IRS Non Profit Tax Information
The Internal Revenue Service has various requirements that must be met for a corporation or organization to be considered non-profit. Once classified as non-profit, certain regulations must be followed.
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Exempt Organizations
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According to the IRS, the tax code provides for the exemption of tax liability for certain businesses and organizations. These include charitable organizations, churches and religious groups, political organizations, private foundations, business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues. These organizations must not be organized for profit, and no part of the net earnings can benefit any private shareholder or individual.
Exemption Requirements
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In addition to earnings not profiting any individual or entity, an exempt organization must be organized and operated for exempt purposes. With the exception of qualified political organizations, it may not attempt to influence legislation as a substantial part of its activities.
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Application Process
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To apply for exempt status, IRS form 1023, Application for Recognition of Exemption, must be filed with the Internal Revenue Service. In addition, a request for an employer identification number should be filed. Organizations required to apply for recognition of exemption must notify the IRS within 27 months from the date of their formation to be deemed non-profit. As of 2008, churches and public charities whose annual gross receipts are normally less than $5,000 do not have to apply for exemption.
In addition to form 1023, applicants must also complete IRS form 1024, Application for Recognition of Exemption Under Section 501(a).
Filing Requirements
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Although exempt from taxation, exempt organizations are generally required to file annual returns of their income and expenses with the Internal Revenue Service. In addition, a charity may have ongoing compliance requirements including employment taxes and charitable contributions.
Political Campaigning Restrictions
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Under the tax code, all non-profit organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of any candidate for elective public office. According to the IRS, "contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity". If a non-profit is found to violate this restriction, it may result in denial or revocation of the tax-exempt.
Business Leagues
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Trade associations, when they meet the requirements of Internal Revenue Code section 501(c)(6), are exempt from federal income tax and classified as business leagues. This provision offers exemption to chambers of commerce, real estate boards, boards of trade, and professional football leagues.
The IRS code specifically exempts professional football leagues under section 501(c)(6). According to the code, professional football leagues are exempt whether or not they administer a pension fund for football players.
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References
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