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INDEX OF LAWS INDEX OF LAWS

 

 

 

Form 1023

Application & Approval Process

Determination Letter

Advanced Ruling Period (Form 8734) Advanced Ruling Period Eliminated - go to link to read more

Group Rulings

 

Jeopardizing Tax Exempt Status & Intermediate Sanctions

Advocacy & Lobbying

Political Activity

Private Benefit and Inurement

 

 

Form 990-N (e-postcard)

Form 990-EZ

Form 990

Form 990 & 990-EZ Schedules

Form 990-PF

Form 990-PF & Schedules

Form 990-T

Employment Tax Filings

Excise Tax Filings

Extension Requestions

 

 

Acknowledging Donations

Valuing In-Kind Donations

Vehicle Donations

Raffles, Sweepstakes, Games of Chance

 

 

 

 

 

Private Letter Rulings

 

 

 

Once the organization is formed, either by incorporating, forming an association or executing a trust document, it needs to obtain a federal identification number known as the Employer Identification Number (EIN), sometimes referred to as the Tax Identification Number (TIN). Every legal entity needs such a number, whether or not they have employees. The EIN can be obtained immediately, either on the IRS website, via telephone (1-800-829-4933), or by applying for the number by mail by submitting IRS Form SS-4. If you apply online or by telephone, print out and complete Form SS-4 before you make the phone call or begin the online process to document how you responded to questions and retain the form in your records. There is no charge for the EIN, regardless of the request method chosen. For information on all of these options, go to the IRS website.

 

Another IRS reference source is Publication 1635, Understanding Your EIN, Employer Identification Number.

 

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The Internal Revenue Code provides for tax exempt status for nonprofit organizations that are formed to carry out a nonprofit purpose that provides some public benefit. Section 501(c) of the Code has more than 25 subsections that describe various kinds of nonprofits, including business leagues and Chambers of Commerce (501(c)(6)); social and recreational clubs (501(c)(7)); mutual insurance companies or associations (501(c)(15)); and more.

 

Charities are exempted under subsection 501(c)(3). This status provides special benefits to charities, but it also brings special obligations. For a discussion of the benefits, see the topic below.  Descriptions and resources explaining the benefits and the legal obligations of charities are included on this website. For a more comprehensive discussion of the various types of tax exempt status and what they mean, go to IRS Publication 557, Tax-Exempt Status for Your Organization.

 

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 It is a common myth that forming a nonprofit organizations makes the organization automatically exempt from paying taxes.

  Even though an organization has a nonprofit charitable purpose, it is not exempt from paying taxes unless it has applied to the IRS and received approval or recognition that it qualifies as a tax exempt organization.

 

When should you apply?

You can apply to the IRS for tax exempt status as soon as you have taken the initial steps to form the charity as a legal entity.  Before you apply to the IRS, the creating documents must be written and adoped and filed, if necessary, with the appropriate state agency (articles of incorporation, constitution and/or bylaws); the board of directors and officers must be chosen; the organization must have the EIN; and an business plan must be adopted, including projected budgets. Look at the IRS website to locate Form 1023 and Instructions and other information, including the attachments and user fee that must accompany the application to find out exactly what information will be required.

 

If an organization applies for tax exempt status within the first 27 months after the end of the month in which the charity was formed, and the application is approved, the tax exempt status will be retroactive to the date the foundation was created. If application is made after the first 27 months, then tax exempt status will be retroactive only to the date application was made.

For a more extensive discussion of the application process and references to several helpful publications, go to the IRS website page Exempt Organizations - Help from the IRS. The IRS publications are also listed in the Other Resources section below.

 

 

 

Nonprofit organizations are not automatically exempt from paying taxes simply because they have a nonprofit charitable purpose.  With only two exceptions, nonprofit organizations must apply to the IRS for 501(c)(3) charitable tax exempt status by completing and filing IRS Form 1023, along with all required documents and a filing fee. The form can be obtained on the IRS website by clicking on Forms and Publications and choosing Form 1023 from the list of forms. Here is a direct link to Form 1023 and to the Instructions. It is important to note that certain documents and documentation must be filed with the 1023, including the articles of incorporation, bylaws, constitution, or other documents that create the organization.

