CRS Releases Exempt Organizations FAQ

This report answers frequently asked questions about tax-exempt organizations, including how to set up a tax-exempt organization, how to get information about a tax-exempt organization, what limits are placed on the lobbying and political activities of tax-exempt organizations, and the meaning of the terms "tax-exempt," "nonprofit," and "private foundation." Although various types of exempt organizations are discussed, the primary emphasis is on the tax treatment of 501(c)(3) organizations, usually called charities or charitable organizations. Several questions are intended to guide the reader to more information about tax-exempt organizations in general or about specific organizations. Another group of questions provides general information on how to form a tax-exempt organization, what record keeping requirements an organization might encounter, and how an organization might lose its tax-exempt status. The appendix contains a comparison of the types of tax-exempt organizations and the deductibility of contributions, and the tax law limits on their ability to lobby and participate in political campaigns.

Susan Watkins provided invaluable assistance in updating the second version of this report. She checked, updated, corrected, and added bibliographic references, addresses, useful sources of information, organizational references, and website addresses.

Erika Lunder, Legal Intern, American Law Division, provided the impetus to produce a third version of the report. She updated and substantially rewrote this version of the report under the supervision of the author. Her able contributions brought it into the 21st century.

 Contents

A tax-exempt organization is an organization that is exempt from Federal income taxes under section 501(a) of the Internal Revenue Code. In order to become exempt, an organization must meet the Code's requirements and file an application for exempt status with the Internal Revenue Service. Various types of organizations may qualify for tax-exempt status, including social welfare organizations, labor unions, trade associations, social clubs, veterans' organizations, cooperatives, and fraternal organizations. The type of organization that people often mean when using the term "tax-exempt organization" is described in section 501(c)(3):

2. What is a Nonprofit (Not-for-profit) Organization?

The term "tax-exempt organization" is often used interchangeably with the term "nonprofit organization." This can be misleading. While a tax-exempt organization is defined under Federal law (the Internal Revenue Code) as exempt from Federal income taxes, the status and privileges of a nonprofit organization are determined under state law. The requirements vary by state, but the term "nonprofit organization" generally means a corporation which is not intended to be a profit-making corporation. State incorporation laws usually take into account the fact that nonprofit corporations typically do not have shareholders or the same business motives as for-profit corporations. A nonprofit corporation is not automatically a tax-exempt organization. Since the qualifications for "nonprofit" status vary among states, it is possible for the term "nonprofit organization" to be broader than, narrower than, or identical to the term "tax-exempt organization." In order for a nonprofit organization to be exempt from Federal income taxes, it must meet the statutory requirements found in the Internal Revenue Code and file an application for recognition of exempt status with the IRS.

3. What are the Differences Between 501(c)(3) and 501(c)(4) Organizations?

Section 501(c) of the Internal Revenue Code (IRC) describes many types of organizations that qualify for tax-exempt status. When an organization applies for exempt status, it must tell the IRS which paragraph of IRC § 501(c) it qualifies under. Generally, the answer is obvious since most paragraphs under section 501(c) are discrete categories; for example, section 501(c)(5) refers to agricultural organizations, section 501(c)(8) refers to fraternal societies, and section 501(c)(14) refers to credit unions. The organizations described in paragraphs 501(c)(3) (usually referred to as "charitable" organizations)¹ and 501(c)(4) (usually referred to as "social welfare organizations")², however, have some overlapping characteristics. Both sections include organizations that operate for charitable purposes³ and are restricted so that none of the organization's earnings may benefit a private shareholder or individual.

Despite these similarities, 501(c)(3) and 501(c)(4) organizations differ in two significant ways. First, under IRC § 170(c), contributions to 501(c)(3) organizations are deductible, but contributions to 501(c)(4) organizations are not. When a contribution is deductible, a donor may deduct the amount of the contribution from taxable income, subject to the restrictions in IRC § 170. This is an important benefit for the organization because it encourages donors to contribute in order to lower their taxable income and to make larger contributions since the after-tax cost of each contribution is reduced. The second difference is that 501(c)(3) organizations are heavily restricted in their ability to lobby and attempts to influence legislation or public opinion and they are prohibited from directly engaging in political campaigns, but 501(c)(4) organizations are not. (Questions 10 and 11 provide information on these restrictions).

