Table of Contents
- Introduction
- Topics - This chapter discusses:
- Useful Items - You may want to see:
- Annual Information Returns
- Unrelated Business Income Tax Return
- Employment Tax Returns
- Political Organization Income Tax Return
- Reporting Requirements for a Political Organization
- Donee Information Return
- Information Provided to Donors
- Report of Cash Received
- Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms
- Required Disclosures
- Miscellaneous Rules
Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period.
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Annual information returns
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Unrelated business income tax return
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Employment tax returns
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Political organization income tax return
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Reporting requirements for a political organization
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Donee information return
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Information provided to donors
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Report of cash received
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Public inspection of exemption applications, annual returns, and political organizations reporting forms
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Required disclosures
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Miscellaneous rules
Publication
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15 Circular E, Employer's Tax Guide
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15-A Employer's Supplemental Tax Guide
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15-B Employer's Tax Guide to Fringe Benefits
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598 Tax on Unrelated Business Income of Exempt Organizations
Form (and Instructions)
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941 Employer's Quarterly Federal Tax Return
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990 Return of Organization Exempt From Income Tax
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990-EZ Short Form Return of Organization Exempt From Income Tax
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Schedule A (Form 990 or 990-EZ) Public Charity Status and Public Support
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Schedule B (Form 990, 990-EZ, or 990-PF) Schedule of Contributors
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Schedule C (Form 990 or 990-EZ) Political Campaign and Lobbying Activities
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Schedule D (Form 990) Supplemental Financial Statements
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Schedule E (Form 990 or 990-EZ) Schools
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Schedule F (Form 990) Statement of Activities Outside the United States
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Schedule G (Form 990 or 990-EZ) Supplemental Information Regarding Fundraising or Gaming Activities
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Schedule H (Form 990) Hospitals
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Schedule I (Form 990) Grants and Other Assistance to Organizations, Governments, and Individuals in the United States
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Schedule J (Form 990) Compensation Information
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Schedule K (Form 990) Supplemental Information on Tax-Exempt Bonds
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Schedule L (Form 990 or 990-EZ) Transactions With Interested Persons
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Schedule M (Form 990) Noncash Contributions
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Schedule N (Form 990 or 990-EZ) Liquidation, Termination, Dissolution, or Significant Disposition of Assets
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Schedule O (Form 990) Supplemental Information to Form 990
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Schedule R (Form 990) Related Organizations and Unrelated Partnerships
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990-PF Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation
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990-BL Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons
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990-T Exempt Organization Business Income Tax Return
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990-W Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations
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1120-POL U.S. Income Tax Return for Certain Political Organizations
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4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code
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5768 Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation
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6069 Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction
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7004 Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns
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8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes
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8282 Donee Information Return
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8300 Report of Cash Payments Over $10,000 Received in a Trade or Business
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8453-X Political Organization Declaration for Electronic Filing of Notice of Section 527 Status
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8822B Change of Address-Business
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8868 Application for Extension of Time to File an Exempt Organization Return
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8870 Information Return for Transfers Associated with Certain Personal Benefits Contracts
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8871 Political Organization Notice of Section 527 Status
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8872 Political Organization Report of Contributions and Expenditures
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8886-T Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction
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8899 Notice of Income from Donated Intellectual Property
See chapter 6 for information about getting these publications and forms.
Every organization exempt from federal income tax under section 501(a) must file an Annual Exempt Organization Return except:
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A church, an interchurch organization of local units of a church, a convention or association of churches,
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An integrated auxiliary of a church,
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A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs,
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A school below college level affiliated with a church or operated by a religious order,
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Church-affiliated mission societies if more than half of their activities are conducted in, or are directed at persons in, foreign countries,
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An exclusively religious activity of any religious order,
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A state institution, the income of which is excluded from gross income under section 115,
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A corporation described in section 501(c)(1) that is organized under an Act of Congress, an instrumentality of the United States, and is exempt from Federal income taxes,
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A stock bonus, pension, or profit-sharing trust that qualifies under section 401 (required to file Form 5500, Annual Return/Report of Employee Benefit Plan),
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A religious or apostolic organization described in section 501(d) (required to file Form 1065, U.S. Return of Partnership Income),
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A governmental unit or an affiliate of a governmental unit that meets the requirements of Rev. Proc. 95-48, 1995-2 C.B. 418, www.irs.gov/pub/irs-tege/rp1995-48.pdf,
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A private foundation described in section 501(c)(3) and exempt under section 501(a) (required to file Form 990-PF, Return of Private Foundation),
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A political organization that is a state or local committee of a political party, a political committee of a state or local candidate, a caucus or association of state or local officials, or required to report under the Federal Election Campaign Act of 1971 as a political committee,
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An exempt organization (other than a private foundation) that normally has annual gross receipts of $50,000 or less), or
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A foreign organization, or an organization located in a U.S. possession, that normally has annual gross receipts from sources within the United States of $50,000 or less.
