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Free State Filing Income Tax

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Free State Filing Income Tax

Free state filing income tax 5. Free state filing income tax   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Prohibited Tax Shelter TransactionsEntity Level Tax Excess Benefit TransactionsTax on Disqualified Persons Tax on Organization Managers Excess Benefit Transaction Excess Business Holdings Taxable Distributions of Sponsoring Organizations Exception. Free state filing income tax A donor advised fund does not include: Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Excise Taxes on Private Foundations Excise Taxes on Black Lung Benefit Trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements Introduction An excise tax may be imposed on certain tax-exempt organizations. Free state filing income tax Topics - This chapter discusses: Prohibited tax shelter transactions Excess benefit transactions Excess business holdings Taxable distributions of sponsoring organizations Taxes on prohibited benefits distributed from donor advised funds Excise taxes on private foundations Excise taxes on 501(c)(21) black lung benefit trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements of Hospitals Useful Items - You may want to see: Forms (and Instructions) 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code See chapter 6 for more information about getting Form 4720. Free state filing income tax Prohibited Tax Shelter Transactions Section 4965 imposes an excise tax on: Certain tax-exempt entities that are party to prohibited tax shelter transactions, and Any entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. Free state filing income tax  Additionally, section 6033 provides new disclosure requirements on a tax-exempt entity that is a party to a prohibited tax shelter transaction. Free state filing income tax Tax-exempt entities. Free state filing income tax   Tax-exempt entities that are subject to section 4965 include: Entities described in section 501(c), including but not limited to the following common types of entities: Instrumentalities of the United States described in section 501(c)(1); Churches, hospitals, museums, schools, scientific research organizations, and other charities described in section 501(c)(3); Civic leagues, social welfare organizations, and local associations of employees described in section 501(c)(4); Labor, agricultural, or horticultural organizations described in section 501(c)(5); Business leagues, chambers of commerce, trade associations, and other organizations described in section 501(c)(6); Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9); Credit unions described in section 501(c)(14); Insurance companies described in section 501(c)(15); and Veterans' organizations described in section 501(c)(19). Free state filing income tax Religious or apostolic associations or corporations described in section 501(d). Free state filing income tax Entities described in section 170(c), including states, possessions of the United States, the District of Columbia, political subdivisions of states and political subdivisions of possessions of the United States (but not including the United States). Free state filing income tax Indian tribal governments within the meaning of section 7701(a)(40). Free state filing income tax Entity manager. Free state filing income tax    An entity manager is any person with authority or responsibility similar to that exercised by an officer, director, or trustee, and, for any act, the person that has authority or responsibility with respect to the prohibited transaction. Free state filing income tax Prohibited tax shelter transaction. Free state filing income tax   A prohibited tax shelter transaction is any listed transaction, within the meaning of section 6707A(c)(2), and any prohibited reportable transactions. Free state filing income tax A prohibited reportable transaction is a confidential transaction within the meaning of Regulations section 1. Free state filing income tax 6011-4(b)(3), and a transaction with contractual protection within the meaning of Regulations section 1. Free state filing income tax 6011-4(b)(4). Free state filing income tax See the Instructions for Form 8886 for more information on listed transactions and prohibited reportable transactions. Free state filing income tax Subsequently listed transaction. Free state filing income tax   Any transaction to which the tax-exempt entity is a party and is later determined to be a listed transaction after the entity has become a party to it, is a subsequently listed transaction. Free state filing income tax Entity Level Tax Section 4965(a)(1) imposes an entity level excise tax on any tax-exempt entity described in 1, 2, 3, or 4 above that becomes a party to a prohibited tax shelter transaction or is a party to a subsequently listed transaction (defined earlier). Free state filing income tax The excise tax imposed on a tax-exempt entity applies to tax years in which the entity becomes a party to the prohibited tax shelter transaction and any subsequent tax years. Free state filing income tax The amount of the excise tax depends on whether the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time it became a party to the transaction. Free state filing income tax To figure and report the excise tax imposed on a tax-exempt entity for being a party to a prohibited tax shelter transaction, file Form 4720. Free state filing income tax For more information about this excise tax, including information about how it is figured, see the Instructions for Form 4720. Free state filing income tax Manager Level Tax Section 4965(a)(2) imposes an excise tax on any tax-exempt entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows (or has reason to know) that the transaction is a prohibited tax shelter transaction. Free state filing income tax The excise tax, in the amount of $20,000, is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction. Free