It is also important to know that the IRS will require certain language in the creating documents of the charity ensuring that charitable assets and resources will be used appropriately. The IRS will only grant 501(c)(3) status if your creating documents include required language

  • affirming a charitable purpose for the corporation;
  • dedicating all assets of the corporation to carrying out the charitable mission; and
  • providing that all assets of the corporation will be passed on to another charitable organization if the corporation is dissolved.

The IRS website provides the required language and sample articles of incorporation for your use. This information is also available in IRS Publication 557 that can be obtained on the IRS website. You may also read more on IRS requirements on this website on the Forming a Charity page.

Exemptions From the Form 1023 Application
Organizations that need not apply to the IRS for recognition as tax exempt are:
  • Churches, associations of churches and church auxiliaries that are an integral part of a church These organizations are not required to file an application for tax exempt status but may operate as a 501(c)(3) organization without making application for such recognition from the IRS.
  • Organizations that have less than $5000 in gross receipts in a typical year.

 

 

Application & Approval Process

 

Once the Form 1023 is submitted to the IRS, the IRS reviews the application and, usually, if there are no deficiencies in the application, within a couple of months, makes a determination of whether the organization may be considered a tax exempt 501(c)(3) organization.

 

If the reviewer has questions or needs additional information that appears to be minor, then you will receive a fax, phone call or letter requesting the additional information or documentation. If, on the other hand, the application has major deficiencies, it may be months before the IRS even assigns the application to a "specialist" who can deal with the issues involved. You will receive notification once the application has been assigned. To read more about the IRS process and find out what the current backlog is in assigning applications to specialists, go to the IRS website.

 

If you receive a request for additional information or documentation, be sure to provide the information within the time limits prescribed on the request. A failure to provide cure the deficiencies within the time limitiations may result in your application being ineffective, and you will forfeit the filing fees you sent to the IRS. If you wish to reapply you may have to pay the fees a second time.

 

The IRS website provides more information on this topic, including a link to Frequently Asked Questions.

 

 

Determination Letter

 

Once the application is approved, you will receive a determination letter. The letter will inform you that you have been approved as a 501(c)(3) organization. It will also inform you of whether the IRS has determined that you are a private foundation or a public charity. If you are determined to be a private foundation, you will be informed of whether you are considered an "operating foundation." If you have questions about the terms or subsection of the IRS Code referenced in the letter, go to the IRS website and put the section number or the term into the Search box. The results of your search will most likely provide you with links to helpful pages or publications that will answer your questions.

 

Also, IRS Publications will assist you:

 

Advanced Ruling Period (form 8734)

 

In the past new organizations were given a 5-year advanced ruling as a publicly supported charity, rather than a private foundation. Then, at the end of the five years, the charity was required File Form 8734 on which they provided evidence from the first five years of operaton that it should continue to be regarded as a public charity by the IRS. This procedure has now changed!

 

On September 9, 2008, the IRS issued temporary Income Tax Regulations eliminating the advance ruling period for charities and eliminating the requirement to file IRS Form 8734. Under the new regulations, a new organization applying for tax exempt status under Section 501(c)(3) will be classified as a publicly supported charity if it can show at the time of application that it can reasonably expect to be supported by the public and will not operate as a private foundation. Private foundations are subject to possible excise taxes and increased scrutiny. For changes to the Form 1023 go to the IRS website and click on "New Instructions for completing Form 1023."

 

In the past charities applying for tax exempt status were presumed to be private foundations unless they represented on the Form 1023 application for tax exempt status that their funding would primarily be from public sources. They would then receive an advanced ruling for their first five tax years, following which they were required to submit Form 8734 to the IRS to document their sources of funding and to justify retention of the public charity ruling. The new procedure replaces the old 2-step, five-year process and, instead, grants immediate public charity status if the organization has shown on its application that it can reasonably expect to receive funding primarily from public sources. The charity keeps that status for five years, regardless of funding sources. Following the five year period, the IRS will review responses to questions on the revised Form 990 to screen for those organizations that must be reclassified as private foundations.