For tax years ending after August 17, 2006, all section 509(a)(3) supporting organizations are required to file Form 990 or 990-EZ with the IRS regardless of the organization's gross receipts, unless it qualifies as one of the following:
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An integrated auxiliary of a church;
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The exclusively religious activities of a religious order; or
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An organization, the gross receipts of which are normally not more than $5,000, that supports a section 509(a)(3) religious order.
If the organization is described in item (3) above, then it must submit Form 990-N (e-Postcard) unless it voluntarily files Form 990 or 990-EZ.
On its annual information return, at Part I, Schedule A (Form 990 or 990-EZ) a supporting organization must:
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List the section 509(a)(3) organizations with respect to which it provides support,
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Indicate whether it is a Type I, Type II, or Type III supporting organization, and
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Certify that the organization is not controlled directly or indirectly by disqualified persons (other than by foundation managers and other than one or more publicly supported organizations).
Small tax-exempt organizations with annual gross receipts normally $50,000 or less must submit Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, with the IRS each year, if they choose not to file a Form 990 or 990-EZ. Form 990-N requires the following information:
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The organization's legal name, and mailing address;
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Any name under which it operates and does business;
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Its Internet website address (if any);
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Its taxpayer identification number;
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The name and address of a principal officer;
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Organization's annual tax period;
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Verification that the organization's annual gross receipts are normally $50,000 or less; and
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Notification if the organization has terminated.
Form 990-N is due by the 15th day of the fifth month after the close of the tax year. For tax years beginning after December 31, 2006, any organization that fails to meet its annual reporting requirement for 3 consecutive years will automatically lose its tax-exempt status. To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization.
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Churches, their integrated auxiliaries, and conventions or associations of churches;
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Organizations that are included in a group return;
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Private foundations required to file Form 990-PF; and
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Section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ.
Exempt organizations, other than private foundations, must file their annual information returns on Form 990 or 990-EZ, unless excepted from filing or allowed to submit Form 990-N, described earlier.
Generally, political organizations with gross receipts of $25,000 ($100,000 for a qualified state or local political organization (QSLPO)) or more for the tax year are required to file Form 990 or 990-EZ unless specifically excepted from filing the annual return. The following political organizations are not required to file Form 990 or Form 990-EZ.
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A state or local committee of a political party.
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A political committee of a state or local candidate.
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A caucus or association of state or local officials.
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A political organization that is required to report as a political committee under the Federal Election Campaign Act.
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A 501(c) organization that has expenditures for influencing or attempting to influence the selection, nomination, election, or appointment of any individual for a federal, state, or local public office.
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Its gross receipts during the year are less than $200,000.
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Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year are less than $500,000.
All private foundations exempt under section 501(c)(3) must file Form 990-PF. These organizations are discussed in chapter 3.
You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically.
If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. See Regulations section 301.6033-4 for more information.
The IRS may waive the requirement to file electronically in cases of undue hardship. For information on filing a waiver, see Notice 2010-13, 2010-4 I.R.B. 327, available at www.irs.gov/ir/2010-04_IRSB/ar14.html.
Forms 990, 990-EZ, or 990-PF must be filed by the 15th day of the fifth month after the end of your organization's accounting period. Thus, for a calendar year taxpayer, Forms 990, 990-EZ, or 990-PF is due May 15 of the following year.
If the organization fails to file a Form 990, 990-EZ, or 990-PF, or fails to submit a Form 990-N, as required, for 3 consecutive years, it will automatically lose its tax-exempt status. Automatic revocations have begun for organizations not filing for the third consecutive year. The list of organizations whose tax-exempt status has been revoked is available on IRS.gov. It includes each organization's name, Employer Identification Number (EIN) and last known address. It also includes the effective date of the automatic revocation and the date it was posted to the list. The IRS updates the list monthly to include additional organizations that lose their tax-exempt status. Organizations that lose their tax-exempt status must file income tax returns and pay income taxes. Check the IRS website, www.IRS.gov/eo, for updates.
