for travel and other activities to interview and persuade prospective students with outstanding athletic ability to attend a particular university does not show an exempt purpose. 1040ez.com If your organization is not exempt as an educational organization, see Amateur Athletic Organizations , later in this chapter. 1040ez.com Private Schools Every private school filing an application for recognition of tax-exempt status must supply the IRS (on Schedule B, Form 1023) with the following information. 1040ez.com The racial composition of the student body, and of the faculty and administrative staff, as of the current academic year. 1040ez.com (This information also must be projected, so far as may be feasible, for the next academic year. 1040ez.com ) The amount of scholarship and loan funds, if any, awarded to students enrolled and the racial composition of students who have received the awards. 1040ez.com A list of the school's incorporators, founders, board members, and donors of land or buildings, whether individuals or organizations. 1040ez.com A statement indicating whether any of the organizations described in item (3) above have an objective of maintaining segregated public or private school education at the time the application is filed and, if so, whether any of the individuals described in item (3) are officers or active members of those organizations at the time the application is filed. 1040ez.com The public school district and county in which the school is located. 1040ez.com How to determine racial composition. 1040ez.com The racial composition of the student body, faculty, and administrative staff can be an estimate based on the best information readily available to the school, without requiring student applicants, students, faculty, or administrative staff to submit to the school information that the school otherwise does not require. 1040ez.com Nevertheless, a statement of the method by which the racial composition was determined must be supplied. 1040ez.com The identity of individual students or members of the faculty and administrative staff should not be included with this information. 1040ez.com A school that is a state or municipal instrumentality (see Instrumentalities , near the beginning of this chapter), whether or not it qualifies for exemption under section 501(c)(3), is not considered to be a private school for purposes of the following discussion. 1040ez.com Racially Nondiscriminatory Policy To qualify as an organization exempt from federal income tax, a private school must include a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy as to students and that it does not discriminate against applicants and students on the basis of race, color, or national or ethnic origin. 1040ez.com Also, the school must circulate information that clearly states the school's admission policies. 1040ez.com A racially nondiscriminatory policy toward students means that the school admits the students of any race to all the rights, privileges, programs, and activities generally accorded or made available to students at that school and that the school does not discriminate on the basis of race in administering its educational policies, admission policies, scholarship and loan programs, and athletic and other school-administered programs. 1040ez.com The IRS considers discrimination on the basis of race to include discrimination on the basis of color or national or ethnic origin. 1040ez.com The existence of a racially discriminatory policy with respect to the employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students. 1040ez.com Conversely, the absence of racial discrimination in the employment of faculty and administrative staff is indicative of a racially nondiscriminatory policy as to students. 1040ez.com A policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance is not discrimination on the basis of race when the purpose and effect of this policy is to promote establishing and maintaining the school's nondiscriminatory policy. 1040ez.com A school that selects students on the basis of membership in a religious denomination or unit is not discriminating if membership in the denomination or unit is open to all on a racially nondiscriminatory basis. 1040ez.com Policy statement. 1040ez.com The school must include a statement of its racially nondiscriminatory policy in all its brochures and catalogs dealing with student admissions, programs, and scholarships. 1040ez.com Also, the school must include a reference to its racially nondiscriminatory policy in other written advertising that it uses to inform prospective students of its programs. 1040ez.com Publicity requirement. 1040ez.com The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school. 1040ez.com Selective communication of a racially nondiscriminatory policy that a school provides solely to leaders of racial groups will not be considered an effective means of communication to make the policy known to all segments of the community. 1040ez.com To satisfy this requirement, the school must use one of the following two methods. 1040ez.com Method one. 1040ez.com The school can publish a notice of its racially nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community. 1040ez.com Such publication must be repeated at least once annually during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. 1040ez.com When more than one community is served by a school, the school can publish the notice in those newspapers that are reasonably likely to be read by all racial segments in the communities that the school serves. 1040ez.com If this method is used, the notice must meet the following printing requirements. 1040ez.com It must appear in a section of the newspaper likely to be read by prospective students and their families. 1040ez.com It must occupy at least 3 column inches. 