For more information go to the IRS website.

 

If a charity supervises or controls subordinate organizations, the controlling, or central, charity may apply for a group exemption along with the request for individual 501(c)(3) status. The central charity may then choose to allow the subordinate charities to be covered by the group ruling.

 

If a charity is a subordinate of another charity, such as a chapter of a national charity, before applying for individual 501(c)(3) status, inquire if the controlling charity already has a group ruling and request inclusion in that group ruling.

For information about group rulinngs, go to the Life Cycle of a Public Charity page of the IRS website and also read IRS Publication 4573, Group Exemptions.

 

NOTE: If a charity operates as a chapter of a state or national organization and the chapter solicits or receives contributions in Michigan, special rules may apply for the Charitable Solicitation License. Go to the Charities section of the Attorney General's website for more information or call the Charitable Trust Section at 517-373-1152

 

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As discussed on the Forming a Charity page, there are strict requirements for gaining recognition from the IRS as a 501(c)(3) charitable, educational or religious organization. The IRS requires assurances from the charity that

  • all assets of the organization will be used to carry out the charitable mission;
  • that no benefit will inure to any individual or individual interest; and
  • that, if the organization dissolves, all of the assets that have not been used in carrying out the mission of the organization will be distributed to one or more other 501(c)(3) organizations or purposes that have similar purposes.

To provide these assurances, the creating documents (articles of incorporation, constitution, bylaws) of the organization must contain language making these assurances.  The IRS website provides the required language and sample articles of incorporation for your use. This information is also available in IRS Publication 557 that can be obtained on the IRS website. You may also read more on IRS requirements on this website on the Forming a Charity page.

 

 

Jeopardizing Tax Exempt Status 

 

In other words, this section provides information on how NOT to jeopardize the charity's tax exempt status.

 

Private Foundations

For IRS information on issues that may jeopardize the tax exempt status of a private foundation, go to the Life Cycle of a Private Foundation on the IRS website.  Issues discussed include:

 

  • failure to operate the foundation exclusively for charitable purposes
  • using the assets or resources of the foundation to benefit a private individual or private interest
  • involvement in political campaigns or substantial lobbying activities
  • conducting a trade or business that is not related to the exempt purpose of the foundation
  • sanctions imposed because an organization "insider" has received an "excess benefit"

 

Private foundations may also be subject to excise taxes.  To read more information on circumstances that may trigger excise taxes for the organization, go to Life Cycle of a Private Foundation on the IRS website. Issues discusses include:

  • intermediate sanctions imposed because an organization "insider" has receieved an "excess benefit"
  • self dealing
  • tax on net investment income
  • failure to distribute income
  • excess business holdings
  • investments that could jeopardize the foundation's charitable mission
  • taxable expenditures

 

Public Charity

For IRS information on how NOT to jeopardize the tax exempt status of a public charity, go to the IRS website, go to the discussion of the Life Cycle of a Public Charity -- Jeopardizing Tax Exemption. The issues discussed include:

  • political activity & lobbying
  • private benefit
  • engaging in commercial activities
  • filing requirements
  • intermediate sanctions

 

Intermediate sanctions

These are penalties (excise taxes) imposed on charities and individuals when there has been some excess benefit provided to a "disqualified person." The basis rule is that charities must use charitable assets exclusively to carry out the charitable mission of the organization. If activities or practices run afoul of this restriction, then "managers" of the organization may be subject to excise taxes and penalties. Such illegal transactions are called "excess benefit transactions" and include activities such as individuals receiving excess compensation, self dealing or receiving more than fair market value for property transactions with the charity. They are activities that involve the improper use of charitable assets. Because the rules governing intermediate sanctions are extremely complex, you should consult with your own tax advisor and/or attorney who are familiar with nonprofit accounting issues and IRS requirements.

You can find more information on intermediate sanctions on the IRS website.