These two differences are important when an organization is faced with the choice of applying for tax-exempt status as a 501(c)(3) or 501(c)(4) organization. If the organization's agenda depends on influencing public opinion or the legislative process, it may be advantageous to be a 501(c)(4) organization. For other organizations, it will usually make more sense to be a 501(c)(3) organization in order to have the advantage of tax-deductible contributions.

Finally, it is important to note that while an organization must identify itself as one type of 501(c) organization, it may be paired with another 501(c) organization under certain circumstances. For example, a 501(c)(3) organization can be paired with another organization, such as a 501(c)(6) trade association or a 501(c)(4) social welfare organization, if the organizations are actually and legally separate entities. It is not unusual for a trade association, such as the American Bar Association or the American Medical Association, to have a similarly named charitable foundation that conducts charitable activities. Organizations may also be paired when a group has a need to lobby as well as to conduct charitable activities. The two organizations' activities and funds must be kept separate, but they may have overlapping boards of directors. The charitable organization may qualify to accept deductible contributions if the charitable activities are isolated from the lobbying organization.

4. What is a Private Foundation?

A 501(c)(3) organization is either a public charity or a private foundation. Public charities have broad public support and tend to provide charitable services directly to the intended beneficiaries. Private foundations differ from public charities in several ways. First, private foundations are often tightly controlled and receive a significant portion of their funds from a small number of donors, perhaps even a single source. Additionally, many private foundations make grants to other organizations rather than directly carry out charitable activities. Since these factors create the potential for self-dealing or abuse of position by a small group controlling a tax-exempt organization, private foundations are more closely regulated than public charities. Thus, private foundations are subject to the additional requirements found in IRC § § 4940- 4946. They face additional taxes and penalties for failing to meet these requirements. It is important to note that all 501(c)(3) groups are presumed to be private foundations and must actively tell the IRS how they qualify for public charity status, based on the support and control tests found in IRC § 509.

5. How Do I Know if My Contribution to an Organization is Tax-Deductible?

Section 170 of the Internal Revenue Code allows for certain charitable contributions made to tax-exempt organizations to be deducted from the donor's gross income. When a contribution to a tax-exempt organization is not deductible as a charitable contribution, the organization must notify the potential contributor of that fact at the time of solicitation.⁴ Organizations that fail to meet this requirement face a fine of $1,000 for each day the failure occurs, with an annual cap of $10,000, under IRC § 6710. The fines are higher and the cap is eliminated for organizations that intentionally disregard the notification requirement. The only contributions to tax-exempt organizations that are deductible are those that meet the requirements of IRC § 170. Under section 170(c), contributions made for charitable purposes are tax deductible when made to qualifying 501(c)(3) organizations, governmental units, veterans organizations, fraternal organizations, and cemetery companies. IRC § 501(c)(3) organizations must be granted approval by the IRC to receive tax-deductible contributions. The IRS determines the deductibility of charitable contributions at the same time that it considers the organization's application for exempt status. A listing of the 501(c)(3) organizations eligible to receive deductible contributions is found in IRS Publication 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1986. This publication is available on the IRS web site [ http://www.irs.gov ] or may be requested from the IRS.

Charitable contributions that meet the requirements of section 170(c) are not deductible if the organization provides goods or services in exchange for the contribution. If the contribution exceeds the fair market value of the goods or services, then the amount of the excess may be deductible. When an organization receives more than $75 in exchange for goods or services, IRC § 6115 requires that the donor be told the amount of the contribution, if any, that is tax-deductible.

Even if a contribution to an organization is deductible, individual taxpayers face restrictions on the ability to benefit from the deduction. Only donors who itemize deductions may take the charitable deduction.⁵ High-income taxpayers are further limited in the amount of total itemized deductions they may take. Additionally, certain substantiation requirements exist, including the rule that donors must obtain a written acknowledgment from the organization for any contribution that exceeds $250 in value. Finally, section 170 may restrict the amount of the deduction depending on the size and nature of the contribution. For example, taxpayers may not deduct contributions exceeding 50% of the taxpayer's adjusted gross income (the percentages are lower for certain property, e.g., a donation of capital gain property).

Dues to some organizations may be deductible as business expenses or employee business expenses. Typically, dues to trade associations (501(c)(6)) and labor unions (501(c)(5)) are potentially deductible as employee business expenses; however, without significant business expenses, i.e., exceeding 2% of adjusted gross income, the individual will find that the deduction cannot be used.