Most tax-exempt organizations, other than churches, must file an annual return or notice with the IRS. If your organization does not file as required for three consecutive years, the law provides that it automatically loses its tax-exempt status. Loss of exempt status means your organization must file income tax returns and pay income tax, and its contributors can not deduct their donations.
An organization whose exemption was automatically revoked must apply for tax exemption in order to be exempt again (even if it was not originally required to apply). In some situations, an organization may be able to obtain exemption retroactive to the date of revocation. See IRS.gov for more information.
If your organization’s tax-exempt status is automatically revoked, you may be required to file one of the following federal income tax returns and pay any applicable income taxes:
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Form 1120, U.S. Corporation Income Tax Return, due by the 15th day of the 3rd month after the end of your organization’s tax year, or
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Form 1041, U.S. Income Tax Return for Estates and Trusts, due by the 15th day of the 4th month after the end of your organization’s tax year.
For more information about automatic revocation, go to IRS.gov and select Charities & Non-Profits.
Even though your organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. If your organization has $1,000 or more of unrelated business income, you must file Form 990-T in addition to your required annual information return.
Example.
ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). As part of its activities, ABC operates a travel tour program. The program is open to all current members of ABC and their guests. ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. XYZ pays ABC a per person fee for each participant. Although the literature advertising the tours encourages ABC members to continue their lifelong learning by joining the tours, and a faculty member of ABC's related university frequently joins the tour as a guest of the alumni association, none of the tours include any scheduled instruction or curriculum related to the destinations being visited. The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. Therefore, ABC's tour program is an unrelated trade or business.
For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T.
Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements, or if the taxes clearly do not apply.
For more information, obtain a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941.
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An officer or employee of a corporation, or
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A member or employee of a partnership.
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Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and
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Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that are not unrelated trades or businesses.
Generally, a political organization is treated as an organization exempt from tax. Certain political organizations, however, must file an annual income tax return, Form 1120-POL, for any year they have political organization taxable income in excess of the $100 specific deduction allowed under section 527.
A political organization that has $25,000 ($100,000 for a qualified state or local political organization) or more in gross receipts for the tax year must file Form 990 or Form 990-EZ (and Schedule B of the form), unless excepted. See Forms 990 and 990-EZ , earlier.
Certain political organizations are required to notify the IRS that they are section 527 organizations. These organizations must use Form 8871. Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. For a discussion on these forms, see Reporting Requirements for a Political Organization, later.
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Gross income for the tax year (excluding exempt function income) minus
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Deductions directly connected with the earning of gross income.
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The total amount of its exempt function expenditures, or
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The organization's net investment income.
Section 501(c)(3) organizations are precluded from, and may suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office.
For more information about filing Form 1120-POL, refer to the instructions accompanying the form.
Certain political organizations are required to notify the IRS that the organization is to be treated as a section 527 political organization. The organization is also required to periodically report certain contributions received and expenditures made by the organization. To notify the IRS of section 527 treatment, an organization must file Form 8871. To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872.
A political organization must electronically file Form 8871 to notify the IRS that it is to be treated as a section 527 organization. However, an organization is not required to file Form 8871 if:
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It reasonably expects its annual gross receipts to always be less than $25,000.
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It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U.S.C. 431(4)).
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It is a state or local candidate committee.
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It is a state or local committee of a political party.
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It is a section 501(c) organization that has made an “exempt function expenditure.”
All other political organizations are required to file Form 8871.
An organization must provide on Form 8871:
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Its name and address (including any business address, if different) and its electronic mailing address;
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Its purpose;
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The names and addresses of its officers, highly compensated employees, contact person, custodian of records, and members of its board of directors;
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The name and address of, and relationship to, any related entities (within the meaning of section 168(h)(4)); and
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Whether it intends to claim an exemption from filing Form 8872, Form 990, or Form 990-EZ.
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Online—Click on the Employer ID Numbers (EINs) link at www.IRS.gov/businesses/small.
