Understanding Nonprofit and Tax Exempt Organizations, Second Edition (2012)

Select a format

eBook :epub
ISBN: 9781579110406
In Stock
Price
$40.99
QTY
International Order Inquiry

Product details

View a sample of this title using the ReadNow feature

To purchase a printed version of this title, please visit www.caplaw.com.

Understanding Nonprofit and Tax Exempt Organizations is a guide for the law student or practitioner who is looking to understand the law governing the nonprofit, tax exempt sector. This text deals with the many types of tax exempt organizations; the rules, regulations and limitations imposed on tax exempt organizations by the courts, the Internal Revenue Code (IRS) and the Treasury Regulations (the Regulations); the charitable contribution and fundraising issues affecting tax exempt organizations; the unrelated business income tax, excise taxes and intermediate sanctions imposed on tax exempt organizations; and the rules regarding private foundations. This new Second Edition reflects recent changes in the law made by the Pension Protection Act of 2006 and the Patient Protection and Affordable Care Act of 2010.
The Second Edition of Understanding Nonprofit and Tax Exempt Organizations begins with an introduction to nonprofit organizations by discussing the relevant law in general, as nonprofits are governed by state law. Next, tax exempt organizations are discussed, by first giving the reader the background on where such organizations fit in the nonprofit sector; why the organizations are given preferential tax treatment; what form these organizations take; and how such organizations are governed and dissolved. The Second Edition also provides detailed explanations of the various rules, regulations and tests they must follow in order to obtain or retain their tax exempt status as well as the consequences for failure to comply.

Professors and adjunct professors may request complimentary examination copies of LexisNexis law school publications to consider for class adoption or recommendation. Please identify the book(s) you wish to receive, provide your institutional contact information, and submit your request here.

Table of Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v 

Chapter 1: INTRODUCTION TO TAX EXEMPT ORGANIZATIONS

1.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 1

1.02 CATEGORIES OF ORGANIZATIONS IN THIRD SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.03 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . 8

Chapter 2: STRUCTURING A NONPROFIT ORGANIZATION

2.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 9

2.02 RATIONALES . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.03 STRUCTURE CHOICES . . . . . . . . . . . . . . . . . . 12

2.04 TAX EXEMPT STATUS . . . . . . . . . . . . . . . . . . . 22

2.05 STATES' ROLE IN CHOICE OF STRUCTURE . . . . 22

Chapter 3: GOVERNANCE OF NONPROFIT ORGANIZATIONS

3.01 INTRODUCTION TO GOVERNANCE . . . . . . . . . . . .25

3.02 MANAGING THE NONPROFIT . . . . . . . . . . . . . . 26

3.03 FIDUCIARY DUTIES . . . . . . . . . . . . . . . . . . . . 27

3.04 ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 35
Chapter 4: DISSOLVING A NONPROFIT ORGANIZATION

4.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 37

4.02 DISPOSITION OF ASSETS . . . . . . . . . . . . . . . . 38

4.03 CONVERSIONS OF NONPROFIT ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 42

4.04 OTHER RESTRUCTURING . . . . . . . . . . . . . . . . 44

4.05 ANTITRUST AND NONPROFITS . . . . . . . . . . . . 45
Chapter 5: RATIONALES FOR TAX EXEMPTION

5.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 51

5.02 PUBLIC BENEFIT THEORY . . . . . . . . . . . . . . . 51

5.03 PLURALISM THEORY . . . . . . . . . . . . . . . . . . . 53

5.04 SUBSIDY THEORY . . . . . . . . . . . . . . . . . . . . . 54

5.05 INCOME MEASUREMENT THEORY . . . . . . . . . . 55

5.06 CAPITAL SUBSIDY THEORY . . . . . . . . . . . . . . . 56

5.07 DONATIVE THEORY . . . . . . . . . . . . . . . . . . . . 57

5.08 RATIONALES FOR TRADE ASSOCIATIONS, SOCIAL CLUBS & FRATERNAL BENEFIT
ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 58