6. Are There Organizations Which Evaluate Charities or Report on Their Activities?

The following are examples of organizations which report on the activities of charities. The information is adapted from the organizations' websites.

7. How Can I Get Information about a Tax-Exempt Organization?

Under IRC § 6104(d), the application for exempt status and the annual information return (Form 990) of a tax-exempt organization are open to public inspection.⁶ This requirement has two parts: the organization must allow the public to inspect the documents and must provide copies upon request. For inspection purposes, the information must be made available during normal business hours at the organization's principal office and any district office with more than three employees. With respect to providing copies, requests for copies of the documents may be made in writing or made in person. The organization must furnish copies immediately if the request is made in person and within 30 days for written requests. The organization is permitted to charge a reasonable fee for reproduction and mailing costs. An organization is not required to provide individual copies if either: (1) the organization makes these documents widely available on the internet or (2) the requests are part of a harassment campaign and compliance is not in the public interest.

Certain information does not have to be disclosed. Organizations are not required to disclose the names and addresses of any contributors. Furthermore, the IRS is permitted to create exceptions to public disclosure of information relating to trade secrets, patents, processes, styles of work, or apparatus, if public disclosure would adversely affect the organization or if the information would adversely affect the national defense.

If an organization refuses to provide a copy of its returns, the IRS suggests that the taxpayer notify the IRS Examination Division, 1100 Commerce Street, ATTN: T:EO:E, Dallas, TX 75242 by letter. The letter should provide the name and address of the organization that refuses to allow public inspection or provide copies of its return, and request that the return be made available for public inspection. The Tax Exempt/Government Entities Division of the IRS will contact the organization and arrange a time during which the return may be inspected. If the organization fails to provide the return at the agreed upon time, the IRS will assess statutory penalties. Failure to comply with the inspection requirement is penalized under IRC § 6652(c)(1). There is a $20 per day penalty for failure to comply with the return inspection requirement, with a maximum penalty of $10,000 per return. There is an unlimited $20 per day penalty for failure to allow inspection of the application for exemption.

There are other sources of information besides the organizations themselves. Requests to see an organization's annual return and application for exemption may be made to the IRS. Furthermore, if the inquiry does not require the level of detail found in the Form 990 and exemption application, other sources of information include:

8. How Do You Set up a Tax-exempt Organization?

For many tax-exempt organizations, the first step is to incorporate the organization. Organizations incorporate for a variety of reasons, but incorporation is not usually required in order to apply for tax-exempt status from the IRS. The benefits associated with corporate status include limited personal liability for members of the organization. Incorporation is achieved under state law. Contact the appropriate state office -- most often, the Secretary of State -- for information on that state's not-for-profit laws. An organization may be required to:

• Register with the Secretary of State to reserve that organization's name and enable the group to solicit funds, do business, or own property in the state.

• File Articles of Incorporation which will include the organization's purposes and names of incorporators and will enable the state to recognize the organization as an incorporated nonprofit organization. Some states do not have special nonprofit corporation status and the organization will be incorporated under regular corporation laws.

• Another important consideration for many exempt organizations is the ability to solicit charitable contributions. The National Association of State Charity Officials web site provides links to state offices which regulate charitable solicitations. [http://www.nasconet.org/stories/storyReader$8]. Many of the links enable the searcher to download the necessary forms. There is also a unified registration form for those charities seeking to solicit in multiple states.

• Obtaining a Federal Employer Identification Number (IRS Form SS-4). Every exempt organization is required to have an employer identification number, whether or not it has any employees; this number will allow the IRS to track your application for tax-exempt status.

• Completing IRS Form 8718 (User Fee for Exempt Organization Determination Letter Request) to calculate the correct fee which must be submitted with the application for tax-exempt status.

Certain organizations are not required to file Package 1023 or submit other specific application forms. This is explained in IRS Publication 557. IRS Publication 557 and the applicable forms may be downloaded from the IRS web site [ http://www.irs.gov ]. The forms may be requested from the IRS at local IRS offices or by calling (toll-free) 1-800-829-3676.