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By telephone at 1-800-829-4933 from 7:00 a.m. to 10:00 p.m. in the organization's local time zone.
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By mailing or faxing Form SS-4.
Every tax-exempt section 527 political organization that accepts a contribution or makes an expenditure, for an exempt function during the calendar year, must file Form 8872 except:
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A political organization that is not required to file Form 8871 (discussed earlier).
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A political organization that is subject to tax on its income because it did not file or amend Form 8871.
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A qualified state or local political organization (QSLPO), discussed below.
All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872.
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All of its political activities relate solely to state or local public office (or office in a state or local political organization).
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It is subject to a state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS.
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The state agency and the organization make the reports publicly available.
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No federal candidate or office holder:
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Controls or materially participates in the direction of the organization,
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Solicits contributions for the organization, or
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Directs the disbursements of the organization.
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Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027
Internal Revenue Service
Attn: Request for 8872 Password
Mail Stop 6273
Ogden, UT 84201
A penalty will be imposed if the organization is required to file Form 8872 and it:
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Fails to file the form by the due date, or
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Files the form but fails to report all of the information required or reports incorrect information.
The penalty is 35% of the total amount of contributions and expenditures to which a failure relates.
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The property is valued at $500 or less, or
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The property is consumed or distributed for charitable purposes.
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Nonpublicly traded stock of $10,000 or less,
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A vehicle (including a car, boat, or airplane), if your deduction for the vehicle is limited to the gross proceeds from its sale,
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Intellectual property,
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Certain securities considered to have market quotations readily available (see Regulations section 1.170A-13(c)(7)(xi)(B)),
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Inventory and other property donated by a corporation that are qualified contributions for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A), or
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Any donation of stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business.
In some situations, a donor must obtain certain information from a donee organization to obtain a deduction for a charitable contribution. In other situations, the donee organization is required to provide information to the donor.
A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. (See Disclosure statement. below.) This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. See Quid pro quo contribution below for an example.
Failure to make the required disclosure may result in a penalty to the organization. A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization.
In certain circumstances, an organization may be able to meet both of these requirements with the same written document.
A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution over $75.
Example.
If a donor gives your charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable part of the payment is $60. Even though the deductible part of the payment is not more than $75, a written statement must be filed because the total payment is more than $75. If your organization fails to disclose quid pro quo contributions, the organization may be subject to a penalty.
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Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and
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Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received.
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The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, 1990-1 C.B. 471, Rev. Proc. 90-12, and Revenue Procedure 92-49, 1992-1 C.B. 507 (as adjusted for inflation), Rev. Proc. 92-49.
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There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop).
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There is only an intangible religious benefit provided to the donor. The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods.
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The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of:
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Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or
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Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedure 90-12 (as adjusted for inflation), Rev. Proc. 90-12.
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Example 1.
A charity provides a 1-hour tennis lesson with a tennis professional for the first $500 payment it receives. The tennis professional provides 1-hour lessons on a commercial basis for $100. A good faith estimate of the lesson's FMV is $100.
Example 2.
For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. A good faith estimate of the FMV of the right to hold the event in the museum can be made by using the cost of renting a hotel ballroom with a capacity, amenities, and atmosphere comparable to the museum room, even though the hotel ballroom lacks the unique art displayed in the museum room. If the hotel ballroom rents for $2,500, a good faith estimate of the FMV of the right to hold the event in the museum is $2,500.
Example 3.
For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. The artist does not provide tours on a commercial basis. Tours of the museum normally are free to the public. A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist.
A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment from the charitable organization. The donor must get the acknowledgment by the earlier of:
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The date the donor files the original return for the year the contribution is made, or
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The due date, including extensions, for filing the return.
The donor is responsible for requesting and obtaining the written acknowledgment from the donee. A charitable organization that receives a payment made as a contribution is treated as the donee organization for this purpose even if the organization (according to the donor's instructions or otherwise) distributes the amount received to one or more charities.
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A pay stub, Form W-2, or other document showing a contribution to a donee organization, together with
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A pledge card or other document from the donee organization that shows its name.
If an exempt organization receives a contribution of a qualified vehicle with a claimed value of more than $500, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. The donee organization can use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. See section 3.03 of Notice 2005-44 for guidance on the information that must be included in a contemporaneous written acknowledgment and the deadline for furnishing the acknowledgment to the donor.