Philanthropic Research, Inc., also offers an article on Intermediate Sanctions on their www.guidestar.org website.



Advocacy & Lobbying

 

Advocacy

Advocacy is simply speaking for the cause you are trying to carry out. All kinds of advocacy are permitted, so long as it does not cross the line into the more specific type of advocacy, lobbying.  Advocacy may include educating the general public, the media, lawmakers, policy makers and elected officials about the existence and mission of the organization.  Advocacy is an important part of the mission of nonprofits, and there is no limit on how much time or how many assets are used on advocacy, as long as the programs and projects are actually carrying out the mission of the charity. For example, an organization established to promote barrier-free design in buildings will spend a great deal of time on advocacy; whereas a homeless shelter or food bank will spend less time, since their core mission is to operate a shelter or distribute food.

 

Lobbying

Lobbying is a specific type of advocacy that involves contacting public officials at the local, state or federal levels to encourage certain legislative action or the adoption of certain policies (direct lobbying); it also includes encouraging the public to contact legislators or policy makers to effect changes (grassroots lobbying).  For example, if the organization operating the homeless shelter chooses to get to know their state legislators, their representatives to the United States Congress and other policy makers to encourage legislation to provide more support for the homeless, then they would be engaging in direct lobbying.  If their presentations at local community groups tell citizens that they should contact their legislators to get a bill passed, they are engaging in grassroots lobbying.

 

There are IRS restrictions on the amount of lobbying activity that is permitted for a charity, organizations must account for their lobbying expenses on Schedule A that accompanies their annual IRS 990 filing.  There are two methods of documenting lobbying activity – the Expenditure Test and the Insubstantial Part Test.

 

The Expenditure Test, also referred to as the 501(h) election, is the most straightforward method but requires the filing of IRS Form 5768. The Expenditure Test is a clearer, easier method of reporting lobbying expenses because the limitations are based solely on the funds spent, and Schedule A and the Instructions provide guidance as to how much can be expended by an organization. For example, an organization with a budget of $500,000 may spend up to 20%, or $100,000 on lobbying activities; an organization with a budget of $1 million may spend up to 20% of the first $500,000, plus 15% of the next $500,000 on lobbying. Form 5768 can be obtained at the IRS website.

 

 

Political Activity

 

Charitable organizations are strictly prohibited from engaging in partisan politiical activities, such as supporting one candidate over another or supporting a particular political party. To read more about  

 

 

Private Benefit and Inurement

 

As discussed in other places on this website (Jeopardizing Tax Exempt Status above, Forming a Charity and Public Charity and Private Foundation), in order to obtain charitable tax exempt status, the organization must ensure that no individual or for profit entity will benefit from the income, assets or activities of the organization.

 

The charity must make representations in its creating documents that no such private benefit will take place. Failure to live up to these representations can jeopardize the charity's tax exempt status.

 

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In general, unless required by special circumstances such as grants or other funding tools or contractors, a charity can choose any  financial accounting system, as long as it supports the information required by the 990. The advice of an accountant or independent auditor who is familiar with nonprofit accounting is strongly advised. For more information on what is required by the IRS, refer to Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities or Publication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations.

 

Financial periods (fiscal year or tax year)

All charities MUST choose a financial period for a basis on which to keep records. The period may coincide with the calendar year, or it may be a year that begins and ends on a quarter, such as:

  • January 1 through December 31 (calendar year)

Audits

Audits are not required by the IRS. For larger organizations, they must accompany the Attorney General's Application for License to Solcit Charitable Contributions. An audit may also be required by grantors. To locate an auditor that serves nonprofits in your part of the state, you may go to the MNA website and click on Service Directory.

 

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Annual IRS Filings

Even though a charity has been exempted by the IRS from taxes, the charity must still file annually with the IRS.  Here are the filing thresholds and the forms that must be filed, with links to each form or information about the form.

