Taxexempt organizations have special tax considerations from "summary" of Income Tax Fundamentals 2021 by Gerald E. Whittenburg,Martha Altus-Buller,Steven Gill
Tax-exempt organizations, such as charities, religious institutions, and educational institutions, are granted special tax considerations by the Internal Revenue Service. These organizations are not required to pay federal income tax on the income they generate, as long as they meet certain requirements set forth by the IRS. One of the key requirements for tax-exempt status is that the organization must operate exclusively for charitable, religious, educational, scientific, or other specified purposes. Additionally, the organization's earnings cannot benefit any individual or shareholder. This ensures that the organization's income is used to further its stated mission rather than for personal gain. In order to maintain their tax-exempt status, organizations must file annual information returns with the IRS, known as Form 990. This form provides detailed financial information about the organization's activities, including its revenue, expenses, and programs. Failure to file Form 990 can result in penalties and jeopardize the organization's tax-exempt status. Tax-exempt organizations also have restrictions on their ability to engage in political activities. While some level of lobbying is allowed, organizations risk losing their tax-exempt status if they engage in excessive political activities. This is to prevent tax-exempt organizations from being used as vehicles for political campaigns or advocacy. It is important for tax-exempt organizations to be aware of these special tax considerations in order to maintain compliance with IRS regulations. By following the rules set forth by the IRS and properly reporting their activities, these organizations can continue to benefit from their tax-exempt status and fulfill their charitable missions.
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