state filing income tax To report this tax, file Form 4720. Free state filing income tax Excess Benefit Transactions Excise tax on excess benefit transactions. Free state filing income tax   A disqualified person who benefits from an excess benefit transaction, such as compensation, fringe benefits, or contract payments from certain section 501(c)(3), 501(c)(4), or 501(c)(29) organizations, must correct the transaction and may have to pay an excise tax under section 4958. Free state filing income tax A manager of the organization may also have to pay an excise tax under section 4958. Free state filing income tax These taxes are reported on Form 4720. Free state filing income tax   The excise taxes are imposed if an applicable tax-exempt organization provides an excess benefit to a disqualified person and that benefit exceeds the value of the benefit received in exchange. Free state filing income tax   There are three taxes under section 4958. Free state filing income tax Disqualified persons are liable for the first two taxes and certain organization managers are liable for the third tax. Free state filing income tax    Taxes imposed on excess benefit transactions do not apply to a transaction under a written contract that was binding on September 13, 1995, and at all times thereafter before the transaction occurred. Free state filing income tax Tax on Disqualified Persons An excise tax equal to 25% of the excess benefit is imposed on each excess benefit transaction between an applicable tax-exempt organization and a disqualified person. Free state filing income tax The disqualified person who benefited from the transaction is liable for the tax. Free state filing income tax See definition of Disqualified person, later at Disqualified person. Free state filing income tax Additional tax on the disqualified person. Free state filing income tax   If the 25% tax is imposed and the excess benefit transaction is not corrected within the taxable period, an additional excise tax equal to 200% of the excess benefit is imposed on any disqualified person involved. Free state filing income tax   If a disqualified person makes a payment of less than the full correction amount, the 200% tax is imposed only on the unpaid portion of the correction amount. Free state filing income tax If more than one disqualified person received an excess benefit from an excess benefit transaction, all such disqualified persons are jointly and severally liable for the taxes. Free state filing income tax   To avoid the 200% tax, a disqualified person must correct the excess benefit transaction during the taxable period. Free state filing income tax The 200% tax is abated (refunded if collected) if the excess benefit transaction is corrected within a 90-day correction period beginning on the date a statutory notice of deficiency is issued. Free state filing income tax Taxable period. Free state filing income tax   The taxable period means the period beginning with the date on which the excess benefit transaction occurs and ending on the earlier of: The date a notice of deficiency was mailed to the disqualified person for the initial tax on the excess benefit transaction, or The date on which the initial tax on the excess benefit transaction for the disqualified person is assessed. Free state filing income tax Tax on Organization Managers If tax is imposed on a disqualified person for any excess benefit transaction, an excise tax equal to 10% of the excess benefit is imposed on an organization manager who knowingly participated in an excess benefit transaction, unless such participation was not willful and was due to reasonable cause. Free state filing income tax This tax cannot exceed $20,000 ($10,000 for transactions entered in a tax year beginning before August 18, 2006), for each transaction. Free state filing income tax There is also joint and several liability for this tax. Free state filing income tax A person can be liable for both the tax paid by the disqualified person and the organization manager tax for a particular excess benefit transaction. Free state filing income tax Organization Manager. Free state filing income tax   An organization manager is any officer, director, or trustee of an applicable tax-exempt organization, or any individual having powers or responsibilities similar to officers, directors, or trustees of the organization, regardless of title. Free state filing income tax An organization manager is not considered to have participated in an excess benefit transaction where the manager has opposed the transaction in a manner consistent with the fulfillment of the manager's responsibilities to the organization. Free state filing income tax For example, a director who votes against giving an excess benefit would ordinarily not be subject to the 10% tax. Free state filing income tax A person participates in a transaction knowingly if the person: Has actual knowledge of sufficient facts so that, based solely upon those facts, such transaction would be an excess benefit transaction; Is aware that such a transaction under these circumstances may violate the provisions of federal tax law governing excess benefit transactions; and Negligently fails to make reasonable attempts to ascertain whether the transaction is an excess benefit transaction, or the manager is in fact aware that it is such a transaction. Free state filing income tax Knowing does not mean having reason to know. Free state filing income tax The organization manager ordinarily will not be considered knowing if, after full disclosure of the factual situation to an appropriate professional, the organization manager relied on the professional's reasoned written opinion on matters within the professional's expertise or if the manager relied on the fact that the requirements for the rebuttable presumption of reasonableness have been satisfied. Free state filing income tax Participation by an organization manager is willful if it is voluntary, conscious, and