1040ez.com It must have its title printed in at least 12 point bold face type. 1040ez.com It must have the remaining text printed in at least 8 point type. 1040ez.com The following is an acceptable example of the notice: NOTICE OF NONDISCRIMINATORY POLICY AS TO STUDENTS The M School admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. 1040ez.com It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs. 1040ez.com Method two. 1040ez.com The school can use the broadcast media to publicize its racially nondiscriminatory policy if this use makes the policy known to all segments of the general community the school serves. 1040ez.com If the school uses this method, it must provide documentation showing that the means by which this policy was communicated to all segments of the general community was reasonably expected to be effective. 1040ez.com In this case, appropriate documentation would include copies of the tapes or scripts used and records showing that there was an adequate number of announcements. 1040ez.com The documentation also would include proof that these announcements were made during hours when they were likely to be communicated to all segments of the general community, that they were long enough to convey the message clearly, and that they were broadcast on radio or television stations likely to be listened to by substantial numbers of members of all racial segments of the general community. 1040ez.com Announcements must be made during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. 1040ez.com Exceptions. 1040ez.com The publicity requirements will not apply in the following situations. 1040ez.com First, if for the preceding 3 years the enrollment of a parochial or other church-related school consists of students at least 75% of whom are members of the sponsoring religious denomination or unit, the school can make known its racially nondiscriminatory policy in whatever newspapers or circulars the religious denomination or unit uses in the communities from which the students are drawn. 1040ez.com These newspapers and circulars can be distributed by a particular religious denomination or unit or by an association that represents a number of religious organizations of the same denomination. 1040ez.com If, however, the school advertises in newspapers of general circulation in the community or communities from which its students are drawn and the second exception (discussed next) does not apply to the school, then it must comply with either of the publicity requirements explained earlier. 1040ez.com Second, if a school customarily draws a substantial percentage of its students nationwide, worldwide, from a large geographic section or sections of the United States, or from local communities, and if the school follows a racially nondiscriminatory policy as to its students, the school may satisfy the publicity requirement by complying with the instructions explained earlier under Policy statement . 1040ez.com The school can demonstrate that it follows a racially nondiscriminatory policy either by showing that it currently enrolls students of racial minority groups in meaningful numbers or, except for local community schools, when minority students are not enrolled in meaningful numbers, that its promotional activities and recruiting efforts in each geographic area were reasonably designed to inform students of all racial segments in the general communities within the area of the availability of the school. 1040ez.com The question as to whether a school demonstrates such a policy satisfactorily will be determined on the basis of the facts and circumstances of each case. 1040ez.com The IRS recognizes that the failure by a school drawing its students from local communities to enroll racial minority group students may not necessarily indicate the absence of a racially nondiscriminatory policy when there are relatively few or no such students in these communities. 1040ez.com Actual enrollment is, however, a meaningful indication of a racially nondiscriminatory policy in a community in which a public school or schools became subject to a desegregation order of a federal court or are otherwise expressly obligated to implement a desegregation plan under the terms of any written contract or other commitment to which any federal agency was a party. 1040ez.com The IRS encourages schools to satisfy the publicity requirement by using either of the methods described earlier, even though a school considers itself to be within one of the Exceptions. 1040ez.com The IRS believes that these publicity requirements are the most effective methods to make known a school's racially nondiscriminatory policy. 1040ez.com In this regard, it is each school's responsibility to determine whether either of the exceptions applies. 1040ez.com Such responsibility will prepare the school, if it is audited by the IRS, to demonstrate that the failure to publish its racially nondiscriminatory policy in accordance with either one of the publicity requirements was justified by one of the exceptions. 1040ez.com Also, a school must be prepared to demonstrate that it has publicly disavowed or repudiated any statements purported to have been made on its behalf (after November 6, 1975) that are contrary to its publicity of a racially nondiscriminatory policy as to students, to the extent that the school or its principal official was aware of these statements. 1040ez.com Facilities and programs. 1040ez.com A school must be able to show that all of its programs and facilities are operated in a racially nondiscriminatory manner. 1040ez.com Scholarship and loan programs. 1040ez.com As a general rule, all scholarship or other comparable benefits obtainable at the school must be offered on a racially nondiscriminatory basis. 1040ez.com This must be known throughout the general community being served by the school and should be referred to in its publicity. 