5.09 ADDITIONAL THEORIES . . . . . . . . . . . . . . . . . 59

5.10 ADDITIONAL BENEFITS OF FEDERAL TAX EXEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . 61

Chapter 6: IRS TESTS FOR TAX EXEMPTION

6.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 63

6.02 ORGANIZATIONAL TEST . . . . . . . . . . . . . . . . . 63

6.03 OPERATIONAL TEST . . . . . . . . . . . . . . . . . . . 66

6.04 PRIVATE INUREMENT TEST . . . . . . . . . . . . . . 70

6.05 EXCESS BENEFIT TRANSACTIONS & INTERMEDIATE SANCTIONS . . . . . . . . . . . . . . 74

6.06 POLITICAL ACTIVITIES TEST. . . . . . . . . . . . . . 76

Chapter 7: COURT IMPOSED LIMITS ON TAX EXEMPT ORGANIZATIONS

7.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 91

7.02 ILLEGALITY & PUBLIC POLICY DOCTRINES . . . . 91

7.03 THE COMMERCIALITY DOCTRINE . . . . . . . . . . 95

Chapter 8: RELIGIOUS ORGANIZATIONS & CHURCHES

8.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 105

8.02 RELIGIOUS ORGANIZATIONS . . . . . . . . . . . . . . 105

8.03 CHURCHES . . . . . . . . . . . . . . . . . . . . . . . . . 109

8.04 CONVENTIONS OR ASSOCIATIONS OF CHURCHES . . . . . . . . . . . . . . . . . . . . . . . . . 117

8.05 GROUP RULING . . . . . . . . . . . . . . . . . . . . . . 118

8.06 INTEGRATED AUXILIARIES OF CHURCHES . . . . 118

8.07 APOSTOLIC ORGANIZATIONS . . . . . . . . . . . . . . 120

8.08 CHURCHES & POLITICAL ACTIVITY . . . . . . . . . 121

8.09 CHURCH AUDIT PROCEDURES ACT . . . . . . . . . 124

8.10 SPECIAL ISSUES FOR CHURCHES . . . . . . . . . . 125

8.11 CONSTITUTIONAL CONSIDERATIONS . . . . . . . . 129

Chapter 9: EDUCATIONAL ORGANIZATIONS

9.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 133

9.02 FORMAL VS. INFORMAL EDUCATIONAL ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 135

9.03 FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

9.04 RIGHTS OF STUDENTS . . . . . . . . . . . . . . . . . . 147

Chapter 10: HEALTHCARE ORGANIZATIONS

10.01 INTRODUCTION TO HOSPITALS . . . . . . . . . . . . 149

10.02 MULTI-CORPORATE FORM . . . . . . . . . . . . . . . 152

10.03 INTEGRAL PART TEST . . . . . . . . . . . . . . . . . . 153

10.04 HOSPITAL CONVERSIONS & PRIVATE INUREMENT . . . . . . . . . . . . . . . . . . . . . . . . . 155

10.06 HOMES FOR THE AGED . . . . . . . . . . . . . . . . . 166

10.07 HEALTH MAINTENANCE ORGANIZATIONS . . . . . 168

10.08 MEDICAL RESEARCH ORGANIZATIONS . . . . . . . 170

Chapter 11: ARTS ORGANIZATIONS

11.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 173

11.02 SCOPE OF ARTS ORGANIZATIONS . . . . . . . . . . 170

11.03 CULTURAL ARTS DISTRICTS . . . . . . . . . . . . . . 180

Chapter 12: OTHER IRC SECTION 501(c)(3) ORGANIZATIONS

12.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 183

12.02 TAX EXEMPT CATEGORIES . . . . . . . . . . . . . . . 183

12.03 RELIEF OF POOR & DISTRESSED OR UNDERPRIVILEGED . . . . . . . . . . . . . . . . . . . . 184

12.04 LESSENING GOVERNMENT’S BURDEN . . . . . . . . 187

12.05 PROMOTION OF SOCIAL WELFARE . . . . . . . . . . 188

12.06 SCIENTIFIC ORGANIZATIONS . . . . . . . . . . . . . 189

12.07 TESTING FOR PUBLIC SAFETY . . . . . . . . . . . . 191

12.08 LITERARY ORGANIZATIONS . . . . . . . . . . . . . . . 192

12.09 NATIONAL & INTERNATIONAL AMATEUR SPORTS ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 192

12.10 PREVENTION OF CRUELTY TO CHILDREN & ANIMALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

12.11 PROTECTION OF ENVIRONMENT . . . . . . . . . . . 194

12.12 ECONOMIC & COMMUNITY DEVELOPMENT & LOW INCOME HOUSING . . . . . . . . . . . . . . . . . 195

Chapter 13: IRC SECTION 501(c)(4): SOCIAL WELFARE ORGANIZATIONS

13.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 197

13.02 APPLYING TESTS FOR TAX EXEMPTION . . . . . . 198

13.03 DEFINING SOCIAL WELFARE . . . . . . . . . . . . . . 199

13.04 COMMUNITY BENEFIT . . . . . . . . . . . . . . . . . . 201

13.05 RELATIONSHIP BETWEEN SECTION 501(c)(4)
ORGANIZATIONS & SECTION 501(c)(3) ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 206

13.06 SECTION 501(c)(4) & FEDERAL ELECTION CAMPAIGN ACT . . . . . . . . . . . . . . . . . . . . . . . 208

13.07 LOCAL ASSOCIATIONS OF EMPLOYEES . . . . . . . 209

13.08 CREDIT COUNSELING GROUPS . . . . . . . . . . . . . . . . . .210

Chapter 14: OTHER TAX EXEMPT ORGANIZATIONS

14.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 213

14.02 RATIONALES . . . . . . . . . . . . . . . . . . . . . . . . 213

14.03 SECTION 501(c)(2) ORGANIZATIONS: TITLE HOLDING COMPANIES . . . . . . . . . . . . . . . . . . 214

14.04 SECTION 501(c)(5) ORGANIZATIONS: LABOR, AGRICULTURE & HORTICULTURE ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 214