intentional. Free state filing income tax An organization manager's participation is due to reasonable cause if the manager has exercised responsibility on behalf of the organization with ordinary business care and prudence. Free state filing income tax Excess Benefit Transaction An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received for providing such benefit. Free state filing income tax The excess benefit transaction rules apply to all transactions with disqualified persons, regardless of whether the amount of the benefit provided is determined in whole or in part by the revenues of one or more activities of the organization. Free state filing income tax To determine whether an excess benefit transaction has occurred, all consideration and benefits exchanged between a disqualified person and the applicable tax-exempt organization, and all entities it controls, are taken into account. Free state filing income tax For purposes of determining the value of economic benefits, the value of property, including the right to use property, is the fair market value. Free state filing income tax Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts. Free state filing income tax Donor advised fund transactions occurring after August 17, 2006. Free state filing income tax   For a donor advised fund, an excess benefit transaction includes a grant, loan, compensation, or other similar payment from the fund to a: Donor or donor advisor, Family member of a donor, or donor advisor, 35% controlled entity of a donor, or donor advisor, or 35% controlled entity of a family member of a donor, or donor advisor. Free state filing income tax   The excess benefit in this transaction is the amount of the grant, loan, compensation, or other similar payment. Free state filing income tax For additional information, see the Instructions for Form 4720. Free state filing income tax Supporting organization transactions occurring after July 25, 2006. Free state filing income tax   For any supporting organization, defined in section 509(a)(3), an excess benefit transaction includes grants, loans, compensation, or other similar payment provided by the supporting organization to a: Substantial contributor, Family member of a substantial contributor, 35% controlled entity of a substantial contributor, or 35% controlled entity of a family member of a substantial contributor. Free state filing income tax   Additionally, an excess benefit transaction includes any loans provided by the supporting organization to a disqualified person (other than an organization described in section 509(a)(1), (2), or (4)). Free state filing income tax   The excess benefit for substantial contributors and parties related to those contributors includes the amount of the grant, loan, compensation, or other similar payment. Free state filing income tax For additional information, see the Instructions for Form 4720. Free state filing income tax   Excess benefit transaction rules generally do not apply to transactions between a supporting organization and its supported organization described in section 501(c)(4), (5), or (6) in furtherance of charitable purposes. Free state filing income tax Date of Occurrence An excess benefit transaction occurs on the date the disqualified person receives the economic benefit from the organization for federal income tax purposes. Free state filing income tax However, when a single contractual arrangement provides for a series of compensation or other payments to or for the use of a disqualified person during the disqualified person's tax year, any excess benefit transaction with respect to these payments occurs on the last day of the taxpayer's tax year. Free state filing income tax In the case of benefits provided to a qualified pension, profit-sharing, or stock bonus plan, the transaction occurs on the date the benefit is vested. Free state filing income tax In the case of the transfer of property subject to a substantial risk of forfeiture, or in the case of rights to future compensation or property, the transaction occurs on the date the property, or the rights to future compensation or property, is not subject to a substantial risk of forfeiture. Free state filing income tax Where the disqualified person elects to include an amount in gross income in the tax year of transfer under section 83(b), the excess benefit transaction occurs on the date the disqualified person receives the economic benefit for federal income tax purposes. Free state filing income tax Correcting the excess benefit. Free state filing income tax   An excess benefit transaction is corrected by undoing the excess benefit to the extent possible, and by taking any additional measures necessary to place the organization in a financial position not worse than what it would have been if the disqualified person were dealing under the highest fiduciary standards. Free state filing income tax   A disqualified person corrects an excess benefit by making a payment in cash or cash equivalents, excluding payment by a promissory note, equal to the correction amount to the applicable tax-exempt organization. Free state filing income tax The correction amount equals the excess benefit plus the interest on the excess benefit. Free state filing income tax The interest rate can be no lower than the applicable federal rate, compounded annually, for the month the transaction occurred. Free state filing income tax   A disqualified person can, with the agreement of the applicable tax-exempt organization, make a payment by returning the specific property previously transferred in the excess transaction. Free state filing income tax In this case, the disqualified person is treated as making a payment equal to the lesser of: The fair market value of the property on the date the property is returned to the organization, or The fair market value of the property on the date the excess benefit transaction occurred. Free state filing income tax   If the payment resulting from the return of property is less