If the organization is applying for 501(c)(3) status, it should file the application for recognition during the first 15 months of the organization's life. This assures that the recognition of exempt status will date back to the date of the organization's formation. Although there are certain exceptions, the general rule under IRC § 508(a) is that if the application is filed at a later time, the determination will date back only to the date of the application. For other types of exempt organizations, the recognition of exempt status will date back to the date of the organization's formation if the organization's activities and purposes are the same as those at the time recognition was granted. If the organization is required to alter its activities or substantially amend its charter to qualify for exempt status, then the recognition of exempt status will be effective as of a date determined by the Internal Revenue Service.

9. What Tax Records Do Tax-exempt Organizations Have to Prepare?

Under IRC § 6033, most exempt organizations are required to file an annual return (Form 990) that discloses such information as income, receipts, expenses and disbursements, a balance sheet of assets, liabilities, and net worth, the total of contributions and gifts received during the year, the names and addresses of substantial contributors, the names and compensation of managers and highly compensated employees, the amounts of penalty taxes imposed for excessive lobbying, political expenditures, or excess benefit transactions. Certain organizations also have to report their lobbying expenditures and grass roots expenditures. Certain dues- collecting organizations are required to estimate what portion of member's dues is spent on lobbying. All of these requirements are satisfied by filing IRS Form 990. If the organization has unrelated business income, it must also file a Form 990-T. Not all organizations have to file an annual return. For example, churches, certain church-related organizations, and organizations with gross receipts that are normally less than $25,000 do not have to file an annual return. There are other exceptions contained in IRC § 6033(a)(2).

The penalty for failure to file the required returns is found in IRC § 6652(c)(1)(A). The penalty is $20 per day for each day the failure continues. If the organization has annual gross receipts exceeding $1 million in any year, then the daily penalty is $100 per day. The maximum penalty is the lesser of $10,000 or 5 percent of the organization's gross receipts. For organizations exceeding $1 million in gross receipts, the maximum penalty is $50,000.

Although tax-exempt organizations are generally exempt from Federal income taxes, they must pay the same employment-related taxes and file the same tax forms as for-profit employers. Thus, organizations must withhold income taxes from employee's wages (Forms 941, W-2, W-3, W-4 and 8109) and pay state and federal unemployment taxes (Forms 940 and 8109 plus state requirements). Additionally, they must pay the employer's share of the social security and medicare taxes and withhold the employee's share of these taxes from wages (Forms 941, W-3, W-4, and 8109).

10. Can Tax-Exempt Organizations Lobby?

Some types of exempt organizations are completely prohibited from lobbying, others are restricted in the amount of lobbying that they may do, and the rest may lobby so long as they primarily serve their tax-exempt purpose. Among those types of exempt organizations completely prohibited from lobbying by the tax law are those described in IRC § § 501(c)(2), (c)(17), (c)(18), (c)(21), (c)(22), (c)(24), and (c)(25). Most of these organizations are trusts which must use their income and principal "exclusively" for the purposes for which they are established. Other organizations are restricted in the amount of lobbying that they may do. This group includes 501(c)(3) organizations, 501(e) cooperative hospital service organizations, 501(f) cooperative investment organizations of educational institutions, and 501(k) child care centers. For these organizations, "no substantial part" of their activities can be lobbying. Case law suggests that "no substantial part" is probably between 5% and 20% of the organization's expenditures. Since this standard is indefinite, some 501(c)(3) organizations may elect to have their lobbying activities measured by an objective, numerical limit, referred to as the 501(h) election.⁷ The limits are described in IRC § 4911: the organization may not spend more than 20% of its first $500,000 of expenditures on lobbying, nor more than 15% of its second $500,000 of expenditures, nor more than 10% of its third $500,000 of expenditures, nor more than 5% of its remaining expenditures. An electing organization may never spend more than $1 million a year on lobbying expenses and no more than 25% of lobbying expenditures can be spent for "grass roots" lobbying. Most organizations do not make the 501(h) election and remain subject to the "no substantial part" test. An organization that fails the applicable test may lose its exempt status, be subject to penalties for loss of exemption, and face possible excise taxes under IRC § § 4911 and 4912. IRC § 4911 imposes a tax on organizations making the 501(h) election equal to 25% of the excess lobbying expenditures for the year. IRC § 4912 imposes two taxes on organizations making expenditures which would disqualify them from continuing as a 501(c)(3) organization: a tax on the organization equal to 5% of all lobbying expenditures, and a tax on the organization management equal to 5% of all lobbying expenditures, unless there is a reasonable cause exception.