14.05 SECTION 501(c)(6) ORGANIZATIONS: BUSINESS LEAGUES & TRADE ASSOCIATIONS . . . . . . . . . 220

14.06 SECTION 501(c)(7) ORGANIZATIONS: SOCIAL CLUBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

14.07 SECTION 501(c)(8) ORGANIZATIONS: FRATERNAL BENEFIT ASSOCIATIONS . . . . . . . . . . . . . . . . . 231

14.08 SECTION 501(c)(10) ORGANIZATIONS: DOMESTIC FRATERNAL ORGANIZATIONS . . . . . . . . . . . . . 232

14.09 SECTION 501(c)(19) ORGANIZATIONS: VETERANS ORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . 233

14.10 SECTION 501(m) ORGANIZATIONS: COMMERCIAL TYPE INSURERS . . . . . . . . . . . . . . . . . . . . . . 234

14.11 OTHER MUTUAL BENEFIT ORGANIZATIONS . . . . 234

14.12 ISSUES INVOLVING VOLUNTARY MEMBERSHIP ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . 235

Chapter 15: IRC SECTION 527: POLITICAL ORGANIZATIONS

15.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 241

15.02 DEFINING A POLITICAL ORGANIZATION . . . . . . 242

15.03 ORGANIZATIONAL & OPERATIONAL TESTS . . . . 242

15.04 DETERMINING TAXATION . . . . . . . . . . . . . . . . 244

15.05 NEWSLETTER FUNDS . . . . . . . . . . . . . . . . . . . 244

15.06 SEGREGATED FUNDS . . . . . . . . . . . . . . . . . . . 245

15.07 THE SECTION 527(f) TAX . . . . . . . . . . . . . . . . . 247

15.08 FILING & REPORTING REQUIREMENTS . . . . . . . 248

15.09 RECENT LITIGATION . . . . . . . . . . . . . . . . . . . . .249

Chapter 16: UNRELATED BUSINESS INCOME TAX

16.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 253

16.02 DEFINING UNRELATED BUSINESS INCOME . . . . 255

16.03 TAX IMPACT OF UNRELATED BUSINESS INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

16.04 PASSIVE INCOME MODIFICATIONS . . . . . . . . . . 265

16.05 PARTNERSHIP INCOME . . . . . . . . . . . . . . . . . 271

16.06 DEBT-FINANCED INCOME . . . . . . . . . . . . . . . . 272

16.07 ADDITIONAL EXCEPTIONS . . . . . . . . . . . . . . . 277

16.08 SPECIAL SITUATION FOR SOCIAL CLUBS . . . . . 282

Chapter 17: CHARITABLE CONTRIBUTIONS

17.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 285

17.02 POLICY CONSIDERATIONS . . . . . . . . . . . . . . . 287

17.03 DEFINING CHARITABLE GIFT . . . . . . . . . . . . . 288

17.04 DEDUCTION LIMITATIONS FOR TAXPAYERS . . . . 294

17.05 FORM AND TIMING . . . . . . . . . . . . . . . . . . . . 296

17.06 SUBSTANTIATION & DISCLOSURE REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . 298

17.07 CONTRIBUTIONS OF PROPERTY . . . . . . . . . . . . 299

17.08 CHARITABLE CONTRIBUTION VEHICLES . . . . . . 304

17.09 DISASTER RELIEF & INTERNATIONAL GIVING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

Chapter 18: FUNDRAISING

18.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 313

18.02 STATE INVOLVEMENT . . . . . . . . . . . . . . . . . . 313

18.03 CONSTITUTIONAL RESTRICTIONS . . . . . . . . . . 315

18.04 INTERNET SOLICITATION . . . . . . . . . . . . . . . . 318

18.05 PROPOSALS FOR REFORM . . . . . . . . . . . . . . . . 318

Chapter 19: PRIVATE FOUNDATIONS

19.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 319

19.02 DEFINING PRIVATE FOUNDATIONS . . . . . . . . . 320

19.03 AVOIDING PRIVATE FOUNDATION STATUS . . . . 321

19.04 RULES FOR PRIVATE FOUNDATIONS . . . . . . . . 322

19.05 FOUR CATEGORIES OF NON-PRIVATE FOUNDATIONS (PUBLIC CHARITIES) . . . . . . . . . 338

19.06 PRIVATE OPERATING FOUNDATIONS . . . . . . . . 358

19.07 TERMINATING A PRIVATE FOUNDATION . . . . . . 360

19.08 PRIVATE FOUNDATION FORMS . . . . . . . . . . . . . . 362

Chapter 20: SECURING & MAINTAINING TAX EXEMPT STATUS

20.01 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 363

20.02 APPLYING FOR TAX EXEMPT STATUS . . . . . . . . 363

20.03 DETERMINING EXEMPT STATUS . . . . . . . . . . . 369

20.04 MAINTAINING TAX EXEMPT STATUS . . . . . . . . 374

Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381

Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417

Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419

Appendix D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423

Appendix E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

TABLE OF CASES . . . . . . . . . . . . . . . . . . . . . . . . . . TOC-1

TABLE OF STATUTES . . . . . . . . . . . . . . . . . . . . . . . TOS-1

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1