than the correction amount, the disqualified person must make an additional cash payment to the organization equal to the difference. Free state filing income tax   If the payment resulting from the return of the property exceeds the correction amount described above, the organization can make a cash payment to the disqualified person equal to the difference. Free state filing income tax Exception. Free state filing income tax   For a correction of an excess benefit transaction (discussed earlier), no amount repaid in a manner prescribed by the Secretary can be held in a donor advised fund. Free state filing income tax Applicable Tax-Exempt Organization An applicable tax-exempt organization is a section 501(c)(3), 501(c)(4), or 501(c)(29) organization that is tax-exempt under section 501(a), or was such an organization at any time during a 5-year period ending on the day of the excess benefit transaction. Free state filing income tax An applicable tax-exempt organization does not include: A private foundation as defined in section 509(a), A governmental entity that is: Exempt from (or not subject to) taxation without regard to section 501(a), or Not required to file an annual return, or A foreign organization, recognized by the IRS or by treaty, that receives substantially all of its support (other than gross investment income) from sources outside the United States. Free state filing income tax An organization is not treated as a section 501(c)(3), 501(c)(4), or 501(c)(29) organization for any period covered by a final determination that the organization was not tax-exempt under section 501(a), but only if the determination was not based on private inurement or one or more excess benefit transactions. Free state filing income tax Disqualified Person A disqualified person is: Any person (at any time during the 5-year period ending on the date of the transaction) in a position to exercise substantial influence over the affairs of the organization, A family member of an individual described in 1, and A 35% controlled entity. Free state filing income tax For donor advised funds, sponsoring organizations, and certain supporting organizations occurring after August 17, 2006. Free state filing income tax   The following persons will be considered disqualified persons along with certain family members and 35% controlled entities associated with them. Free state filing income tax Donors of donor advised funds, Investment advisors of sponsoring organizations, and Disqualified persons of a section 509(a)(3) supporting organization that supports the applicable tax-exempt organization. Free state filing income tax For certain supporting organization transactions occurring after July 25, 2006. Free state filing income tax   Substantial contributors to supporting organizations will also be considered disqualified persons with respect to the supporting organizations, along with their family members and 35% controlled entities. Free state filing income tax Investment advisor. Free state filing income tax   Investment advisor means for any sponsoring organization, any person compensated by such organization (but not an employee of such organization) for managing the investment of, or providing investment advice for, assets maintained in donor advised funds owned by such sponsoring organization. Free state filing income tax Substantial contributor. Free state filing income tax   In general, a substantial contributor means any person who contributed or bequeathed an aggregate of more than $5,000 to the organization, if that amount is more than 2% of the total contributions and bequests received by the end of the organization's tax year in which the contribution or bequest is received. Free state filing income tax A substantial contributor includes the grantor of a trust. Free state filing income tax Family members. Free state filing income tax   Family members of a disqualified person include a disqualified person's spouse, brothers or sisters (whether by whole or half-blood), spouses of brothers or sisters (whether by whole or half-blood), ancestors, children (including a legally adopted child), grandchildren, great grandchildren, and spouses of children, grandchildren, and great grandchildren (whether by whole or half-blood). Free state filing income tax 35% controlled entity. Free state filing income tax   A 35% controlled entity is: A corporation in which disqualified persons own more than 35% of the total combined voting power, A partnership in which such persons own more than 35% of the profits interest, or A trust or estate in which such persons own more than 35% of the beneficial interest. Free state filing income tax   In determining the holdings of a business enterprise, any stock or other interest owned directly or indirectly shall apply. Free state filing income tax Persons having substantial influence. Free state filing income tax   Among those who are in a position to exercise substantial influence over the affairs of the organization are, for example, voting members of the governing body, and persons holding the power of: Presidents, chief executives, or chief operating officers. Free state filing income tax Treasurers and chief financial officers. Free state filing income tax Persons with a material financial interest in a provider-sponsored organization. Free state filing income tax Persons not considered to have substantial influence. Free state filing income tax   Persons who are not considered to be in a position to exercise substantial influence over the affairs of an organization include: An employee who receives benefits that total less than the highly compensated amount in section 414(q)(1)(B)(i) and who does not hold the executive or voting powers mentioned earlier in the discussion on Disqualified Person, is not a family member of a disqualified person, and is not a substantial contributor, Tax-exempt organizations described in section 501(c)(3), and Section 501(c)(4) organizations with respect to transactions engaged