Most other types of tax-exempt organizations are not subject to any tax law limits on the amount of lobbying that can be done, other than they must primarily serve their own tax-exempt purposes. In other words, lobbying cannot be the primary purpose of the organization.

A tax-exempt organization's lobbying may affect the amount that its contributors would otherwise be able to deduct (see question 5). The organizations at issue are those that collect tax-deductible dues from their members (e.g., a trade association or a charitable organization). When such an organization conducts lobbying activities, IRC § § 162(e) and 6033(e) work together to disallow a deduction for the portion of the members' dues that represents the lobbying expenditures. The organization is required to notify its members of the portion of dues that is nondeductible. ⁸ If the organization fails to make the notification, IRC § 6033(e)(2) imposes a proxy tax on the organization's lobbying expenditures.

Since the 104th Congress, there have been a number of non-tax proposals to restrict the ability of certain tax-exempt organizations, especially 501(c)(4) social welfare organizations and 501(c)(5) labor unions, to lobby. Section 18 of the Lobbying Disclosure Act of 1995, P.L. 104-65, prohibited organizations described in IRC § 501(c)(4) from receiving federal grants, loans, contracts, or other awards if they engage in lobbying activities, even if they conducted the lobbying with their own funds. This language was quickly amended by P.L. 104-99 to permit lobbying by certain tax-exempt organizations that received federal contracts, but not grants or loans. The Lobbying Disclosure Act also imposes registration and disclosure requirements on organizations that have paid lobbyists whose lobbying activities on behalf of the organization exceed certain time and monetary limits. For more information on this topic, see CRS Report 96-809, Lobbying Regulations on Non-Profit Organizations, by Jack H. Maskell.

11. Can Tax-Exempt Organizations Participate in Political Activities?

IRC § 501(c)(3) organizations are prohibited from participating in, or intervening in "any political campaign on behalf of (or in opposition to) any candidate for public office." Thus, charitable organizations can lose their exempt status for engaging in "political campaign activities." Political campaign activities include those activities that are specifically linked to election periods that support or oppose particular candidates. Examples of prohibited political campaign activities include endorsing or opposing particular candidates; evaluating candidates and supporting a slate of the best-qualified candidates; preparing and distributing voters' guides during an election where the questions asked or the presentation of the information indicate a bias on certain issues; and making contributions to a political campaign.

It should be noted, however, that many types of political activities which are not "campaign activities" are permitted to some extent. The key is that these activities do not support or oppose a particular candidate. Permissible activities under the tax laws, so long as no candidate is endorsed or opposed, include: educational activities such as conducting public forums at which social, political, and international questions are considered; compiling voting records of Members of Congress, so long as the record is not widely distributed to the general public during an election campaign; publishing candidate responses to a questionnaire on a variety of subjects; issuing report cards that indicate whether legislators support or oppose the organization's views; issue advertising (this is usually considered lobbying); nonpartisan public opinion polling; non-partisan voter registration drives meeting the requirements of IRC § 4945(f); and lobbying for or against the appointment of nonelective officers, such as judges. While these non-campaign political activities are not prohibited, they may be subject to tax under IRC § 527 or IRC § 4955, or they may be regulated or taxed as "lobbying" or "legislative" activities. See IRC § § 4911 and 4912.

The "Bipartisan Campaign Reform Act of 2002" (P L. 107-155) bans corporations, including tax-exempt corporations, and labor unions from referring in their broadcasts to federal candidates within 60 days of an election and 30 days of a primary. The Federal Election Commission regulations have carved out an exception for 501(c)(3) organizations on the theory that the Internal Revenue Code prohibits such organizations from doing so.

The other types of tax-exempt organizations may generally engage in all types of political activities, so long as such activities are not the organization's primary means of accomplishing its exempt purpose. However, while the tax laws may permit organizations described in IRC § § 501(c)(4) social welfare organizations, 501(c)(5) labor unions, 501(c)(6) trade associations, and 501(c)(19) veterans' organizations to engage in political campaign activities, it should be noted that the election laws ban corporations and labor unions from making any contribution or expenditure in connection with federal elections. 2 USC § 441b. This ban applies whether or not a corporation is for-profit or tax-exempt. Exceptions may arise from the definitions used in election law rules, but it is important to observe that the election law rules do not necessarily correspond to the tax law rules.

