Tax Planning and Compliance for Tax-Exempt Organizations: Rules, Checklists, Procedures 4e
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JODY BLAZEK, CPA, is a partner in Blazek &Vetterling, LLP, an accounting firm that focuses on financial planning, tax compliance, and auditing for tax-exempt organizations and the individuals who create, fund, and work for them. She is also a founding director of Texas Accountants and Lawyers for the Arts and a board member of the Anchorage Foundation, Houston Artists Fund, River Pierce Foundation, and the Planned Giving Council of Houston. Blazek's nonprofit concentration began when she worked at KPMG Peat Marwick and continued when she served as chief financial officer of the Menil Foundation. She is the author of The Legal Answer Book for Private Foundations, the 990 Handbook, and Financial Planning for Nonprofit Organizations. She received her BBA from the University of Texas at Austin and attended South Texas School of Law.



Chapter One. Distinguishing Characteristics of Tax-Exempt Organizations.

1.1 Differences Between Exempt and Nonexempt Organizations.

1.2 Nomenclature.

1.3 Ownership and Control.

1.4 Role of the Internal Revenue Service.

1.5 Suitability as an Exempt Organization.

1.6 Start-Up Tax and Financial Considerations.

1.7 Choosing the Best Form of Organization.

Chapter Two. Qualifying Under IRC §501©(3).

2.1 Organizational Test.

2.2 Operational Test.

Chapter Three. Religious Organizations.

3.1 Types of Religious Organizations.

3.2 Churches.

3.3 Religious Orders.

3.4 Religious and Apostolic Associations.

Chapter Four. Charitable Organizations.

4.1 Relief of the Poor.

4.2 Promotion of Social Welfare.

4.3 Lessening the Burdens of Government.

4.4 Advancement of Religion. < ;p> 4.5 Advancement of Education and Science.

4.6 Promotion of Health.

4.7 Cooperative Hospital Service Organizations.

Chapter Five. Educational, Scientific, and Literary Purposes and Prevention of Cruelty to Children and Animals.

5.1 Educational Purposes.

5.2 Literary Purposes.

5.3 Scientific Purposes.

5.4 Testing for Public Safety.

5.5 Fostering National or International Amateur Sports Competition (But Only If No Parts of Its Activities Involves the Provision of Athletic Facilities or Equipment).

5.6 Prevention of Cruelty to Children or Animals.

Chapter Six. Civic Leagues and Local Associations of Employees: §501©(4).

6.1 Comparison of ©(3) and ©(4) Organizations.

6.2 Qualifying and Nonqualifying Civic Organizations.

6.3 Local Associations of Employees.

6.4 Neighborhood and Homeowner’s Associations.

6.5 Disclosure of Nondeductibility.

Chapter Seven. Labor, Agricultural, and Horticultural Organizations: §501©(5).

7.1 Labor Unions.

7.2 Agricultural Groups.

7.3 Horticultural Groups.

7.4 Disclosures of Nondeductibility.

Chapter Eight. Business leagues:§501©(6).

8.1 Basic Characteristics.

8.2 Meaning of “Common Business Interest”.

8.3 Line of Business.

8.4 Rendering Services for Members.

8.5 Sources of Revenue.

8.6 Membership Categories.

8.7 Member Inurement.

8.8 Chambers of Commerce and Boards of Trade.

8.9 Comparisons to §501©(5).

8.10 Recognition of Exempt Status.

8.11 Formation of a Related Charitable Organization.

8.12 Disclosures for Lobbying and Nondeductibility.

Chapter Nine. Social Clubs: §501©(7).

9.1 Organizational Requirements and Characteristics.

9.2 Member Inurement Prohibited.

9.3 Membership Requirements.

9.4 Revenue Tests.

9.5 Unrelated Business Income Tax.

9.6 Filing and Disclosure Requirements.

Chapter Ten. Instrumentalities of Government and Title-Holding Corporations.

10.1 §’501©(1) Instrumentalities of the United States.

10.2 Governmental Units.

10.3 §’501©(2) Title-Holding Corporations.

10.4 §’501©(25) Title-Holding Corporations.

Chapter Eleven. Public Charities.

11.1 Distinctions Between Public and Private Charities.

11.2 “Inherently Public Activity” and Broad Public Support: §509(a)(1).

11.3 Community Foundations.

11.4 Service-Providing Organizations: §509(a)(2).

11.5 Difference Between §509(a)(1) and §509(a)(2).

11.6 Supporting Organizations: §509(a)(3).

11.7 Testing for Public Safety: §509(a)(4).


Chapter Twelve. Private Foundations—General Concepts.

12.1 Why Private Foundations Are Special.

12.2 Special Rules Pertaining to Private Foundations.

12.3 Application of Taxes to Certain Nonexempt Trusts.

12.4 Termination of Private Foundation Status.

Appendix 12-1: Brief Description of Tax Sanctions Application to Private Foundations.