Any donee organization that provides a contemporaneous written acknowledgment to a donor is required to report to the IRS the information contained in the acknowledgment. The report is due by February 28 (March 31 if filing electronically) of the year following the year in which the donee organization provides the acknowledgment to the donor. The organization must file the report on Copy A of Form 1098-C.
An organization that files Form 1098-C on paper should send it with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. See the Instructions for Form 1096 for the correct filing location.
An organization that is required to file 250 or more Forms 1098-C during the calendar year must file the forms electronically or magnetically. Specifications for filing Form 1098-C electronically or magnetically can be found in Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically at www.IRS.gov/pub/irs-pdf/p1220.pdf.
For a contribution of a qualified vehicle with a claimed value of $500 or less, do not file Form 1098-C. However, you can use it as the contemporaneous written acknowledgment under section 170(f)(8) by providing the donor with Copy C only. See the Instructions for Form 1098-C.
Generally, the organization should complete Form 1098-C as the written acknowledgment to the donor and the IRS. The contents of the acknowledgment depend upon whether the organization:
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Sells a qualified vehicle without any significant intervening use or material improvement,
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Intends to make a significant intervening use of or material improvement to a qualified vehicle prior to sale, or
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Sells a qualified vehicle to a needy individual at a price significantly below fair market value, or a gratuitous transfer to a needy individual in direct furtherance of a charitable purpose of the organization of relieving the poor and distressed or the underprivileged who are in need of a means of transportation.
For more information on the acknowledgment, see Notice 2005-44, 2005-25 I.R.B. 1287, at www.irs.gov/irb/2005-25_IRB/2005-25_IRB/ar09.html.
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Driving a vehicle every day for 1 year to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization.
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Driving a vehicle for 10,000 miles over a 1-year period to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization.
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Fails to furnish an acknowledgement in a timely manner, showing the required information, or
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Furnishes a false or fraudulent acknowledgement of the contribution.
A taxpayer who contributes qualified intellectual property to a charity may be entitled to a charitable deduction, in addition to any initial deduction allowed in the year of contribution. The additional deduction is based on a specified percentage of the qualified donee income with respect to the qualified intellectual property. To qualify for the additional charitable deduction, the donor must provide notice to the donee at the time of the contribution that the donor intends to treat the contribution as qualified intellectual property contribution for purposes of sections 170(m) and 6050L.
Every donee organization described in section 170(c) (except a private foundation as defined in section 509(a) that is not described in section 170(b)(1)(F)) that receives or accrues net income from a charitable gift of qualified intellectual property must file Form 8899.
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Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified.
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A copyright held by a taxpayer:
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Whose personal efforts created the property, or
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In whose hands the basis of the property is determined, for purposes of determining gain from a sale or exchange, in whole or in part by reference to the basis of the property in the hands of a taxpayer whose personal efforts created the property.
An exempt organization that receives, in the course of its activities, more than $10,000 cash in one transaction (or two or more related transactions) that is not a charitable contribution must report the transaction to the IRS on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
The following rules apply to private foundations as well as other tax-exempt organizations. Private foundations filing annual returns are subject to the public disclosure requirements under section 6104(d).
Included in this section is a discussion on the public inspection requirements for political organizations filing Forms 8871 and 8872.
An exempt organization must make available for public inspection, upon request and without charge, a copy of its original and amended annual information returns. Each information return must be made available from the date it is required to be filed (determined with regard to any extensions), or is actually filed, whichever is later. An original return does not have to be made available if more than 3 years have passed from the date the return was required to be filed (including any extensions) or was filed, whichever is later. An amended return does not have to be made available if more than 3 years have passed from the date it was filed.
An annual information return includes an exact copy of the return (Forms 990, 990-EZ, 990-BL, 990-PF, 990-T, or 1065), and amended return if any, and all schedules, attachments, and supporting documents filed with the IRS.
An annual information return does not include:
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Schedule A of Form 990-BL,
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Schedule K-1 of Form 1065, or
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Form 1120-POL.
In the case of a tax-exempt organization other than a private foundation, an annual information return does not include the names and addresses of contributors to the organization.
