The Nonprofit FAQ: Tax Exemptions

Select an FAQ   (10):

Can a tax-exempt organization sell coupon books to raise money? Selling coupon books is not an exempt activity (regardless of how the funds are used) unless the books are somehow related to the organization's exempt purposes.

Can I sell things for a profit and be tax-exempt? Selling items does not risk an organization's tax-exempt status if the revenue generated is used to promote the organization's exempt function and the applicable taxes are paid on any unrelated business income.

General resources about nonprofit taxation See the Free Management Library at http://www.mapnp.org/library/tax/np_tax.htm

How Can We Make a Budget for the IRS Before We Start Work? Form 1023 requires a three-year projected budget. What approach should be used to prepare one?

How do we get our Federal tax-exempt number? There really isn't any such thing. The Federal Employer Identification Number (EIN) is used for identifying nonprofit organizations. Local tax exemptions are set by local jurisdictions and must be researched locally.

Is there some legal requirement to spend a certain percentage of funds Foundations: yes. Public charities: no.

New Form 1023 Effective 2005 Form 1023 is used to file for recognition as a tax-exempt charity (etc.) with the IRS. The new form must be used after April 2005.

What if we lose our determination letter from the IRS? There is a simple procedure for getting a replacement. (These letters are sometimes also called 'recognition' letters.)

What sorts of organizations are exempt from federal income taxes? The Internal Revenue Code specifies many sorts of exempt organizations besides the familiar 501(c)(3). Donations to most other types, though, cannot be deducted from the donor's income taxes. The IRS website offers a complete list.

Where can I find detailed information on IRS treatment of nonprofits? The IRS itself has a detailed website.