1040ez.com Financial assistance programs, as well as scholarships and loans made under financial assistance programs, that favor members of one or more racial minority groups and that do not significantly detract from or are designed to promote a school's racially nondiscriminatory policy will not adversely affect the school's exempt status. 1040ez.com Certification. 1040ez.com An individual authorized to take official action on behalf of a school that claims to be racially nondiscriminatory as to students must certify annually, under penalties of perjury, on Schedule E (Form 990 or 990-EZ) or Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax, whichever applies, that to the best of his or her knowledge and belief the school has satisfied all requirements that apply, as previously explained. 1040ez.com Failure to comply with the guidelines ordinarily will result in the proposed revocation of the exempt status of a school. 1040ez.com Recordkeeping requirements. 1040ez.com With certain exceptions, given later, each exempt private school must maintain the following records for a minimum period of 3 years, beginning with the year after the year of compilation or acquisition. 1040ez.com Records indicating the racial composition of the student body, faculty, and administrative staff for each academic year. 1040ez.com Records sufficient to document that scholarship and other financial assistance is awarded on a racially nondiscriminatory basis. 1040ez.com Copies of all materials used by or on behalf of the school to solicit contributions. 1040ez.com Copies of all brochures, catalogs, and advertising dealing with student admissions, programs, and scholarships. 1040ez.com (Schools advertising nationally or in a large geographic segment or segments of the United States need only maintain a record sufficient to indicate when and in what publications their advertisements were placed. 1040ez.com ) The racial composition of the student body, faculty, and administrative staff can be determined in the same manner as that described at the beginning of this section. 1040ez.com However, a school cannot discontinue maintaining a system of records that reflect the racial composition of its students, faculty, and administrative staff used on November 6, 1975, unless it substitutes a different system that compiles substantially the same information, without advance approval of the IRS. 1040ez.com The IRS does not require that a school release any personally identifiable records or personal information except in accordance with the requirements of the Family Educational Rights and Privacy Act of 1974. 1040ez.com Similarly, the IRS does not require a school to keep records prohibited under state or federal law. 1040ez.com Exceptions. 1040ez.com The school does not have to independently maintain these records for IRS use if both of the following are true. 1040ez.com Substantially the same information has been included in a report or reports filed with an agency or agencies of federal, state, or local governments, and this information is current within 1 year. 1040ez.com The school maintains copies of these reports from which this information is readily obtainable. 1040ez.com If these reports do not include all of the information required, as discussed earlier, records providing such remaining information must be maintained by the school for IRS use. 1040ez.com Failure to maintain records. 1040ez.com Failure to maintain or to produce the required records and information, upon proper request, will create a presumption that the organization has failed to comply with these guidelines. 1040ez.com Organizations Providing Insurance An organization described in sections 501(c)(3) or 501(c)(4) may be exempt from tax only if no substantial part of its activities consists of providing commercial-type insurance. 1040ez.com However, this rule does not apply to state-sponsored organizations described in sections 501(c)(26) or 501(c)(27), which are discussed in chapter 4, or to charitable risk pools, discussed next. 1040ez.com Charitable Risk Pools A charitable risk pool is treated as organized and operated exclusively for charitable purposes if it: Is organized and operated only to pool insurable risks of its members (not including risks related to medical malpractice) and to provide information to its members about loss control and risk management, Consists only of members that are section 501(c)(3) organizations exempt from tax under section 501(a), Is organized under state law authorizing this type of risk pooling, Is exempt from state income tax (or will be after qualifying as a section 501(c)(3) organization), Has obtained at least $1,000,000 in startup capital from nonmember charitable organizations, Is controlled by a board of directors elected by its members, and Is organized under documents requiring that: Each member be a section 501(c)(3) organization exempt from tax under section 501(a), Each member that receives a final determination that it no longer qualifies under section 501(c)(3) notify the pool immediately, and Each insurance policy issued by the pool provide that it will not cover events occurring after a final determination described in (b). 1040ez.com Other Section 501(c)(3) Organizations In addition to the information required for all organizations, as described earlier, you should include any other information described in this section. 1040ez.com Charitable Organizations If your organization is applying for recognition of exemption as a charitable organization, it must show that it is organized and operated for purposes that are beneficial to the public interest. 