 

NOTE: Because the IRS is phasing in a newly revised Form 990, the filing thresholds will change each year until the new form is fullyl implemented in 2010. The thresholds below are for fiscal years with beginning dates after December 31, 2006 and before January 1, 2008. For filing thresholds for the 2008, 2009 and 2010 fiscal years, go to the charities section of theIRS website.

 

 

Gross receipts for the fiscal year: File Form:
less than $25,000 990-N (E-Postcard)*
$25,000 or more, but less than $100,000 

990-EZ ( Instructions ),  Schedule A ( Instructions ), other Schedules, as required

 

Gross receipts $100,000 or more  Form 990 (Instructions),  Schedule A ( Instructions ) , and other Schedules, as required

 

 

*The e-Postcard for small organizations is a new requirement starting with fiscal years that have beginning dates after December 31, 2006. Information on filing the 990-N can be found on the IRS website. If a charity fails to file this new form for three years, it will lose its tax exempt status.

 

To learn about how to file the following forms electronically, go to the e-file for Charities and Non-Profits page on the IRS website.

  • Form 990, Return of Organization Exempt from Income Tax
  • Form 990-EZ, Short Return of Organization Exempt from Income Tax
  • Form 990-PF, Return of Private Foundation
  • Form 8868, Application for Extension of Time To File an Exempt Organization Return

 

 

Form 990-N (e-Postcard)

 

This is a new annual filing requirement for small nonprofit organizations (annual gross receipts less than $25,000)  that have not previously had a filing requirement. The form has not yet been released by the IRS, but the IRS website does contain current information on the new requirement. It is extremely important for charities to complete this new filing each year. If a charity fails to file the 990-N for three years, the charity's tax exempt status will be revoked.

 

 

Form 990-EZ

 

This is the financial report that organizations with gross annual receipts of $25,000 or more, but less than $100,000 must file with the IRS. The form is to be file 4 months and 15 days following the end of the organization's fiscal year. So, if the organization uses a calendar year as its fiscal year, then May 15 is the filing deadline for the Form 990-EZ. Form 990-EZ. Another way to look at it is the filing date is the 15th day of the 5th month. The Form 99EZ and Instructions are available on the IRS website.

 

Organizations that may be exempt from the 990-EZ filing are:

  • churches and some church-affiliated organizations
  • some organizations that are closely affiliated with government agencies
  • organizations that file as part of a group ruling
  • organizations that fall below (or above) the thresholds described above.

 

Charities that file Form 990-EZ must also file all required schedules (Schedule A; Schedule B, Schedule of Contributors; and others as required)

 

Form 990

 

This is the financial report that organizations with gross annual receipts of $100,000 or more must file with the IRS. The form is to be file 4 months and 15 days following the end of the organization's fiscal year. So, if the organization uses a calendar year as its fiscal year, then May 15 is the filing deadline for the Form 990. Another way to look at it is the filing date is the 15th day of the 5th month. Form 990 and Instructions are available on the IRS website.

 

Organizations that may be exempt from the 990 filing are:

  • churches and some church-affiliated organizations
  • some organizations that are closely affiliated with government agencies
  • organizations that file as part of a group ruling
  • organizations that fall below (or above) the thresholds described above.

 

Charities that file Form 990 must also file all required schedules (Schedule A; Schedule B, Schedule of Contributors, and others, as required)

 

 

Form 990 & 990-EZ Schedules

 

Organizations that are exempt under Section 501(c)(3) of the IRS Code must file :

 

Form 990, Schedule A (Instructions)

Schedule B, Schedule of Contributors

Other schedules and forms may be required for certain organizations and circumstances. Carefully follow all of the Instructions for Form 990 or 990-EZ.

 

Over the next three years, the IRS will be phasing in a new Form 990, more than a dozen new schedules and new thresholds. To learn more about the new requirements, go to the IRS website.

 

 

Form 990-PF

 

Private foundations must file Form 990-PF (Instructions). There is no filing threshold; every organization that has received recognition as a private foundation must file this form, even if it has neither income nor assets.

 

 

Form 990-PF Schedules

 

Private foundations filing 990-PF must file Schedule B, if applicable. A number of other filings may be required. Follow carefully all of the  Instructions for Form 990-PF.