Chapter Thirteen. Excise Tax Based on Investment Income: IRC §4940.

13.1 Formula for Taxable Income.

13.2 Capital Gains.

13.3 Deductions from Gross Investment Income.

13.4 Tax-Planning Ideas.

13.5 Foreign Foundations.

13.6 Timely Payment of Excise Tax.

13.7 Exempt Operating Foundations.

Chapter Fourteen. Self-Dealing: IRC §4941.

14.1 Definition of Self-Dealing.

14.2 Sale, Exchange’ or Lease of Property.

14.3 Loans.

14.4 Compensation.

14.5 Transactions That Benefit Disqualified Persons.

14.6 Payments to Government Officials.

14.7 Sharing Space, People, and Expenses.

14.8 Indirect Deals.

14.9 Property Held by Fiduciaries.

14.10 Issues Once Self-Dealing Occurs.

Chapter Fifteen. Minimum Distribution Requirements: IRC §4942.

15.1 Assets Used to Calculate Minimum Investment Return.

15.2 Measuring Fair Market Value.

15.3 Distributable Amount.

15.4 Qualifying Distributions.

15.5 Private Operating Foundations.

15.6 Satisfying the Distribution Test.

Chapter Sixteen. Excess Business Holdings and Jeopardizing Investments: IRC §4943 and sect; 4944.

16.1 Excess Business Holdings.

16.2 Jeopardizing Investments.

16.3 Program-Related Investments.

16.4 Penalty Taxes.

Chapter Seventeen. Taxable Expenditures: IRC §4945.

17.1 Lobbying.

17.2 Voter Registration Drives.

17.3 Grants to Individuals.

17.4 Grants to Public Charities.

17.5 Grants to Foreign Organizations.

17.6 Expenditure Responsibility Grants.

17.7 Noncharitable Expenditures.

17.8 Excise Taxes Payable.

Appendix 17-1: Examples of Emergency and Hardship Grant Applications.


Chapter Eighteen. IRS Filing, Procedures, and Policies.

18.1 IRS Determination Process.

18.2 Annual Filing of Forms.

18.3 Reporting Organizational Changes to the IRS.

18.4 Weathering an IRS Examination.

18.5 When Organization Loses Its Tax-Exempt Status.

Chapter Nineteen. Maintaining Exempt Status.

19.1 Checklists.

Chapter Twenty. Private Inurement and Intermediate Sanctions.

20.1 Defining Inurement.

20.2 Salaries and Other Compensation.

20.3 Finding Salary Statistics.

20.4 Housing and Meals.

20.5 Purchase, Lease, or Sale of Property or Services.

20.6 Loans and Guarantees.

20.7 For-Profit to Nonprofit and Vice Versa.

20.8 Services Rendered for Individuals.

20.9 Joint Ventures.

20.10 Intermediate Sanctions.

Chapter Twenty-One. Unrelated Business Income.

21.1 IRS Scrutiny of Unrelated Business Income.

21.2 History of the Unrelated Business Income Tax.

21.3 Consequences of Receiving UBI.

21.4 Definition of Trade or Business.

21.5 What Is Unrelated Business Income?

21.6 “Regularly Carried On”.

21.7 “Substantially Related”.

21.8 Unrelated Activities.

21.9 The Exceptions.

21.10 Income Modifications.

21.11 Calculating and Minimizing Taxable Income.

21.12 Debt-Financed Property.

21.13 Museums.

21.14 Travel Tours.

21.15 Publishing.

Chapter Twenty-Two. Relationships with Other Organizations and Businesses.

22.1 Creation of ©(3) by ©(4), (5) or (6).

22.2 Alliances with Investors.

22.3 Creation of a For-Profit Corporate Subsidiary.

22.4 Active Business Relationships.

Chapter Twenty-Three. Electioneering and Lobbying.

23.1 Election Campaign Involvement.

23.2 Voter Education versus Candidate Promotion.

23.3 Tax on Political Expenditures.

23.4 Lobbying Activity of §501©(3) Organizations.

23.5 Permissible Amounts of Lobbying.

23.6 Lobbying Limits for 501©(4), (5). (6), and Other Exempt Organizations.

23.7 Advocacy and Nonpartisan Analysis.

Chapter Twenty-Four. Deductibility and Disclosures.

24.1 Overview of Deductibility.

24.2 The Substantiation and Quid Pro Quo Rules.

24.3 Valuing Donor Benefits.

24.4 Unrelated Business Income Aspects of Fund-Raising.

24.5 State and Local Regulations.

Chapter Twenty-Five. Employment Taxes.

25.1 Distinctions Between Employees and Independent Contractors.

25.2 Ministers.

25.3 Reporting Requirements.

Chapter Twenty Six. Mergers, Bankruptcies, and Terminations.

26.1 Mergers and Other Combinations.

26.2 Bankruptcy.

26.3 Terminations.

Table of Cases.

Table of IRS Revenue Rulings and Revenue Procedures.