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Tax forms 3. Tax forms   Section 501(c)(3) Organizations Table of Contents IntroductionChild care organizations. Tax forms Topics - This chapter discusses: Useful Items - You may want to see: Contributions to 501(c)(3) OrganizationsCertain annuity contracts. Tax forms Certain contracts held by a charitable remainder trust. Tax forms Excise Taxes. Tax forms Indoor tanning services. Tax forms Application for Recognition of ExemptionPolitical activity. Tax forms Private delivery service. Tax forms Amendments to organizing documents required. Tax forms How to show reasonable action and good faith. Tax forms Not acting reasonably and in good faith. Tax forms Prejudicing the interest of the Government. Tax forms Procedure for requesting extension. Tax forms More information. Tax forms 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. Tax forms Grass roots expenditures. Tax forms Lobbying nontaxable amount. Tax forms Grass roots nontaxable amount. Tax forms Organization that no longer qualifies. Tax forms Tax on organization. Tax forms Tax on managers. Tax forms Taxes on organizations. Tax forms Taxes on managers. Tax forms Political expenditures. Tax forms Correction of expenditure. Tax forms 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. Tax forms Religious. Tax forms Charitable. Tax forms Scientific. Tax forms Testing for public safety. Tax forms Literary. Tax forms Educational. Tax forms 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). Tax forms The prevention of cruelty to children or animals. Tax forms To qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. Tax forms A trust is a fund or foundation and will qualify. Tax forms However, an individual or a partnership will not qualify. Tax forms Examples. Tax forms   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. Tax forms Child care organizations. Tax forms   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. Tax forms Instrumentalities. Tax forms   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). Tax forms Examples of a qualifying instrumentality might include state schools, universities, or hospitals. Tax forms However, if an organization is an integral part of the local government or possesses governmental powers, it does not qualify for exemption. Tax forms A state or municipality itself does not qualify for exemption. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms Fundraising events. Tax forms   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. Tax forms 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. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms See Disclosure of Quid Pro Quo Contributions in chapter 2. Tax forms Exemption application not filed. Tax forms   Donors cannot deduct any charitable contribution to an organization that is required to apply for recognition of exemption but has not done so. Tax forms Separate fund—contributions that are deductible. Tax forms   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. Tax forms   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. Tax forms 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. Tax forms Personal benefit contracts. Tax forms   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. Tax forms   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. Tax forms Certain annuity contracts. Tax forms   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). Tax forms Certain contracts held by a charitable remainder trust. Tax forms   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. Tax forms Excise tax. Tax forms   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. Tax forms The excise tax does not apply if all of the direct and indirect beneficiaries under the contract are organizations. Tax forms Excise Taxes. Tax forms   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. Tax forms 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. Tax forms Indoor tanning services. Tax forms   If your organization provides an indoor tanning bed service, the ACA imposed a 10% excise tax on services provided after June 30, 2010. Tax forms For more information, go to IRS. Tax forms gov and select Affordable Care Act Tax Provisions. Tax forms 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. Tax forms 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. Tax forms See the organization headings that follow for specific information your organization may need to provide. Tax forms Form 1023. Tax forms   Your organization must file its application for recognition of exemption on Form 1023. Tax forms See chapter 1 and the instructions accompanying Form 1023 for the procedures to follow in applying. Tax forms Some organizations are not required to file Form 1023. Tax forms See Organizations Not Required To File Form 1023, later. Tax forms    Additional information to help you complete your application can be found online. Tax forms 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. Tax forms See Exemption Requirements - Section 501(c)(3) Organizations. Tax forms   Form 1023 and accompanying statements must show that all of the following are true. Tax forms The organization is organized exclusively for, and will be operated exclusively for, one or more of the purposes (religious, charitable, etc. Tax forms ) specified in the introduction to this chapter. Tax forms No part of the organization's net earnings will inure to the benefit of private shareholders or individuals. Tax forms 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. Tax forms 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. Tax forms See Political activity, next, and Lobbying Expenditures , near the end of this chapter. Tax forms Political activity. Tax forms   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). Tax forms Such participation or intervention includes the publishing or distributing of statements. Tax forms   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. Tax forms 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. Tax forms Effective date of exemption. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms Otherwise, exemption will be recognized only from the date of receipt. Tax forms The date of receipt is the date of the U. Tax forms S. Tax forms 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. Tax forms Private delivery service. Tax forms   If a private delivery service designated by the IRS, rather than the U. Tax forms S. Tax forms Postal Service, is used to deliver the application, the date of receipt is the date recorded or marked by the private delivery service. Tax forms The following private delivery services have been designated by the IRS. Tax forms DHL Express (DHL): DHL “Same Day” Service. Tax forms Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Tax forms United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Tax forms M. Tax forms , UPS Worldwide Express Plus, and UPS Worldwide Express. Tax forms Amendments to organizing documents required. Tax forms   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. Tax forms 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. Tax forms Extensions of time for filing. Tax forms   There are two ways organizations seeking exemption can receive an extension of time for filing Form 1023. Tax forms Automatic 12-month extension. Tax forms 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. Tax forms To get this extension, an organization must add the following statement at the top of its application: “Filed Pursuant to Section 301. Tax forms 9100-2. Tax forms ” Discretionary extensions. Tax forms 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. Tax forms How to show reasonable action and good faith. Tax forms   An organization acted reasonably and showed good faith if at least one of the following is true. Tax forms The organization requests relief before its failure to file is discovered by the IRS. Tax forms The organization failed to file because of intervening events beyond its control. Tax forms 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. Tax forms The organization reasonably relied upon the written advice of the IRS. Tax forms The organization reasonably relied upon the advice of a qualified tax professional who failed to file or advise the organization to file Form 1023. Tax forms 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. Tax forms Not acting reasonably and in good faith. Tax forms   An organization has not acted reasonably and in good faith under the following circumstances. Tax forms 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. Tax forms It was informed of the requirement to file and related tax consequences, but chose not to file. Tax forms It uses hindsight in requesting relief. Tax forms 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. Tax forms Prejudicing the interest of the Government. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms Procedure for requesting extension. Tax forms   To request a discretionary extension, an organization must submit (to the IRS address shown on Form 1023 and Notice 1382) the following. Tax forms A statement showing the date Form 1023 was required to have been filed and the date it was actually filed. Tax forms Any documents relevant to the application. Tax forms An affidavit describing in detail the events that led to the failure to apply and to the discovery of that failure. Tax forms 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. Tax forms 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. Tax forms ” 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. Tax forms This includes the organization's return preparer, and any accountant or attorney, knowledgeable in tax matters, who advised the taxpayer on the application. Tax forms The affidavits must describe the engagement and responsibilities of the individual and the advice that he or she provided. Tax forms 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. Tax forms ” 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. Tax forms 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. Tax forms The organization, if requested, has to submit copies of its tax returns, and copies of the returns of other affected taxpayers. Tax forms   A request for this relief in connection with an application for exemption does not require payment of an additional user fee. Tax forms Also, a request for relief under the automatic 12-month extension does not require payment of a user fee. Tax forms More information. Tax forms   For more information about these procedures, see Regulations sections 301. Tax forms 9100-1, 301. Tax forms 9100-2, 301. Tax forms 9100-3, Revenue Procedure 2013-4, section 6. Tax forms 04, 2013-1 I. Tax forms R. Tax forms B. Tax forms 126, and Revenue Procedure 2013-8, 2013-1 I. Tax forms R. Tax forms B. Tax forms 237. Tax forms See Revenue Procedure 2013-4 and Revenue Procedure 2013-8. Tax forms Notification from the IRS. Tax forms   Organizations filing Form 1023 and satisfying all requirements of section 501(c)(3) will be notified of their exempt status in writing. Tax forms Organizations Not Required To File Form 1023 Some organizations are not required to file Form 1023. Tax forms 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. Tax forms Any organization (other than a private foundation) normally having annual gross receipts of not more than $5,000 (see Gross receipts test, later). Tax forms These organizations are exempt automatically if they meet the requirements of section 501(c)(3). Tax forms Filing Form 1023 to establish exemption. Tax forms   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. Tax forms By establishing its exemption, potential contributors are assured by the IRS that contributions will be deductible. Tax forms A subordinate organization (other than a private foundation) covered by a group exemption letter does not have to submit a Form 1023 for itself. Tax forms Private foundations. Tax forms   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. Tax forms Gross receipts test. Tax forms   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. Tax forms   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. Tax forms 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. Tax forms The organization must file Form 1023 within 90 days after the end of its second tax year. Tax forms   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. Tax forms 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. Tax forms Example. Tax forms   An organization is organized and operated exclusively for charitable purposes and is not a private foundation. Tax forms It was incorporated on January 1, 2009, and files returns on a calendar-year basis. Tax forms It did not file a Form 1023. Tax forms 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. Tax forms Therefore, it did not have to file Form 1023 and is exempt for those years. Tax forms However, for 2010, 2011, and 2012 the total gross receipts were $15,900. Tax forms Therefore, the organization must file Form 1023 within 90 days after the end of its 2012 tax year. Tax forms 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. Tax forms The organization, however, will not lose its exempt status for the tax years ending before January 1, 2012. Tax forms   The IRS will consider applying the Commissioner's discretionary authority to extend the time for filing Form 1023. Tax forms See the procedures for this extension discussed earlier. Tax forms Articles of Organization Your organization must include a conformed copy of its articles of organization with the application for recognition of exemption. Tax forms This may be its trust instrument, corporate charter, articles of association, or any other written instrument by which it is created. Tax forms 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. Tax forms These conditions for exemption are referred to as the organizational test. Tax forms Section 501(c)(3) is the provision of law that grants exemption to the organizations described in this chapter. Tax forms 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). Tax forms 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. Tax forms Moreover, the organizational test is not satisfied by statements of your organization's officers that you intend to operate only for exempt purposes. Tax forms Also, the test is not satisfied by the fact that your actual operations are for exempt purposes. Tax forms In interpreting an organization's articles, the law of the state where the organization was created is controlling. Tax forms 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. Tax forms The following are examples illustrating the organizational test. Tax forms Example 1. Tax forms Articles of organization state that an organization is formed exclusively for literary and scientific purposes within the meaning of section 501(c)(3). Tax forms These articles appropriately limit the organization's purposes. Tax forms The organization meets the organizational test. Tax forms Example 2. Tax forms An organization, by the terms of its articles, is formed to engage in research without any further description or limitation. Tax forms The organization will not be properly limited as to its purposes since all research is not scientific. Tax forms The organization does not meet the organizational test. Tax forms Example 3. Tax forms 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). Tax forms The organization meets the organizational test. Tax forms Example 4. Tax forms 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. Tax forms Example 5. Tax forms 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. Tax forms 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. Tax forms Example 6. Tax forms 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. Tax forms Such purposes are vague and may be accomplished other than in an exempt manner. Tax forms Example 7. Tax forms A stated purpose to operate a hospital does not meet the organizational test since it is not necessarily charitable. Tax forms A hospital may or may not be exempt depending on the manner in which it is operated. Tax forms Example 8. Tax forms 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. Tax forms Dedication and Distribution of Assets Assets of an organization must be permanently dedicated to an exempt purpose. Tax forms 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. Tax forms If the assets could be distributed to members or private individuals or for any other purpose, the organizational test is not met. Tax forms Dedication. Tax forms   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. Tax forms 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. Tax forms Distribution. Tax forms   Revenue Procedure 82-2, 1982-1 C. Tax forms B. Tax forms 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. Tax forms The procedure also provides a sample of an acceptable dissolution provision for organizations required to have one. Tax forms   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. Tax forms 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. Tax forms Sample articles of organization. Tax forms   See sample articles of organization in the Appendix in the back of this publication. Tax forms 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. Tax forms 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. Tax forms You must submit a copy of the pertinent contracts, agreements, publications, programs, etc. Tax forms 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. Tax forms See also Private Schools , discussed later. Tax forms 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. Tax forms Advocacy of a position. Tax forms   