1040ez.com Some examples of this type of organization are those organized for: Relief of the poor, the distressed, or the underprivileged, Advancement of religion, Advancement of education or science, Erection or maintenance of public buildings, monuments, or works, Lessening the burdens of government, Lessening of neighborhood tensions, Elimination of prejudice and discrimination, Defense of human and civil rights secured by law, and Combating community deterioration and juvenile delinquency. 1040ez.com The rest of this section contains a description of the information to be provided by certain specific organizations. 1040ez.com This information is in addition to the required inclusions described in chapter 1, and other statements requested on Form 1023. 1040ez.com Each of the following organizations must submit the information described. 1040ez.com Charitable organization supporting education. 1040ez.com Submit information showing how your organization supports education — for example, contributes to an existing educational institution, endows a professorial chair, contributes toward paying teachers' salaries, or contributes to an educational institution to enable it to carry on research. 1040ez.com Scholarships. 1040ez.com If the organization awards or plans to award scholarships, complete Schedule H of Form 1023. 1040ez.com Also, submit the following: Criteria used for selecting recipients, including the rules of eligibility. 1040ez.com How and by whom the recipients are or will be selected. 1040ez.com If awards are or will be made directly to individuals, whether information is required assuring that the student remains in school. 1040ez.com If awards are or will be made to recipients of a particular class, for example, children of employees of a particular employer— Whether any preference is or will be accorded an applicant by reason of the parent's position, length of employment, or salary, Whether as a condition of the award the recipient must upon graduation accept employment with the company, and Whether the award will be continued even if the parent's employment ends. 1040ez.com A copy of the scholarship application form and any brochures or literature describing the scholarship program. 1040ez.com Hospital. 1040ez.com If you are organized to operate a charitable hospital, complete and attach Section I of Schedule C, Form 1023. 1040ez.com If your hospital was transferred to you from proprietary ownership, complete and attach Schedule G of Form 1023. 1040ez.com You must attach a list showing: The names of the active and courtesy staff members of the proprietary hospital, as well as the names of your medical staff members after the transfer to nonprofit ownership, and The names of any doctors who continued to lease office space in the hospital after its transfer to nonprofit ownership and the amount of rent paid. 1040ez.com Submit also an appraisal showing the fair rental value of the rented space. 1040ez.com Clinic. 1040ez.com If you are organized to operate a clinic, attach a statement including: A description of the facilities and services, To whom the services are offered, such as the public at large or a specific group, How charges are determined, such as on a profit basis, to recover costs, or at less than cost, By whom administered and controlled, Whether any of the professional staff (that is, those who perform or will perform the clinical services) also serve or will serve in an administrative capacity, and How compensation paid the professional staff is or will be determined. 1040ez.com Home for the aged. 1040ez.com If you are organized to operate a home for the aged, complete and attach Schedule F of Form 1023 and required attachments. 1040ez.com Community nursing bureau. 1040ez.com If you provide a nursing register or community nursing bureau, provide information showing that your organization will be operated as a community project and will receive its primary support from public contributions to maintain a nonprofit register of qualified nursing personnel, including graduate nurses, unregistered nursing school graduates, licensed attendants and practical nurses for the benefit of hospitals, health agencies, doctors, and individuals. 1040ez.com Organization providing loans. 1040ez.com If you make, or will make, loans for charitable and educational purposes, submit the following information. 1040ez.com An explanation of the circumstances under which such loans are, or will be, made. 1040ez.com Criteria for selection, including the rules of eligibility. 1040ez.com How and by whom the recipients are or will be selected. 1040ez.com Manner of repayment of the loan. 1040ez.com Security required, if any. 1040ez.com Interest charged, if any, and when payable. 1040ez.com Copies in duplicate of the loan application and any brochures or literature describing the loan program. 1040ez.com Public-interest law firms. 1040ez.com If your organization was formed to litigate in the public interest (as opposed to providing legal services to the poor), such as in the area of protection of the environment, you should submit the following information. 1040ez.com How the litigation can reasonably be said to be representative of a broad public interest rather than a private one. 1040ez.com Whether the organization will accept fees for its services. 1040ez.com A description of the cases litigated or to be litigated and how they benefit the public generally. 1040ez.com Whether the policies and program of the organization are the responsibility of a board or committee representative of the public interest, which is neither controlled by employees or persons who litigate on behalf of the organization nor by any organization that is not itself an organization described in this chapter. 1040ez.com Whether the organization is operated, through sharing of office space or otherwise, in a way to create identification or confusion with a particular private law firm. 1040ez.com Whether there is an arrangement to provide, directly or indirectly, a deduction for the cost of litigation that is for the private benefit of the donor. 