Form 990-T. All section 501(c)(3) organizations that file Form 990-T must make the return public, regardless of whether the organization is otherwise subject to the disclosure requirements of section 6104. For example, although churches are not required to file Form 1023 or Form 990 with the IRS, they must file the Form 990-T with the IRS to report unrelated business taxable income. Thus, churches must disclose Form 990-T to the public.
State colleges and universities have been recognized by the IRS as exempt under section 501(a) as organizations described in section 501(c)(3) must disclose Form 990-T to the public. However, state colleges and universities that are subject to tax under section 511(a) solely by virtue of section 511(a)(2)(B) and that have not been recognized by the IRS as exempt under section 501(a) as organizations described in section 501(c)(3) are not required to make their Forms 990-T public.
An exempt organization must also make available for public inspection without charge its application for tax-exempt status. An application for tax exemption includes the application form (such as Forms 1023 or 1024), all documents and statements the IRS requires the organization to file with the form, any statement or other supporting document submitted by an organization in support of its application, and any letter or other document issued by the IRS concerning the application.
The application for exemption does not include:
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Any application from an organization that is not yet recognized as exempt;
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Any material that is required to be withheld from public inspection, see Material required to be withheld from public inspection , next;
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In the case of a tax-exempt organization other than a private foundation, the names and addresses of contributors to the organization; or
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Any applications filed before July 15, 1987, if the organization did not have a copy of the application on July 15, 1987.
If there is no prescribed application form, see Regulations section 301.6104(d)-1(b)(3)(ii) for a list of the documents that must be made available.
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Trade secrets, patents, processes, styles of work, or apparatus for which withholding was requested and granted;
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National defense material;
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Unfavorable rulings or determination letters issued in response to applications for tax exemption;
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Rulings or determination letters revoking or modifying a favorable determination letter;
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Technical advice memoranda relating to a disapproved application for tax exemption or the revocation or modification of a favorable determination letter;
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Any letter or document filed with or issued by the IRS relating to whether a proposed or accomplished transaction is a prohibited transaction under section 503;
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Any letter or document filed with or issued by the IRS relating to an organization's status as an organization described in section 509(a) or 4942(j)(3), unless the letter or document relates to the organization's application for tax exemption; and
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Any other letter or document filed with or issued by the IRS which, although it relates to an organization's tax-exempt status as an organization described in section 501(c) or 501(d), does not relate to that organization's application for tax exemption.
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Is addressed to the exempt organization's principal, regional, or district office;
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Is sent to that address by mail, electronic mail (e-mail), facsimile (fax), or a private delivery service approved by the IRS; and
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Gives the address to where the copy of the document should be sent.
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The application submitted to the IRS by the central or parent organization to obtain the group exemption letter, and
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Those documents which were submitted by the central or parent organization to include the local or subordinate organization in the group exemption letter.
Forms 8871 and 8872 (discussed earlier under Reporting Requirements for a Political Organization) are open to public inspection.
Both Forms 8871 and 8872 are available online 48 hours after the form has been filed and is considered available if you provide the online address to the requester. In addition, your organization must make a copy of these materials available for public inspection during regular business hours at the organization’s principal office and at each of its regional or district offices having at least three paid employees.
The penalty for failure to allow public inspection of annual returns is $20 for each day the failure continues. The maximum penalty on all persons for failures involving any one return is $10,000.
The penalty for failure to allow public inspection of exemption applications is $20 for each day the failure continues.
The penalty for willful failure to allow public inspection of a return or exemption application is $5,000 for each return or application. The penalty also applies to a willful failure to provide copies.
The penalty for failure to allow public inspection of a political organization's section 527 notice (Form 8871) is $20 for each day the failure continues.
The penalty for failure to allow public inspection of a section 527 organization's contributions and expenditures report (Form 8872) is $20 for each day the failure continues. The maximum penalty on all persons for failures involving any one report is $10,000.
Certain exempt organizations must disclose to the IRS or the public certain information about their activities. Generally, an organization discloses this information by entering it on the appropriate lines of its annual return. In addition, there are disclosure requirements for:
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Solicitation of nondeductible contributions,
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Sales of information or services that are available free from the government,
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Dues paid to the organization that are not deductible because they are used for lobbying or political activities, and
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Prohibited tax shelter transactions.
Solicitations for contributions or other payments by certain exempt organizations (including lobbying groups and political action committees) must include a statement that payments to those organizations are not deductible as charitable contributions for federal income tax purposes. The statement must be included in the fundraising solicitation and be conspicuous and easily recognizable.
