Income Test for Private Operating Foundation

In order to qualify as a private operating foundation, a nonprofit organization should prove that majority of its resources are used to run its own charitable programs or to provide its own charitable services. IRS has mandated ‘Income Test’ as a method of distinguishing between a private operating foundation and a public charity. Income test […]

‘Tax exemption’ Versus ‘tax deductible’

The terms ‘tax exemption’ and ‘tax deductible’ are not one and the same. ‘Tax-exempt’ implies that organization doesn’t have to pay taxes on its income.’Tax deductible’ means that a donor can claim tax deductions in his federal income tax return upto a certain proportion of the donated amount. A tax-exempt status does not always grant […]

Types of NPO: IRS classification

IRS classifies non-profit organizations into 32 categories each with several sub categories. (See: Table below). These categories/sub categories have been mentioned in the IRS code under sections 501(c)(1) up to section 501(c)(27) and under sections 501(d) – 501(n). Section of 1986 Tax Code Description of organization General nature of activities 501(c)(1) Corporations Organized Under Act […]

Public Support Test

This classifica­tion of an organization as either a public charity or as a private foundation is important because different tax rules apply to the operations of these two categories. For instance, private foundations are subject to excise taxes while public charities are not required to do so. Further deductibility of contribu­tions to a private foundation […]

State tax framework for non-profits

Different states have different taxation systems and as such provide different kinds of exemption to non-profit organizations. In addition to the sales tax, many states offer exemption on corporate income taxes, excise taxes, franchisee taxes, property taxes and others. Detailed and updated information about state tax exemption can be obtained from the website of the […]