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. Tax forms The mere presentation of unsupported opinion is not educational. Tax forms Method not educational. Tax forms   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). Tax forms The following factors may indicate that the method is not educational. Tax forms The presentation of viewpoints unsupported by facts is a significant part of the organization's communications. Tax forms The facts that purport to support the viewpoint are distorted. Tax forms 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. Tax forms 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. Tax forms   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. Tax forms Qualifying organizations. Tax forms   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. Tax forms College book stores, cafeterias, restaurants, etc. Tax forms   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. Tax forms Alumni association. Tax forms   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. Tax forms 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 . Tax forms Athletic organization. Tax forms   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. Tax forms If it is not so engaged, your organization may be exempt as a social club described in chapter 4. Tax forms 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. Tax forms If your organization is not exempt as an educational organization, see Amateur Athletic Organizations , later in this chapter. Tax forms 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. Tax forms The racial composition of the student body, and of the faculty and administrative staff, as of the current academic year. Tax forms (This information also must be projected, so far as may be feasible, for the next academic year. Tax forms ) The amount of scholarship and loan funds, if any, awarded to students enrolled and the racial composition of students who have received the awards. Tax forms A list of the school's incorporators, founders, board members, and donors of land or buildings, whether individuals or organizations. Tax forms 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. Tax forms The public school district and county in which the school is located. Tax forms How to determine racial composition. Tax forms   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. Tax forms Nevertheless, a statement of the method by which the racial composition was determined must be supplied. Tax forms The identity of individual students or members of the faculty and administrative staff should not be included with this information. Tax forms   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. Tax forms 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. Tax forms Also, the school must circulate information that clearly states the school's admission policies. Tax forms 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. Tax forms The IRS considers discrimination on the basis of race to include discrimination on the basis of color or national or ethnic origin. Tax forms 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. Tax forms Conversely, the absence of racial discrimination in the employment of faculty and administrative staff is indicative of a racially nondiscriminatory policy as to students. Tax forms 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. Tax forms 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. Tax forms Policy statement. Tax forms   The school must include a statement of its racially nondiscriminatory policy in all its brochures and catalogs dealing with student admissions, programs, and scholarships. Tax forms 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. Tax forms Publicity requirement. Tax forms   The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school. Tax forms 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. Tax forms To satisfy this requirement, the school must use one of the following two methods. Tax forms Method one. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms If this method is used, the notice must meet the following printing requirements. Tax forms It must appear in a section of the newspaper likely to be read by prospective students and their families. Tax forms It must occupy at least 3 column inches. Tax forms It must have its title printed in at least 12 point bold face type. Tax forms It must have the remaining text printed in at least 8 point type. Tax forms 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. Tax forms 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. Tax forms   Method two. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms Exceptions. Tax forms   The publicity requirements will not apply in the following situations. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms 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 . Tax forms   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. Tax forms 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. Tax forms   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. Tax forms 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. Tax forms   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. Tax forms The IRS believes that these publicity requirements are the most effective methods to make known a school's racially nondiscriminatory policy. Tax forms In this regard, it is each school's responsibility to determine whether either of the exceptions applies. Tax forms 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. Tax forms 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. Tax forms Facilities and programs. Tax forms   A school must be able to show that all of its programs and facilities are operated in a racially nondiscriminatory manner. Tax forms Scholarship and loan programs. Tax forms   As a general rule, all scholarship or other comparable benefits obtainable at the school must be