Preface xi
PART I QUALIFICATIONS OF TAX-EXEMPT ORGANIZATIONS 1
CHAPTER 2 Qualifying Under IRC § 501(c)(3) 3
§ 2.1 Organizational Test 3
§ 2.2 Operational Test 4
CHAPTER 3 Religious Organizations 7
§ 3.2 Churches 7
CHAPTER 4 Charitable Organizations 9
§ 4.2 Promotion of Social Welfare 9
§ 4.6 Promotion of Health 9
CHAPTER 5 Educational, Scientific, and Literary Purposes,
and Prevention of Cruelty to Children and Animals 19
§ 5.1 Educational Purposes 19
CHAPTER 6 Civic Leagues and Local Associations of Employees: § 501(c)(4) 21
§ 6.1 Comparison of (c)(3) and (c)(4) Organizations 21
CHAPTER 7 Labor, Agricultural, and Horticultural Organizations:
§ 501(c)(5) 23
§ 7.2 Agricultural Groups 23
CHAPTER 8 Business Leagues: § 501(c)(6) 25
§ 8.2 Meaning of “Common Business Interest” 25
§ 8.3 Line of Business 25
CHAPTER 9 Social Clubs: § 501(c)(7) 27
§ 9.4 Revenue Tests 27
CHAPTER 11 Public Charities 29
§ 11.2 “Inherently Public Activity” and Broad Public Support
§ 509(a)(1) 29
§ 11.6 Supporting Organizations 30
PART II STANDARDS FOR PRIVATE FOUNDATIONS 39
CHAPTER 12 Private Foundations—General Concepts 41
§ 12.2 Special Rules Pertaining to Private Foundations 41
§ 12.4 Termination of Private Foundation Status 41
CHAPTER 13 Excise Tax Based on Investment Income: IRC § 4940 45
§ 13.2 Capital Gains 45
CHAPTER 14 Self-Dealing: IRC § 4941 47
§ 14.2 Sale, Exchange, or Lease of Property 47
§ 14.3 Loans 48
§ 14.4 Compensation 49
§ 14.7 Sharing Space, People, and Expenses 49
§ 14.9 Property Held by Fiduciaries 49
§ 14.10 Issues Once Self-Dealing Occurs 49
CHAPTER 15 Minimum Distribution Requirements: IRC § 4942 51
§ 15.2 Measuring Fair Market Value 51
§ 15.4 Qualifying Distributions 52
§ 15.6 Satisfying the Distribution Test 59
CHAPTER 16 Excess Business Holdings and Jeopardizing Investments:
IRC §§ 4943 and 4944 63
§ 16.1 Excess Business Holdings 63
§ 16.3 Program-Related Investments 64
§ 16.4 Penalty Taxes 65
CHAPTER 17 Taxable Expenditures: IRC § 4945 67
§ 17.3 Grants to Individuals 67
§ 17.4 Grants to Public Charities 69
§ 17.5 Grants to Foreign Organizations 71
PART III OBTAINING AND MAINTAINING TAX-EXEMPT STATUS 95
CHAPTER 18 IRS Filings, Procedures, and Policies 97
§ 18.1 Determination Process 97
§ 18.2 Annual Filing of Forms 990 98
§ 18.3 Reporting Organizational Changes to the IRS 103
§ 18.4 Weathering an IRS Examination 103
CHAPTER 19 Maintaining Exempt Status 119
§ 19.1 Checklists 119
CHAPTER 20 Private Inurement and Intermediate Sanctions 125
§ 20.1 Defining Inurement 125
§ 20.2 Salaries and Other Compensation 126
CHAPTER 21 Unrelated Business Income 127
§ 21.1 IRS Scrutiny of Unrelated Business Income 127
§ 21.8 Unrelated Activities 127
§ 21.10 Income Modifications 128
§ 21.12 Debt-Financed Property 128
§ 21.15 Publishing 129
CHAPTER 24 Deductibility and Disclosures 131
§ 24.1 Overview of Deductibility 131
§ 24.2 Substantiation and Quid Pro Quo Rules 132
CHAPTER 25 Employment Taxes 133
§ 25.2 Ministers 133
Index 135
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