One way that corporations and labor unions participate in election campaigns without violating federal election laws is to set up political action committees or PACs. PACs are creatures of federal election law, but they are subject to special tax rules for "political organizations" in IRC § 527. Organizations described in IRC § 527 are expected to raise money for, and to try to influence, the selection, nomination, election or appointment of candidates for public office. Although considered tax-exempt organizations, IRC § 527 organizations are subject to special tax rules. Generally, 527 organizations are not taxed on their political income, but they are taxed on their investment income.

Political organizations cannot be used to participate indirectly in activities that are prohibited to an exempt organization. The activities of a 527 organization affiliated with a tax-exempt organization are attributed to the organization. Thus, if a PAC affiliated with a charitable organization engages in political campaign activities that would cause the organization to lose its tax exemption if the organization had participated in the activity directly, the charitable organization could still lose its exemption because of the activities of the PAC. For this reason, if 501(c)(3) organizations have PACs, their activities are generally limited to noncampaign political activities. The Federal Election Commission takes the position that the directors of a charitable organization could establish an independent or "nonconnected" PAC. The IRS has not addressed this issue, other than to state that any rulings in the area will be prospective only.

12. How Does an Organization Lose its Tax-exempt Status?

Generally, once an organization has tax-exempt status, it can continue as a tax-exempt organization unless there is a material change in its character, purposes, or methods of operation. Organizations are required to report material changes to the IRS. A 501(c)(3) organization can lose its tax-exempt status for excessive lobbying or engaging in political campaign activities or if its principal purpose becomes operating a for-profit business. The IRS may also revoke rulings granting exempt status because of changes in the law or regulations or for other good causes.⁹ Organizations may ask for court review of any IRS attempt to revoke their exempt status.

An individual who believes that an organization should lose its exempt status may contact the IRS. Complaints about the appropriateness of continued exemption for a particular organization may be directed to the Exempt Organizations Examination Division, 1100 Commerce Street, ATTN: T:EO:E, Dallas, TX 75242. The complaint should contain all relevant facts concerning the alleged violation of tax law. The complaints or allegations may cause the IRS to review the propriety of exempt status for a particular organization, but because of confidentiality rules, the IRS cannot reveal whether or not it has followed up on a particular complaint or not.

It is not possible to bring a legal suit to challenge the IRS' granting of an exemption to a particular organization. While third parties had been successful in bringing suits to challenge IRS policies in administering the tax laws¹⁰, the Supreme Court severely limited this practice by requiring plaintiffs to show a direct personal injury that is likely to be redressed by a favorable decision in the case.¹¹ In United States Catholic Conference v. Baker, 885 F.2d 1020 (2d Cir. 1989), cert. den., ARM v. USCC, 495 U.S. 918 (1990), the Second Circuit reviewed the standing of various parties to force the IRS to examine the tax- exempt status of the Catholic Church because of its political activities and concluded that it would be a very rare case when a third party would have standing to bring such a suit.

Suggested Resources for More Information

In addition to the previously mentioned organizations, the following organization and books may provide further information.

Organization.

Books. These books, all recently published, deal with various aspects of starting and managing non-profit organizations. All are available at the Library of Congress and may be available in larger public libraries or be borrowed by a local library on interlibrary loan. They may also be ordered from various bookstores.

Blazek, Jody. Tax planning and compliance for tax-exempt organizations: forms, checklists, procedures. 3rd ed. New York: Wiley, 1999. 818 p.

LC CALL NUMBER: KF6449 .B58 1999

Colombo, John D. The charitable tax exemption. Boulder, CO: Westview Press, 1995. 265p.

LC CALL NUMBER: KF6449.C59 1995

Financial and accounting guide for not-for-profit organizations. New York: Wiley, 2000. 6th ed. 823p.

LC CALL NUMBER: HF5686.N56 G76 2000

Grobman, Gary M. The nonprofit handbook: everything you need to know to start up and run your nonprofit organization. Harrisburg, PA: White Hat Communications, 2002. 3rd ed. 441p.

