Tax
II. C. Principle–501(c)(3) Status for the Charitable Nonprofit
After completion of incorporation, creation of the trust with an indenture, or adoption of the articles of organization of an unincorporated association, the board should seek tax treatment consistent with its charitable purposes under Internal Revenue Code 501(c)(3) from the U.S. Internal Revenue Service, and then faithfully and successfully conduct the affairs of the nonprofit entity within that Code sections’ provisions.
Practices
- Application should be made to the U.S. International Revenue Service for federal income exempt status on IRS Form 1023 available on the IRS Web site. The nonprofit should also apply for an employer identification number (EIN) with form SS-4 which is also available on the IRS Web site. This EIN number is required even if the charitable nonprofit is not an employer.
The Law of Tax Exempt Organizations (2007), by Bruce Hopkins.
Frequently Asked Questions about Tax
You’ll notice in the definition of “government affiliate” that part (a) is for organizations that have received a determination letter from the I.R.S. and part (b) is for organizations that have not received a determination letter. It is highly advisable to get a determination letter, as your organization's characterization as a government affiliate is more solid.
See the Internal Revenue Service Revenue Procedure for a more detailed discussion of this issue.
Yes. All nonprofits with 501(c)(3) status, except for churches, must now file some version of a Form 990. The Iowa Principles and Practices for Charitable Nonprofit Excellence states that nonprofits must file the reports required by taxing authorities including, "Annual informational report to US Internal Revenue Service. A 501(c)(3) organization with public charity status must annually file a Form 990 report if its annual gross revenue is $50,000 or more. Churches are not required to file the Form 990 even if the church’s revenue is above that amount. 501(c)(3) entities that are private foundations file Form 990PF. Nonprofits with less than $50,000 gross receipts must file Form 990-N." (II. E. 2) Nonprofits required to file the Form 990 which fail to file it face a penalty of $20 per day up to five percent of the nonprofit’s gross receipts or $10,000, whichever is smaller (IRS §6652(c)).
Iowa Code section 28E.4 provides that:
Any public agency of this state may enter into an agreement with one or more public or private agencies for joint or cooperative action pursuant to the provisions of this chapter, including the creation of a separate entity to carry out the purpose of the agreement. Appropriate action by ordinance, resolution, or otherwise pursuant to law of the governing bodies shall be necessary before any such agreement may enter into force. For details, see this document of the same name.
A separate acknowledgement may be provided for each single contribution of $250 or more, or one acknowledgement, such as an annual summary, may be used to substantiate several single contributions of $250 or more. There are no IRS forms for the acknowledgement. Letters, postcards, or computer-generated forms are acceptable. An organization can provide either a paper copy of the acknowledgment to the donor, or the organization can provide the acknowledgement electronically, such as an e-mail addressed to the donor. It is the donor's responsibility to obtain a written acknowledgement from the recipient organization. Written statements should contain the following information: 1. the name of the recipient organization; 2. the amount of cash contributed by the donor; 3. a description (but not the value) of non-cash contributions; and 4. a. either a statement that no goods or services were provided by the organization in return for the contribution, or b. a description and good faith estimate of the value of goods or services that an organization provided in return for the contribution (see information on quid pro quo contributions below). Note: additional information is required if the goods or services donated were provided in return for entirely intangible religious benefits. When a donor makes a single contribution of $250 or more by payroll deduction, the donor may use both of the following documents as written acknowledgement obtained from the recipient organization: 1. A pay stub, Form W-2, Wage and Tax Statement, or other document furnished by the employer that sets forth the amount withheld by the employer and paid to a charitable organization, and 2. a pledge card that includes a statement to the effect that the organization does not provide goods or services in exchange for contributions to the organization by payroll deduction.
If a landlord rents to a nonprofit organization at no cost or at a rate less than fair market value, the landlord is not entitled to a charitable deduction for rents that could have been received.