Exam 13: Not-for-Profit Organizations—Regulatory, Taxation, and Performance Issues

A not-for-profit typically has gross receipts of $4,500 or less each year. According to the IRS it would not have to file with the IRS to be considered tax-exempt under Sec. 501(c)(3).

Which of the following defines an appeal to the public to take action on a legislative matter?

A tax-exempt organization that receives its support primarily from a large number of individuals or corporations and a relatively small amount from investment income is called a:

A nongovernmental tax-exempt organization must complete a Form 990 and send it to the Internal Revenue Service:

The Charleston Principles provide guidance to state governments in setting registration requirements for not-for-profits wanting to raise funds over the Internet.

The ratio unrestricted net assets as a percent of operating expenses is helpful in determining if the not-for-profit organization can cover its debt service expense.

The Internal Revenue Service may impose intermediate sanctions on all of the following transactions between a not-for-profit organization and its executive officer except:

The unrelated business income tax could be a significant cost and therefore should be of concern to tax-exempt organizations.

Describe the difficulty in comparing the financial performance of a not-for-profit organization to other similar organizations. What benchmarks are available to assist in this task?

A large not-for-profit organization expended $1,250,000 in direct lobbying during the current year. As long as the $1,250,000 did not exceed 2 percent of the organization's gross receipts, the amount is allowable according to the Internal Revenue Code.

A 501(c)(3) organization must provide donors with a written disclosure of the amount of the donation if the donation is $1,000 or more.

Describe the process for becoming a tax-exempt organization. Why do you believe it is important for an accountant to understand this process?

Explain the purpose of "intermediate sanctions."

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is:

Intermediate sanctions can be imposed by the Internal Revenue Service, in addition to revoking the tax-exempt status for organizations that confer excessive economic benefits on officers of the organization.

The income most likely to be considered unrelated business income of a human service organization that provides immunizations to children in the community is:

Only 501(c)(3) organizations receiving at least 50 percent of their support from the public at large rather than a few individual donors can be considered public charities.

Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec. 501(c)(3)?

"Excess benefit transactions" are those in which persons who have substantial influence over the not-for-profit organization engage in transactions that result in economic benefits to them that are excessive, such as unreasonable compensation, sale of assets at bargain prices, and lease arrangements.

An individual can generally receive a tax deduction for contributions to which type of not-for-profit organization?