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Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition 2019 Cumulative Supplement

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Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition 2019 Cumulative Supplement

Jody Blazek

ISBN: 978-1-119-53821-9 March 2019 272 Pages

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Description

An essential, timesaving guide for accountants, lawyers, nonprofit executives and directors, consultants, and volunteers

This book is an indispensable guide to navigating the complex maze of nonprofit tax rules and regulations. A clear and fully cited description of the requirements for the various categories of tax-exempt entities from public charities, private foundations, civic associations, business leagues, and social clubs to title-holding companies and governmental entities can be found. Practical guidance on potential for income tax on revenue-producing enterprises along with explanations of many exceptions to taxability is provided. Issues raised by Internet activity, advertising, publishing, providing services, and much more are explained.

This useful guide covers the many significant issues facing nonprofit organizations, including compensation and possible private inurement, affiliation, separations and mergers, donor disclosures, lobbying and electioneering, and employment taxes.

  • Offers a supplemental, annual update to keep subscribers current on relevant changes in IRS forms, requirements, and related tax procedures
  • Includes easy-to-use checklists highlighting such critical concerns as tax-exempt eligibility, reporting to the IRS, and comprehensive tax compliance issues
  • Features a variety of sample documents for private foundations, including penalty abatement requests and sharing space agreements
  • Provides helpful practice aids, such as a comparison of the differences between public and private charities, charts reflecting lobbying limits for different types of entities, and listings of rulings and cases that illustrate permissible activity for each type of organizations compared to impermissible activity

Filled with practical tips and suggestions for handling such critical situations as preparing for and surviving an IRS examination, Tax Planning and Compliance for Tax-Exempt Organizations, Fifth Edition provides guidance for the significant issues facing nonprofit organizations.

Preface ix

Part I Qualifications of Tax-Exempt Organizations 1

Chapter 2 Qualifying Under IRC 501(c)(3) 3

2.1 Organizational Test 3

2.2 Operational Test 4

Chapter 4 Charitable Organizations 7

4.1 Relief of the Poor 7

4.2 Promotion of Social Welfare 7

4.3 Lessening Burdens of Government 8

4.6 Promotion of Health 9

Chapter 5 Educational, Scientific, and Literary Purposes, and Prevention of Cruelty to Children and Animals 21

5.1 Educational Purposes 21

5.4 Testing for Public Safety 22

Chapter 6 Civic Leagues and Local Associations of Employees: 501(c)(4) 23

6.1 Comparison of (c)(3) and (c)(4) Organizations 23

6.2 Qualifying and Nonqualifying Civic Organizations 25

6.4 Neighborhood and Homeowner’s Associations 27

6.5 Disclosures of Nondeductibility 27

Chapter 7 Labor, Agricultural, and Horticultural Organizations: 501(c)(5) 29

7.2 Agricultural Groups 29

7.4 Disclosure of Nondeductibility 29

Chapter 8 Business Leagues: 501(c)(6) 31

8.2 Meaning of “Common Business Interest” 31

8.3 Line of Business 31

8.4 Rendering Services for Members 32

Chapter 9 Social Clubs: 501(c)(7) 35

9.1 Organizational Requirements and Characteristics 35

9.3 Membership Requirements 36

9.4 Revenue Tests 37

9.5 Unrelated Business Income Tax 37

Chapter 10 Instrumentalities of Government and Title-Holding Organizations 39

10.2 Governmental Units 39

10.3 Qualifying for 501(c)(3) Status 40

Chapter 11 Public Charities 43

11.1 Distinction between Public and Private Charities 43

11.2 “Inherently Public Activity” and Broad Public Support: 509(a)(1) 43

11.3 Community Foundations 47

11.6 Supporting Organizations: 509(a)(3) 51

Part II Standards for Private Foundations 63

Chapter 12 Private Foundations—General Concepts 65

12.2 Special Rules Pertaining to Private Foundations 65

12.4 Termination of Private Foundation Status 66

Chapter 13 Excise Tax Based on Investment Income: IRC 4940 73

13.1 Formula for Taxable Income 73

13.2 Capital Gains 74

13.2A Tax on Private Colleges and Universities 76

Chapter 14 Self-Dealing: IRC 4941 77

14.1 Definition of Self-Dealing 78

14.2 Sale, Exchange, or Lease of Property 78

14.3 Loans 81

14.4 Compensation 82

14.5 Transactions That Benefit Disqualified Persons 83

14.7 Sharing Space, People, and Expenses with Family Office 85

14.8 Indirect Deals 87

14.9 Property Held by Fiduciaries 87

14.10 Issues Once Self-Dealing Occurs 88

Chapter 15 Minimum Distribution Requirements: IRC 4942 89

15.1 Assets Used to Calculate Minimum Investment Return 89

15.2 Measuring Fair Market Value 90

15.4 Qualifying Distributions 91

15.6 Satisfying the Distribution Test 101

Chapter 16 Excess Business Holdings and Jeopardizing Investments: IRC §4943 and 4944 105

16.1 Excess Business Holdings 105

16.2 Jeopardizing Investments 108

16.3 Program-Related Investments 109

16.4 Penalty Taxes 111

Chapter 17 Taxable Expenditures: IRC 4945 113

17.1 Lobbying 113

17.3 Grants to Individuals 114

17.4 Grants to Public Charities 125

17.5 Grants to Foreign Organizations 132

17.8 Excise Taxes Payable 133

Part III Obtaining and Maintaining Tax-Exempt Status 157

Chapter 18 IRS Filings, Procedures, and Policies 159

18.1 IRS Determination Process 159

18.2 Annual Filing of Forms 990 169

18.3 Reporting Organizational Changes to the IRS 176

18.4 Weathering an IRS Examination 177

18.5 When an Organization Loses Its Tax-Exempt Status 178

Chapter 19 Maintaining Exempt Status 197

19.1 Checklists 197

Chapter 20 Private Inurement and Intermediate Sanctions 203

20.1 Defining Inurement 204

20.2 Salaries and Other Compensation 205

20.4 Finding Salary Statistics 205

20.8 Services Rendered for Individuals 206

20.10 Intermediate Sanctions 206

Chapter 21 Unrelated Business Income 209

21.1 IRS Scrutiny of Unrelated Business Income 209

21.4 Definition of Trade or Business 210

21.5 What Is Unrelated Business Income? 211

21.7 “Substantially Related” 211

21.8 Unrelated Activities 213

21.10 Income Modifications 216

21.11 Calculating and Minimizing Taxable Income 217

21.12 Debt-Financed Property 223

21.13 Museums 224

21.15 Publishing 224

Chapter 23 Electioneering and Lobbying 225

23.1 Election Campaign Involvement 225

23.2 Voter Education versus Candidate Promotion 225

Chapter 24 Deductibility and Disclosures 227

24.1 Overview of Deductibility 227

24.2 Substantiation and Quid Pro Quo Rules 232

Chapter 25 Employment Taxes 233

25.2 Ministers 233

Index 239