1040ez.com Acceptance of attorneys' fees. 1040ez.com A nonprofit public-interest law firm can accept attorneys' fees in public-interest cases if the fees are paid directly by its clients and the fees are not more than the actual costs incurred in the case. 1040ez.com Upon undertaking a representation, the organization cannot withdraw from the case because the litigant is unable to pay the fee. 1040ez.com Firms can accept fees awarded or approved by a court or an administrative agency and paid by an opposing party if the firms do not use the likelihood or probability of fee awards as a consideration in the selection of cases. 1040ez.com All fee awards must be paid to the organization and not to its individual staff attorneys. 1040ez.com Instead, a public-interest law firm can reasonably compensate its staff attorneys, but only on a straight salary basis. 1040ez.com Private attorneys, whose services are retained by the firm to assist it in particular cases, can be compensated by the firm, but only on a fixed fee or salary basis. 1040ez.com The total amount of all attorneys' fees (court awarded and those received from clients) must not be more than 50% of the total cost of operations of the organization's legal functions, calculated over a 5-year period. 1040ez.com If, in order to carry out its program, an organization violates applicable canons of ethics, disrupts the judicial system, or engages in any illegal action, the organization will jeopardize its exemption. 1040ez.com Religious Organizations To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains two basic guidelines. 1040ez.com That the particular religious beliefs of the organization are truly and sincerely held. 1040ez.com That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy. 1040ez.com Therefore, your group (or organization) may not qualify for treatment as an exempt religious organization for tax purposes if its actions, as contrasted with its beliefs, are contrary to well established and clearly defined public policy. 1040ez.com If there is a clear showing that the beliefs (or doctrines) are sincerely held by those professing them, the IRS will not question the religious nature of those beliefs. 1040ez.com Churches. 1040ez.com Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption. 1040ez.com In this event, you should submit information showing that your organization is a church, synagogue, association or convention of churches, religious order, or religious organization that is an integral part of a church, and that it is engaged in carrying out the function of a church. 1040ez.com In determining whether an admittedly religious organization is also a church, the IRS does not accept every assertion that the organization is a church. 1040ez.com Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. 1040ez.com The IRS considers the facts and circumstances of each organization applying for church status. 1040ez.com Convention or association of churches. 1040ez.com Any organization that is otherwise a convention or association of churches will not fail to qualify as a church merely because the membership of the organization includes individuals as well as churches or because the individuals have voting rights in the organization. 1040ez.com Integrated auxiliaries. 1040ez.com An organization is an integrated auxiliary of a church if all the following are true. 1040ez.com The organization is described both in sections 501(c)(3) and 509(a)(1), 509(a)(2), or 509(a)(3). 1040ez.com It is affiliated with a church or a convention or association of churches. 1040ez.com It is internally supported. 1040ez.com An organization is internally supported unless both of the following are true. 1040ez.com It offers admissions, goods, services, or facilities for sale, other than on an incidental basis, to the general public (except goods, services, or facilities sold at a nominal charge or for a small part of the cost). 1040ez.com It normally gets more than 50% of its support from a combination of governmental sources, public solicitation of contributions, and receipts from the sale of admissions, goods, performance of services, or furnishing of facilities in activities that are not unrelated trades or businesses. 1040ez.com Special rule. 1040ez.com Men's and women's organizations, seminaries, mission societies, and youth groups that satisfy (1) and (2) shown earlier are integrated auxiliaries of a church even if they are not internally supported. 1040ez.com In order for an organization (including a church and religious organization) to qualify for tax exemption, no part of its net earnings can inure to any individual. 1040ez.com Although an individual is entitled to a charitable deduction for contributions to a church, the assignment or similar transfer of compensation for personal services to a church generally does not relieve a taxpayer of federal income tax liability on the compensation, regardless of the motivation behind the transfer. 1040ez.com Scientific Organizations You must show that your organization's research will be carried on in the public interest. 1040ez.com Scientific research will be considered to be in the public interest if the results of the research (including any patents, copyrights, processes, or formulas) are made available to the public on a nondiscriminatory basis; if the research is performed for the United States or a state, county, or municipal government; or if the research is carried on for one of the following purposes. 1040ez.com Aiding in the scientific education of college or university students. 1040ez.com Obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form th
Personal and Public Safety
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