in with other section 501(c)(4) organizations. Free state filing income tax Facts and circumstances. Free state filing income tax   The determination of whether a person has substantial influence over the affairs of an organization is based on all the facts and circumstances. Free state filing income tax Facts and circumstances that tend to show a person has substantial influence over the affairs of an organization include, but are not limited to, the following. Free state filing income tax The person founded the organization. Free state filing income tax The person is a substantial contributor to the organization under the section 507(d)(2)(A) definition, only taking into account contributions to the organization for the past 5 years. Free state filing income tax The person's compensation is primarily based on revenues derived from activities of the organization that the person controls. Free state filing income tax The person has or shares authority to control or determine a substantial portion of the organization's capital expenditures, operating budget, or compensation for employees. Free state filing income tax The person manages a discrete segment or activity of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. Free state filing income tax The person owns a controlling interest (measured by either vote or value) in a corporation, partnership, or trust that is a disqualified person. Free state filing income tax The person is a nonstock organization controlled directly or indirectly by one or more disqualified persons. Free state filing income tax   Facts and circumstances tending to show that a person does not have substantial influence over the affairs of an organization include, but are not limited to, the following. Free state filing income tax The person has taken a bona fide vow of poverty as an employee or agent of a religious organization or on its behalf. Free state filing income tax The person is an independent contractor whose sole relationship to the organization is providing professional advice (without having decision-making authority) with respect to transactions from which the independent contractor will not economically benefit either directly or indirectly aside from customary fees received for the professional advice rendered. Free state filing income tax Any preferential treatment the person receives based on the size of the person's donation is also offered to others making comparable widely solicited donations. Free state filing income tax The direct supervisor of the person is not a disqualified person. Free state filing income tax The person does not participate in any management decisions affecting the organization as a whole or a discrete segment of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. Free state filing income tax   In the case of multiple organizations affiliated by common control or governing documents, the determination of whether a person does or does not have substantial influence is made separately for each applicable tax-exempt organization. Free state filing income tax A person may be a disqualified person with respect to transactions with more than one organization. Free state filing income tax Reasonable Compensation. Free state filing income tax    Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. Free state filing income tax The section 162 standard will apply in determining the reasonableness of compensation. Free state filing income tax The fact that a bonus or revenue-sharing arrangement is subject to a cap is a relevant factor in determining reasonableness of compensation. Free state filing income tax   To determine the reasonableness of compensation, all items of compensation provided by an applicable tax-exempt organization in exchange for performance of services are taken into account in determining the value of compensation (except for economic benefits that are disregarded under the discussion Disregarded benefits , later). Free state filing income tax Items of compensation include: All forms of cash and noncash compensation, including salary, fees, bonuses, severance payments, and deferred noncash compensation, The payment of liability insurance premiums for, or the payment or reimbursement by the organization of penalties, taxes, or certain expenses under section 4958, unless excludable from income as a de minimis fringe benefit under section 132(a)(4), All other compensatory benefits, whether or not included in gross income for income tax purposes, Taxable and nontaxable fringe benefits, except fringe benefits described in section 132, and Foregone interest on loans. Free state filing income tax    Intent to treat benefits as compensation. Free state filing income tax An economic benefit is not treated as consideration for the performance of services unless the organization providing the benefit clearly indicates its intent to treat the benefit as compensation when the benefit is paid. Free state filing income tax   An applicable tax-exempt organization (or entity that it controls) is treated as clearly indicating its intent to provide an economic benefit as compensation for services only if the organization provides written substantiation that is contemporaneous with the transfer of the economic benefits under consideration. Free state filing income tax Ways to provide contemporaneous written substantiation of its intent to provide an economic benefit as compensation include: The organization produces a signed written employment contract, The organization reports the benefit as compensation on an original Form W-2, Form 1099, or Form 990, or on an amended form filed before starting an IRS examination, or The disqualified person reports the benefit as income on the person's original Form 1040, or on an amended form filed before starting an IRS examination. Free state filing income tax Exception. Free state filing income tax   If the economic benefit is excluded from the disqualified person's gross income for income tax purposes, the applicable