Legal Guidelines of 501(C)3 Organizations
Legal Aspects of 501(c)3 Organizations: Maintaining Tax Exempt Status
Marlea Maschmeyer
University of Texas Arlington
Abstract
This paper discusses some of the main legal restrictions that nonprofit organizations face when maintaining their 501(c)3 tax-exempt status. The full extent of boundaries is vast in scope, but topics explored within this paper include restrictions on endorsing candidates for public office, limitations on lobbying, restrictions on business activities, and excess benefit transactions. Knowing, understanding, and following these legal restrictions is imperative for nonprofit organizations in order to maintain their tax-exempt status.
Introduction
Nonprofit organizations have a deep history in serving the public in ways that the government and for-profits organizations traditionally have not helped society. Because of this inherent good nature and desire to fill gaps in societal needs, the Internal Revenue Service, the government agency responsible for tax collection and tax law enforcement, has granted nonprofits the opportunity to acquire tax-exempt status. This beneficial status is not awarded lightly or undeservedly. Organizations must meet certain requirements before being considered eligible to apply for tax-exempt status, and even after acquiring tax-exempt status, nonprofits must adhere to certain guidelines in order to maintain their status.
Discussion
Nonprofit organizations must annually submit certain forms to maintain tax-exemption. Each year, almost all nonprofits must file annual returns with the IRS, known as series 990 forms. There are different form versions for different organizations. The returns must state the items of income, receipts, and expenditures. If a nonprofit fails to file a return, it may face financial penalties or have its tax-exempt status revoked (Annual Filings for Tax-Exempt Charitable Organizations, 2012). Over the past three years alone, 275,000 nonprofits in the United States had their
Marlea Maschmeyer
University of Texas Arlington
Abstract
This paper discusses some of the main legal restrictions that nonprofit organizations face when maintaining their 501(c)3 tax-exempt status. The full extent of boundaries is vast in scope, but topics explored within this paper include restrictions on endorsing candidates for public office, limitations on lobbying, restrictions on business activities, and excess benefit transactions. Knowing, understanding, and following these legal restrictions is imperative for nonprofit organizations in order to maintain their tax-exempt status.
Introduction
Nonprofit organizations have a deep history in serving the public in ways that the government and for-profits organizations traditionally have not helped society. Because of this inherent good nature and desire to fill gaps in societal needs, the Internal Revenue Service, the government agency responsible for tax collection and tax law enforcement, has granted nonprofits the opportunity to acquire tax-exempt status. This beneficial status is not awarded lightly or undeservedly. Organizations must meet certain requirements before being considered eligible to apply for tax-exempt status, and even after acquiring tax-exempt status, nonprofits must adhere to certain guidelines in order to maintain their status.
Discussion
Nonprofit organizations must annually submit certain forms to maintain tax-exemption. Each year, almost all nonprofits must file annual returns with the IRS, known as series 990 forms. There are different form versions for different organizations. The returns must state the items of income, receipts, and expenditures. If a nonprofit fails to file a return, it may face financial penalties or have its tax-exempt status revoked (Annual Filings for Tax-Exempt Charitable Organizations, 2012). Over the past three years alone, 275,000 nonprofits in the United States had their
References: Annual filings for tax-exempt charitable organizations. (2012). Retrieved October 29, 2012, from National Council of Nonprofits: http://www.councilofnonprofits.org/annual-filings Blackwood, A Branch Ministries, Inc. v. Charles O. Rossotti. (n.d.). Retrieved October 13, 2012, from IRS: http://www.irs.gov/pub/irs-utl/branch_ministries.pdf Exemption requirements - section 501(c)(3) organizations Hodges, A. (2006). Starting a nonprofit: what you need to know. Retrieved October 13, 2012, from Richmond School of Law: http://law.richmond.edu/people/initiatives/nonprofit.html Nonprofit excess benefit transactions O 'Connell, R. &. (2012, July 16). Livestrong lobbyist 's agenda is questioned. Retrieved November 5, 2012, from The Wall Street Journal: http://online.wsj.com/article/SB10001424052702303612804577531353567249064.html O 'Keeffe, C United States v. Christian Echos Ministry. (n.d.). Retrieved October 14, 2012, from FindLaw: http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=404&invol=561 Unrelated business income