LC CALL NUMBER: HD62.6 .G762 2002

Hopkins, Bruce R. The law of tax-exempt organizations. 7th ed. New York: Wiley, 1998. (2003 edition is expected soon)

LC CALL NUMBER: KF6449 .H6 1998

Kitrosser, Edward. Tax considerations in non-profit organizations. New York, NY (1211 Ave. of the Americas, New York 10036) : American Institute of Certified Public Accountants, 1993. 1 v. (various pagings) : ill.

LC CALL NUMBER: KF6449.Z9 K57 1993

Listro, John P. Accounting and financial reporting for governmental units and not-for-profit organizations. Dubuque, Iowa : Kendall/Hunt Pub., 1998. 3rd ed. 424p.

LC CALL NUMBER: HF5686.N56 L57 2001

National directory of nonprofit organizations. Rockville, MD: The Taft Group. 2 vol. (annual)

LC CALL NUMBER: AS29.5.N38

Nonprofit executive's tax desk annual. Gaithersburg, MD: Aspen Publishers, Inc. (annual)

LC CALL NUMBER: KF6449 .A15 N66

The nonprofit handbook. Fund raising. 3rd ed. New York : J. Wiley, 2001. 1154p. : ill.

LC CALL NUMBER: HD62.6 .N662 2001

The nonprofit handbook. Management. 3rd ed. New York : J. Wiley, 2001. 932 p. : ill.

LC CALL NUMBER: HD62.6 .N662 2001b

Nonprofit organization management: forms, checklists & guidelines. Gaithersburg, MD: Aspen Publishers, 2001. 2nd ed. 1 v. (various pagings): ill.

LC CALL NUMBER: HD62.6 .N666 2001

²501(c)(4): Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.

³The IRS recognizes that a "social welfare organization" qualifying under 501(c)(4) may, in certain circumstances, also meet the definition of "charitable organization" under 501(c)(3). Treas. Reg. § 1.501(c)(4)-1(a)(2).

⁴IRC § 6113. This notification requirement applies to organizations that qualify for tax-exempt status under sections 501(c) and (d), except 501(c)(1), and 527. Organizations with gross annual receipts of less than $100,000 are exempted from the notification requirement.

⁵Legislation introduced in the 108th Congress proposes a limited charitable contribution deduction for non-itemizers: Three versions of the CARE Act of 2003 (S. 476, § 101; S. 272 § 101; and S. 256 § 101) would allow a direct deduction of up to $250 of charitable contributions ($500 in the case of a joint return) in addition to the standard deduction. The deduction would be available only for that portion of contributions actually made during the year that exceed $250 ($500 in the case of a joint return). Under the provision, an individual would not be entitled to a charitable deduction for the first $250 of cash contributions made during the tax year, would be entitled to a deduction on a dollar-for-dollar basis for contributions of $251 to $500 (e.g., a $1 deduction in the case of $251 of contributions, and a $250 deduction in the case of $500 of contributions), and would not be entitled to a deduction for contributions exceeding $500. Contributions below the minimum amount or that exceed the maximum deduction would not be carried over for purposes of a subsequent taxable year's calculation of the direct charitable deduction. S. 476 was reported by the Senate Finance Committee on February 27, 2003. S. Rept. 108-11.

⁶If an organization is denied exempt status, its application for exemption is not open to public inspection.

⁷Churches and related organizations are not allowed to make this election.

⁸If the organization's dues are generally not deductible, then the notification requirement does not apply. IRC § 6033(e)(3).

⁹Section 208 of three versions of the CARE Act of 2003 (S. 476, S. 272, and S. 256) and section 108 of two versions of the Armed Forces Tax Fairness Act of 2003 (S. 351 and S. 289) contain provisions that would suspend the tax-exempt status of any organization designated a terrorist organization by certain executive actions. S. 476 was reported by the Senate Finance Committee on February 27, 2003; S. 351 was reported by the Finance Committee on February 11, 2003. Under these bills, terrorist organizations would not be entitled to court review of the suspension.

¹⁰See e.g., Green v. Kennedy, 309 F.Supp. 1127 (D.D.C. 1970), where a class action was brought to force the IRS to stop granting exempt status to racially discriminatory private schools, and its subsequent history found at 398 U.S. 956 (1970), 330 F.Supp. 1150 (D.D.C. 1971), culminating in a summary affirmance, Coit v. Green, 404 U.S. 997 (1971)).

¹¹Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26 (1976)