tax-exempt organization is not required to indicate its intent to provide an economic benefit as compensation for services. Free state filing income tax Rebuttable presumption that a transaction is not an excess benefit transaction. Free state filing income tax   Payments under a compensation arrangement are presumed to be reasonable and the transfer of property (or right to use property) is presumed to be at fair market value, if the following three conditions are met. Free state filing income tax The transaction is approved in advance by an authorized body of the organization (or an entity it controls) which is composed of individuals who do not have a conflict of interest concerning the transaction. Free state filing income tax Before making its determination, the authorized body obtained and relied upon appropriate data as to comparability. Free state filing income tax (There is a special safe harbor for small organizations. Free state filing income tax If the organization has gross receipts of less than $1 million, appropriate comparability data includes data on compensation paid by three comparable organizations in the same or similar communities for similar services. Free state filing income tax ) The authorized body adequately documents the basis for its determination concurrently with making that determination. Free state filing income tax The documentation should include: The terms of the approved transaction and the date approved, The members of the authorized body who were present during debate on the transaction that was approved and those who voted on it, The comparability data obtained and relied upon by the authorized body and how the data was obtained, Any actions by a member of the authorized body having conflict of interest, and Documentation of the basis of the determination before the later of the next meeting of the authorized body or 60 days after the final actions of the authorized body are taken, and approval of records as reasonable, accurate, and complete within a reasonable time thereafter. Free state filing income tax Disregarded benefits. Free state filing income tax   The following economic benefits are disregarded for section 4958 purposes. Free state filing income tax Nontaxable fringe benefits that are excluded from income under section 132. Free state filing income tax Benefits provided to a volunteer for the organization if the benefit is provided to the general public in exchange for a membership fee or contribution of $75 or less. Free state filing income tax Benefits provided to a member of an organization due to the payment of a membership fee or to a donor as a result of a deductible contribution, if a significant number of disqualified persons make similar payments or contributions and are offered a similar economic benefit. Free state filing income tax Benefits provided to a person solely as a member of a charitable class that the applicable tax-exempt organization intends to benefit as part of the accomplishment of its exempt purpose. Free state filing income tax A transfer of an economic benefit to or for the use of a governmental unit, as defined in section 170(c)(1), if exclusively for public purposes. Free state filing income tax Special Exception for Initial Contracts      Section 4958 does not apply to any fixed payment made to a person under an initial contract. Free state filing income tax   A fixed payment is an amount of cash or other property specified in the contract, or determined by a fixed formula that is specified in the contract, which is to be paid or transferred in exchange for the provision of specified services or property. Free state filing income tax   A fixed formula can, generally, incorporate an amount that depends upon future specified events or contingencies, as long as no one has discretion when calculating the amount of a payment or deciding whether to make a payment (such as a bonus). Free state filing income tax   An initial contract is a binding written contract between an applicable tax-exempt organization and a person who was not a disqualified person immediately before entering into the contract. Free state filing income tax   A binding written contract, providing it can be terminated or canceled by the applicable tax-exempt organization without the other party's consent (except as a result of substantial nonperformance) and without substantial penalty, is treated as a new contract, as of the earliest date any termination or cancellation would be effective. Free state filing income tax Also, if the parties make a material change to a contract, which includes an extension or renewal of the contract (except for an extension or renewal resulting from the exercise of an option by the disqualified person), or a more than incidental change to the amount payable under the contract, it is treated as a new contract as of the effective date of the material change. Free state filing income tax More information. Free state filing income tax   For more information, see the Instructions to Forms 990 and 4720. Free state filing income tax Excess Business Holdings Private foundations are generally not permitted to hold more than a 20% interest in an unrelated business enterprise. Free state filing income tax They may be subject to an excise tax on the amount of any excess business holdings. Free state filing income tax For purposes of section 4943, for tax years beginning after August 17, 2006, donor advised funds and certain supporting organizations are considered private foundations. Free state filing income tax Donor advised fund. Free state filing income tax   In general, a donor advised fund is a fund or account separately identified by reference to contributions of a donor or donors that is owned and controlled by a sponsoring organization and for which the donor has or expects to have advisory privileges concerning the distribution or investment of the funds. Free state filing income tax Supporting organizations. Free state filing income tax   Only certain