 

 

Form 990-T

 Charities that have more than $1,000 in gross income from business that is unrelated to their exempt purpose must file IRS Form 990-T (Instructions) and will most likely be subject to taxes on income from those activities. For more information on this requirement go to IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations, the Unrelated Business Income Tax page of the IRS website, and the Instructions for Form 990-T

 

 

Employment Tax Filings

 

For a discussion of filings for employee tax withholding and other required filings with the IRS and other federal agencies, go to the Employment Laws page of this website.

 

 

 

Excise Tax Filings (Form 4720)

 Private foundations may be subject to payment of excise taxes because of: self dealing, excess holdings in private businesses, or a failure to distribute required amounts to carry out the exempt purpose. These taxes must be reported on  IRS Form 4720 (Instructions) For more information go to the Private Foundation Excise Taxes page on the IRS website.

Excise tax on net investment income is reported on Form 990-PF. See above.

 

 

Extension Requests (Form 8868)

Charities that will not be able to file their annual report (Form 990, 990-EZ or 990-PF) on time must file Form 8868, Application for Extension of Time To File an Exempt Organization Return. The first request is an automatic 3-month extension. A detailed reason must be provided for a request for a second 3-month extension

 

Penalties

If no request for an extension is filed, or if the charity fails to file in a timely manner after the extensions, the charity could be subject to penalties of $20 to $100 per day. For more information for public charities go to the Penalties for Failure to File page of the IRS website (For private foundations go to the Private Foundation - Annual Return page.)

 

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Disclosure to the general public

The IRS requires 501(c)(3) charitable organizations to make the following documents available for public inspection and copying by those who request them:

 

      • The organization’s Form 1023, Application for Recognition of Exemption, along with all documents the organization submitted in support of its application
      • The IRS ruling letter
      • IRS 990s, including all schedules, attachments and supporting documents filed for three years following the due date or the filing date of the return, whichever is later


NOTE:  Schedule B, Schedule of Contributors, submitted by public charities is exempt from the disclosure requirement. 

 

For more information on disclosure requirements go to the IRS webpage;  IRS Publication 557, Tax-Exempt Status for Your Organization; and IRS Publication 4221, Compliance Guide for 501(c)(3) Tax-Exempt Organizations.

 

Disclosure to Donors

See below under Acknowledging Donations

 

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Acknowledging Donations

When a donor makes a payment to a charity and receives goods or services in return, the charity is required to provide the donor with a written acknowledgment of the donation and the fair market value of any goods or services provided to the donor, if the payment to the charity exceeds $75. This rule applies to fundraising activities where a donor attends a social function, sporting event or other event and provides a donation to the charity; the rule also applies to fundraising activities where the charity provides premiums or incentives to donors if the premium is of more than token value.

 

Penalties may be assessed against charities that fail to comply with these disclosure requirements and to individuals responsible for the compliance failure.

 

For more information on this rule, go to the IRS website article "Charitable Contributions - Quid Pro Quo Contributions."

 

While charities are not required to provide acknowledgments of cash contributions, it is a necessary part of building relationships with donors; and donors are required to retain in their records documentation of all cash, check, or other monetary contributions for which they claim deductions. Documentation of contributions less than $250 must be either a bank record or a written acknowledgment from the charity. The documentation must show the name of the recipient charity, the date of the contribution and the amount of the contribution.

 

For single donations of more than $250, the donor must have an acknowledgment from the charity showing all of the information required for smaller donations, as well as a statement of whether anything of value was received by the donor in return for the contribution.

 

The following IRS resources provide more detailed information and examples:

 

 

 

Valuing In-Kind Donations

If an organization receives in-kind donations of goods and services, then the organization may need to value those contributions.  The charity should not provide a value of the item to the donor, unless it is a cash contribution.  The donor has the obligation to determine the value of the item or service that he or she will report to the IRS, but the organization must determine the value of the donated goods or services to report on their own financial reports.  The general rule is to report any in-kind donations at “fair market value,” i.e., what someone would be willing to pay for the goods or services. The American Institute of Certified Public Accountants (AICPA) provides guidance on valuation of donations in its AICPA Audit and Accounting Guide. 