offered on a racially nondiscriminatory basis. Tax forms This must be known throughout the general community being served by the school and should be referred to in its publicity. Tax forms 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. Tax forms Certification. Tax forms   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. Tax forms   Failure to comply with the guidelines ordinarily will result in the proposed revocation of the exempt status of a school. Tax forms Recordkeeping requirements. Tax forms 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. Tax forms Records indicating the racial composition of the student body, faculty, and administrative staff for each academic year. Tax forms Records sufficient to document that scholarship and other financial assistance is awarded on a racially nondiscriminatory basis. Tax forms Copies of all materials used by or on behalf of the school to solicit contributions. Tax forms Copies of all brochures, catalogs, and advertising dealing with student admissions, programs, and scholarships. Tax forms (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. Tax forms ) 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. Tax forms 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. Tax forms 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. Tax forms Similarly, the IRS does not require a school to keep records prohibited under state or federal law. Tax forms Exceptions. Tax forms   The school does not have to independently maintain these records for IRS use if both of the following are true. Tax forms 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. Tax forms The school maintains copies of these reports from which this information is readily obtainable. Tax forms 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. Tax forms Failure to maintain records. Tax forms   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. Tax forms 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. Tax forms 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. Tax forms 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). Tax forms 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. Tax forms 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. Tax forms 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. Tax forms The rest of this section contains a description of the information to be provided by certain specific organizations. Tax forms This information is in addition to the required inclusions described in chapter 1, and other statements requested on Form 1023. Tax forms Each of the following organizations must submit the information described. Tax forms Charitable organization supporting education. Tax forms   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. Tax forms Scholarships. Tax forms   If the organization awards or plans to award scholarships, complete Schedule H of Form 1023. Tax forms Also, submit the following: Criteria used for selecting recipients, including the rules of eligibility. Tax forms How and by whom the recipients are or will be selected. Tax forms If awards are or will be made directly to individuals, whether information is required assuring that the student remains in school. Tax forms 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. Tax forms A copy of the scholarship application form and any brochures or literature describing the scholarship program. Tax forms Hospital. Tax forms   If you are organized to operate a charitable hospital, complete and attach Section I of Schedule C, Form 1023. Tax forms   If your hospital was transferred to you from proprietary ownership, complete and attach Schedule G of Form 1023. Tax forms 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. Tax forms Submit also an appraisal showing the fair rental value of the rented space. Tax forms Clinic. Tax forms   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. Tax forms Home for the aged. Tax forms   If you are organized to operate a home for the aged, complete and attach Schedule F of Form 1023 and required attachments. Tax forms Community nursing bureau. Tax forms   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. Tax forms Organization providing loans. Tax forms   If you make, or will make, loans for charitable and educational purposes, submit the following information. Tax forms An explanation of the circumstances under which such loans are, or will be, made. Tax forms Criteria for selection, including the rules of eligibility. Tax forms How and by whom the recipients are or will be selected. Tax forms Manner of repayment of the loan. Tax forms Security required, if any. Tax forms Interest charged, if any, and when payable. Tax forms Copies in duplicate of the loan application and any brochures or literature describing the loan program. Tax forms Public-interest law firms. Tax forms   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. Tax forms How the litigation can reasonably be said to be representative of a broad public interest rather than a private one. Tax forms Whether the organization will accept fees for its services. Tax forms A description of the cases litigated or to be litigated and how they benefit the public generally. Tax forms 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. Tax forms 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. Tax forms 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. Tax forms Acceptance of attorneys' fees. Tax forms   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. Tax forms Upon undertaking a representation, the organization cannot withdraw from the case because the litigant is unable to pay the fee. Tax forms   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. Tax forms All fee awards must be paid to the organization and not to its individual staff attorneys. Tax forms Instead, a public-interest law firm can reasonably compensate its staff attorneys, but