supporting organizations are subject to the excess business holdings tax under section 4943. Free state filing income tax These include (1) Type III supporting organizations that are not functionally integrated and (2) Type II supporting organizations that accept any gift or contribution from a person who by himself or in connection with a related party controls the supported organization that the Type II supporting organization supports. Free state filing income tax Taxes. Free state filing income tax   A private foundation that has excess holdings in a business enterprise may become liable for an excise tax based on the amount of holdings. Free state filing income tax The initial tax is 10% (5% for tax years beginning before August 18, 2006) of the value of the excess holdings and is imposed on the last day of each tax year that ends during the taxable period. Free state filing income tax The excess holdings are determined on the day during the tax year when they were the largest. Free state filing income tax   A foundation that fails to correct the excess business holdings becomes liable for an additional tax of 200% of the remaining excess business holdings as of the earlier of tax assessment or mailing of a notice of deficiency. Free state filing income tax   For more information on the tax on excess business holdings, see the Instructions for Form 4720. Free state filing income tax Taxable Distributions of Sponsoring Organizations An excise tax is imposed on a sponsoring organization for each taxable distribution it makes from a donor advised fund. Free state filing income tax An excise tax is also imposed on any fund manager of the sponsoring organization who agreed to the making of a distribution, knowing that it is a taxable distribution. Free state filing income tax Taxable distribution. Free state filing income tax   A taxable distribution is any distribution from a donor advised fund to any natural person or to any other person if: The distribution is for any purpose other than one specified in section 170(c)(2)(B), or The sponsoring organization maintaining the donor advised fund does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h). Free state filing income tax    However, a taxable distribution does not include a distribution from a donor advised fund to: Any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), The sponsoring organization of the donor advised fund, or Any other donor advised fund. Free state filing income tax The tax on taxable distributions applies to distributions occurring in tax years beginning after August 17, 2006. Free state filing income tax Sponsoring organization. Free state filing income tax   A sponsoring organization is a section 170(c) organization that is neither a government organization (as referred to in section 170(c)(1) and (2)(A)) nor a private foundation. Free state filing income tax Donor advised fund. Free state filing income tax    A donor advised fund is a fund or account: Which is separately identified by reference to contributions of a donor or donors, Which is owned and controlled by a sponsoring organization, and For which the donor (or any person appointed or designated by the donor) has or expects to have advisory privileges concerning the distribution or investment of the funds held in the donor advised funds or accounts because of the donor's status as a donor. Free state filing income tax Exception. Free state filing income tax A donor advised fund does not include:    A fund or account that makes distributions only to a single identified organization or governmental entity, or Any fund or account for a person described in 3 above that gives advice about which individuals receive grants for travel, study, or similar purposes, if the following three requirements are met: The person's advisory privileges are performed exclusively by such person in their capacity as a committee member of which all the committee members are appointed by the sponsoring organization, No combination of persons with advisory privileges, described in 3 above, or persons related to those in 3 above directly or indirectly control the committee, and All grants from the fund or account are awarded on an objective and nondiscriminatory basis according to a procedure approved in advance by the board of directors of the sponsoring organization. Free state filing income tax The procedure must be designed to ensure that all grants meet the requirements of section 4945(g)(1), (2), or (3). Free state filing income tax Disqualified supporting organization. Free state filing income tax   A disqualified supporting organization includes (1) a Type III supporting organization that is not functionally integrated and (2) any supporting organization where the donor or donor advisor (and any related parties) directly or indirectly controls a supported organization of the supporting organization. Free state filing income tax Tax on sponsoring organization. Free state filing income tax   A tax of 20% of the amount of each taxable distribution is imposed on the sponsoring organization. Free state filing income tax Tax on fund manager. Free state filing income tax   If a tax is imposed on a taxable distribution of the sponsoring organization, a tax of 5% of the distribution will be imposed on any fund manager who agreed to the distribution knowing that it was a taxable distribution. Free state filing income tax Any fund manager who took part in the distribution and is liable for the tax must pay the tax. Free state filing income tax The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. Free state filing income tax If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. Free state filing income tax   For more information on the tax on taxable distributions of sponsoring organizations, see the Instructions for Form 4720. Free state filing income tax Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Prohibited benefit. Free state filing income tax   If any donor, donor advisor, or related party