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Not-for-profit organizations are different from for-profit businesses in many vital ways. One of the most crucial differences is that under Section 501(c)(3), Sec. 501(c)(7) and other provisions, nonprofits are tax-exempt. But your tax-exempt status is fragile. If you don\u2019t follow the rules laid out in IRS Publication 557, Tax-Exempt Status for Your Organization<\/em>, the IRS could revoke it. Be particularly alert to the following common stumbling blocks.<\/p>\n Lobbying and campaign activities<\/strong><\/p>\n There are many categories of tax exemption \u2014 each with its own rules. But certain hot-button issues apply to most tax-exempt entities \u2014 such as lobbying and campaign activities. Having a Sec. 501(c)(3) status limits the amount of lobbying a charitable organization can undertake. This doesn\u2019t mean lobbying is totally prohibited. But according to the IRS, your organization shouldn\u2019t devote \u201ca substantial part of its activities\u201d trying to influence legislation.<\/p>\n For nonprofits that are exempt under other categories of Sec. 501(c), there are fewer restrictions on lobbying activities. Lobbying activities these groups undertake must relate to the accomplishment of the group\u2019s purpose. For instance, an association of teachers can lobby for education reform without risking its tax exemption.<\/p>\n The IRS considers lobbying to be different from campaign activities, which are completely off limits to Sec. 501(c)(3) organizations. This means they can\u2019t participate or intervene in any political campaign for or against a candidate for public office. If you\u2019re not a 501(c)(3) organization, campaign restrictions vary.<\/p>\n Excess profit and unrelated revenue<\/strong><\/p>\n The cardinal rule about excess profits is that a nonprofit can\u2019t be operated to benefit private interests. If your fundraising is successful and you have extra income, you must put it back into the organization through additional services or by creating a reserve or an endowment. You can\u2019t use extra income to reward an individual or a person\u2019s related entities.<\/p>\n If you\u2019re generating income through a trade or business you conduct regularly and it\u2019s outside the scope of your mission, you may be subject to unrelated business income tax (UBIT). Examples include a college that rents performance halls to noncollege members of its community or a charity that sells advertising in its newsletter. Almost all nonprofits are subject to this provision of the tax code, and, if you ignore it, you could risk your exempt status. That said, losing an exempt status from unrelated business income is rare.<\/p>\n Notice from the IRS<\/strong><\/p>\n The best way to preserve your organization\u2019s exempt status is to refrain from risky activities. But if you receive notice from the IRS of a violation, please contact us. We can help you respond and get your nonprofit back on track.<\/p>\n \u00a9 2021<\/em><\/p>\n <\/body> Not-for-profit organizations are different from for-profit businesses in many vital ways. One of the most crucial differences is that under Section 501(c)(3), Sec. 501(c)(7) and other provisions, nonprofits are tax-exempt. But your tax-exempt status is fragile. If you don\u2019t follow the rules laid out in IRS Publication 557, Tax-Exempt Status for Your Organization, the IRS […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,15],"tags":[8,11,12],"class_list":["post-15401","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-not-for-profit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=15401"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15401\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=15401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=15401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=15401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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