only on a straight salary basis. Tax forms 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. Tax forms   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. Tax forms   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. Tax forms Religious Organizations To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains two basic guidelines. Tax forms That the particular religious beliefs of the organization are truly and sincerely held. Tax forms That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy. Tax forms 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. Tax forms 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. Tax forms Churches. Tax forms   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. Tax forms 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. Tax forms   In determining whether an admittedly religious organization is also a church, the IRS does not accept every assertion that the organization is a church. Tax forms Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. Tax forms The IRS considers the facts and circumstances of each organization applying for church status. Tax forms Convention or association of churches. Tax forms   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. Tax forms Integrated auxiliaries. Tax forms   An organization is an integrated auxiliary of a church if all the following are true. Tax forms The organization is described both in sections 501(c)(3) and 509(a)(1), 509(a)(2), or 509(a)(3). Tax forms It is affiliated with a church or a convention or association of churches. Tax forms It is internally supported. Tax forms An organization is internally supported unless both of the following are true. Tax forms 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). Tax forms 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. Tax forms Special rule. Tax forms   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. Tax forms   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. Tax forms   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. Tax forms Scientific Organizations You must show that your organization's research will be carried on in the public interest. Tax forms 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. Tax forms Aiding in the scientific education of college or university students. Tax forms Obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form th
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Tax forms 2. Tax forms   Maximum Amount Contributable (MAC) Table of Contents Components of Your MAC How Do I Figure My MAC?Elective deferrals only. Tax forms Nonelective contributions only. Tax forms Elective deferrals and nonelective contributions. Tax forms When Should I Figure My MAC? Throughout this publication, the limit on the amount that can be contributed to your 403(b) account for any year is referred to as your maximum amount contributable (MAC). Tax forms This chapter: Introduces the components of your MAC, Tells you how to figure your MAC, and Tells you when to figure your MAC. Tax forms Components of Your MAC Generally, before you can determine your MAC, you must first figure the components of your MAC. Tax forms The components of your MAC are: The limit on annual additions (chapter 3), and The limit on elective deferrals (chapter 4). Tax forms How Do I Figure My MAC? Generally, contributions to your 403(b) account are limited to the lesser of: The limit on annual additions, or The limit on elective deferrals. Tax forms Depending upon the type of contributions made to your 403(b) account, only one of the limits may apply to you. Tax forms Which limit applies. Tax forms   Whether you must apply one or both of the limits depends on the type of contributions made to your 403(b) account during the year. Tax forms Elective deferrals only. Tax forms   If the only contributions made to your 403(b) account during the year were elective deferrals made under a salary reduction agreement, you will need to figure both of the limits. Tax forms Your MAC is the lesser of the two limits. Tax forms Nonelective contributions only. Tax forms   If the only contributions made to your 403(b) account during the year were nonelective contributions (employer contributions not made under a salary reduction agreement), you will only need to figure the limit on annual additions. Tax forms Your MAC is the limit on annual additions. Tax forms Elective deferrals and nonelective contributions. Tax forms   If the contributions made to your 403(b) account were a combination of both elective deferrals made under a salary reduction agreement and nonelective contributions (employer contributions not made under a salary reduction agreement), you will need to figure both limits. Tax forms Your MAC is the limit on the annual additions. Tax forms   You need to figure the limit on elective deferrals to determine if you have excess elective deferrals, which are explained in chapter 7. Tax forms Worksheets. Tax forms   Worksheets are available in chapter 9 to help you figure your MAC. Tax forms When Should I Figure My MAC? At the beginning of 2014, you should refigure your 2013 MAC based on your actual compensation for 2013. Tax forms This will allow you to determine if the amount that has been contributed to your 403(b) account for 2013 has exceeded the allowable limits. Tax forms In some cases, this will allow you to avoid penalties and additional taxes. Tax forms See chapter 7. Tax forms Generally, you should figure your MAC for the current year at the beginning of each tax year using a conservative estimate of your compensation. Tax forms If your compensation changes during the year, you should refigure your MAC based on a revised conservative estimate. Tax forms By doing this, you will be able to determine if contributions to your 403(b) account can be increased or should be decreased for the year. Tax forms Prev  Up  Next   Home   More Online Publications