 

While IRS publications focus on the valuation of the goods or services from the donor’s point of view, IRS publications may also be instructive to the organization.  To learn more from the IRS about proper acceptance and valuation of contributions, go to IRS Publication 526, Charitable Contributions and Publication 561, Determining the Value of Donated Property.

 

 

Vehicle Donations

 

The IRS website explains rules for vehicle donations, the information that charities need to know, as well as information for donors as to what amount they can deduct on their income tax forms. IRS Publication 4302, A Charity's Guide to Vehicle Donations also provides guidance.

 

Because the laws have changed in the past few years, if there is a conflict between information in the publication and information on the IRS website, you should contact the IRS (1-800-829-3676) for up-to-date information.

The IRS also provides Publication #4303, A Donor's Guide to Car Donations. 

 

NOTE:  Donors should be informed that they may need to submit IRS Form 8283 along with their tax return for the year they are claiming the donation.

 

Raffles, Bingo & Other Charity Games

 

It is important to know that Bingo, raffles, sweepstakes or other charitable gaming activities are not considered charitable activities under federal or state laws. Even though the funds raised through these activities are used to carry out charitable activities and purposes, the activities are not charitable.

 

Charitable gaming activities may subject a charity to unrelated business income tax (UBIT), excise taxes or other tax liabilities. There are also federal reporting requirements concerning charitable gaming activities. To learn more about these requirements and possible tax liabilities, go to IRS Publication 3079. Gaming Publication for Tax-Exempt Organizations. Some organizations must file IRS Form 730.

 

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For information on IRS rules that apply to foundations go to the Private Foundation page of this website.

 

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Churches and Religious Organizations

 

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A donor advised fund is a fund established within a larger trust or foundation where the donor retains some rights of advising the trustees how to expend the funds. The funds become part of the larger pool of funds of the foundation or trust for purposes of investment, but income is directed back to the donor advised fund. Often community foundations host such donor advised funds, and information about how they operate can be found on many of the websites of community foundations in Michigan.

Interim Guidance

Philanthropic Research, Inc., at their website www.guidestar.org also offers an article, New Rules Affecting Donor-Advised Funds: December 2006 Question of the Month Results.

 

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Private Foundations

Special IRS rules apply to private foundations that wish to award scholarships.  If the scholarship award program does not follow meet IRS requirements, they may be deemed to be taxable expenditures. The IRS provides information under two categories:

 

  • Grants to individuals – This information is for those private foundations making grants to individuals for the purpose of travel, study, or similar purposes.  Most often the grants would be in the form of scholarships for the pursuit of educational opportunities.  To learn about the IRS requirements, to the IRS website under the topic Grants to Individuals

  • Company-related scholarship programs – This information relates to company-related private foundations that award scholarships, often giving preference to children or relatives of employees.  Such programs must obtain prior approval from the IRS to ensure they are operating under strict guidelines to avoid private benefit or substitution or enhancement of employee compensation packages.  To learn more about rules that apply and the prior approval process, go to the IRS website under the topic Company Scholarship Programs

Information concerning the impact of the Pension Protection Act of 2006 on scholarship funds can be found at the  website for the Council of Foundations

 

NOTE:  Information in these sections, and other sections dealing with topics included in the Pension Protection Act of 2006, may change quickly as the IRS issues guidance on the compliance with, and enforcement of, these provisions.  Please check the IRS website for recent changes and notices.

 

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For help from the IRS concerning exempt organizations, go to the IRS website.

 

The Irs also offers a toll-free telephone number for questions from or about tax exempt organizations.

Call 1-877-829-5500

 

 

Private Letter Rulings

 

Some programs or activities require prior approval or a letter ruling from the IRS. For information about requesting a letter ruling go to the IRS website article Exempt Organizations - Private Letter Rulings and Determination Letters