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Labor unions (section 501(c)(5)),
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Trade associations (section 501(c)(6)),
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Social clubs (section 501(c)(7)),
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Fraternal organizations (section 501(c)(8) and 501(c)(10)) (however, fraternal organizations described in section 170(c)(4) must follow these requirements only for solicitations for funds that are to be used for noncharitable purposes not described in section 170(c)(4)),
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Any political organization described in section 527(e), including political campaign committees and political action committees, and
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Any organization not eligible to receive tax-deductible contributions if the organization or a predecessor organization was, at any time during the 5-year period ending on the date of the fundraising solicitation, an organization of the type to which this disclosure requirement applies.
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The organization soliciting the funds normally has gross receipts over $100,000 per year.
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The solicitation is part of a coordinated fundraising campaign that is soliciting more than 10 persons during the year.
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The solicitation is made in written or printed form, by television or radio, or by telephone.
Certain organizations that offer to sell to individuals (or solicit money for) information or routine services that could be readily obtained free (or for a nominal fee) from the Federal Government must include a statement that the information or service can be so obtained. The statement must be made in a conspicuous and easily recognized format when the organization makes an offer or solicitation to sell the information or service. Organizations affected are those exempt under section 501(c) or 501(d) and political organizations defined in section 527(e).
Certain exempt organizations must notify anyone paying dues to the organization whether any part of the dues is not deductible because it is related to lobbying or political activities.
An organization must provide the notice if it is exempt from tax under section 501(a) and is one of the following.
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A social welfare organization described in section 501(c)(4) that is not a veterans' organization.
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An agricultural or horticultural organization described in section 501(c)(5).
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A business league, chamber of commerce, real estate board, or other organization described in section 501(c)(6).
However, an organization described in (1), (2), or (3) does not have to provide the notice if it establishes that substantially all the dues paid to it are not deductible anyway or if certain other conditions are met. For more information, see Revenue Procedure 98-19, 1998-19, 1998-1 C.B. 547 (or later update).
If the organization does not provide the required notice, it may have to pay a tax that is reported on Form 990-T. But the tax does not apply to any amount on which the section 527 tax has been paid on Form 1120-POL. See Political Organization Income Tax Return , earlier.
For more information about nondeductible dues, see Deduction not allowed for dues used for political or legislative activities. ??? under Section 501(c)(6) organizations, later.
Every exempt organization (as defined in section 4965(c)) that is a party to a prohibited tax shelter transaction is required to disclose to the IRS the following information:
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Whether such organization is a party to the prohibited tax shelter transaction (as defined in section 4965(e)); and
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The identity of any other party to the transaction that is known to the exempt organization.
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Facilitates a prohibited tax shelter transaction by reason of its tax-exempt, tax-indifferent, or tax-favored status; or
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Is identified in published guidance by type, class, or role as a party to a prohibited tax shelter transaction.
If your exempt organization changes its legal structure, such as from a trust to a corporation, you must file a new exemption application to establish that the new legal entity qualifies for exemption. If your organization becomes inactive for a period of time but does not cease being an entity under the laws of the state in which it was formed, its exemption will not be terminated. However, unless you are covered by one of the filing exceptions, you will have to continue to file an annual information return during the period of inactivity. If your organization has been liquidated, dissolved, terminated, or substantially contracted, you should file your annual return of information by the 15th day of the 5th month after the change and follow the applicable instructions to the form.
If your organization amends its articles of organization or its internal regulations (bylaws), then follow the instructions to Form 990, Form 990-EZ, or Form 990-PF for reporting these changes. Regardless of whether your organization files an annual information return, you may also report these changes to the EO Determinations office; however, such reporting does not relieve your organization from reporting the changes on its annual information return. For information about informing the IRS of a termination or merger, see Pub. 4779, Facts about Terminating or Merging Your Exempt Organization.
An organization should report new significant program services or significant changes in how it conducts program services, and significant changes to its organizational documents, on its Form 990 rather than in a letter to EO Determinations. EO Determinations no longer issues letters confirming the tax-exempt status of organizations that report new services or significant changes, or changes to organizational documents.
The procedures that an organization must follow to change its accounting period differ for an individual organization and for a central organization that seeks a group change for its subordinate organizations.
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