Organizational/Operational Tests
A test that focuses on the content of an organization’s “statement of purposes” and the “dissolution clause” in its organizing document
What is the organizational test?
A nonprofit CANNOT be set up to benefit a person instead of a cause.
What is the private inurement doctrine?
True or False: Non charitable, tax-exempt organizations generally may engage in lobbying
True
Tax-exempt organizations must pay income tax on their net income from unrelated business activities.
What is the unrelated business income tax?
True or False: Nonprofit organizations can have one or more subsidiaries and/or joint ventures that can be nonprofits or for profits.
True
The basic requirements are advancement of one or more exempt purposes, and avoidance of private inurement, unwarranted private benefit, substantial legislative activity, political campaign activity, and excessive unrelated business activities.
What is the operational test?
Charitable organizations must establish that they are organized or operated for the benefit of other private interests
What is the private benefit doctrine?
True or False: Legislative activities, such as lobbying, may be a substantial part of tax-exempt public charities overall functions.
False, they cannot make up a substantial part of overall functions.
An activity that's carried on for the production of income from the sale of goods or the performance of services
What is a business of a tax-exempt organization?
A shield for the parent organization from liability
What is a subsidiary?
How often must charitable organizations meet the organizational test?
Throughout their entire existence.
An individual or other person who has a close relationship with the organization, particularly a person that is in a position to exercise a significant degree of control over the entity
What is an "insider"?
True or False: A tax-exempt charitable organization may participate or intervene in a political campaign.
False
A business is _________ when it is regularly carried on and is not substantially related to the accomplishment of your mission.
When is a business considered unrelated?
Nearly all joint ventures take place within an ______ framework.
LLC, limited liability company
A small amount of private benefit that will be tolerated
What is "incidental" private benefit?
Activities that are substantially conducted by volunteers, the sale of donated items, activities meeting a convenience exception, and qualified convention and trade show activities.
What are exceptions from the UBIT?