advises the sponsoring organization about making a distribution which results in a donor, donor advisor, or related party receiving (either directly or indirectly) a more than incidental benefit, then such benefit is a prohibited benefit. Free state filing income tax The tax on prohibited benefits applies to distributions occurring in tax years beginning after August 17, 2006. Free state filing income tax Donor advisor. Free state filing income tax   A donor advisor is any person appointed or designated by a donor to advise a sponsoring organization on the distribution or investment of amounts held in the donor's fund or account. Free state filing income tax Related party. Free state filing income tax   A related party includes any family member or 35% controlled entity. Free state filing income tax See the definition of those terms under Disqualified Person , earlier. Free state filing income tax Tax on donor, donor advisor, or related person. Free state filing income tax    A tax of 125% of the benefit resulting from the distribution is imposed on both the party who advised as to the distribution (which might be a donor, donor advisor, or related party) and the party who received such benefit (which might be a donor, donor advisor, or related party). Free state filing income tax The advisor and the party who received the benefit are jointly and severally liable for the tax. Free state filing income tax Tax on fund managers. Free state filing income tax   If a tax is imposed on a prohibited benefit received by a donor, donor advisor, or related person, a tax of 10% of the amount of the prohibited benefit is imposed on any fund manager who agreed to the distribution knowing that it would confer a prohibited benefit. Free state filing income tax Any fund manager who took part in the distribution and is liable for the tax must pay the tax. Free state filing income tax The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. Free state filing income tax If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. Free state filing income tax Exception. Free state filing income tax   If a person engaged in an excess benefit transaction and received a prohibited benefit for the same transaction, the person is taxed under section 4958, and no tax is imposed under section 4967 for a prohibited benefit. Free state filing income tax   For more information on taxes on prohibited benefits distributed from donor advised funds, see the Instructions for Form 4720. Free state filing income tax Excise Taxes on Private Foundations There is an excise tax on the net investment income of most domestic private foundations. Free state filing income tax Capital gains from appreciation are included in the tax base on private foundation net investment income. Free state filing income tax This tax must be reported on Form 990-PF and must be paid annually at the time for filing that return or in quarterly estimated tax payments if the total tax for the year (section 4940 tax minus credits) is $500 or more. Free state filing income tax Form 990-W is used to calculate the estimated tax. Free state filing income tax In addition, there are several other rules that apply to excise taxes on private foundations. Free state filing income tax These include: Restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons, Requirements that the foundation annually distribute income for charitable purposes, Limits on their holdings in any business enterprise (see Excess Business Holdings, earlier), Provisions that investments must not jeopardize the carrying out of exempt purposes, and Provisions to assure that expenditures further the organization's exempt purposes. Free state filing income tax Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons. Free state filing income tax For more information on the excise taxes imposed on private foundations, see the Instructions for Form 4720 and the Instructions for Form 990-PF. Free state filing income tax Excise Taxes on Black Lung Benefit Trusts A black lung benefit trust that makes any expenditures, payments, or investments other than those described in chapter 4 under 501(c)(21) - Black Lung Benefit Trusts must pay a tax equal to 10% of the amount of such expenditures. Free state filing income tax If there are any acts of self-dealing between the trust and a disqualified person, a tax equal to 10% of the amount involved is imposed on the disqualified person. Free state filing income tax Both of these excise taxes are reported on Schedule A (Form 990-BL). Free state filing income tax See the Form 990-BL instructions for more information on these taxes and what has to be filed, even if the trust is excepted from filing. Free state filing income tax Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements For tax years beginning after March 23, 2012, new section 4959 imposes an excise tax on hospital organizations which fail to meet certain section 501(r) requirements for each of their hospital facilities. Free state filing income tax These entities must meet section 501(r)(3) requirements at all times during their tax year. Free state filing income tax Section 501(r)(3) requirements pertain to a hospital organization preparing a community health needs assessment (CHNA). Free state filing income tax See Schedule H, Hospitals (Form 990), for details. Free state filing income tax Prev  Up  Next   Home   More Online Publications
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The Free State Filing Income Tax

Free state filing income tax Index A Abatement of interest and penalties, Abatement of interest and penalties. Free state filing income tax Accidents, Deductible losses. Free state filing income tax , Nondeductible losses. Free state filing income tax Adjusted basis, Adjusted Basis Adjustments to basis, Basis adjustment to corporation's property. Free state filing income tax , Adjustments to Basis Amended returns, Amended return. Free state filing income tax Appraisals, Appraisal. Free state filing income tax , Costs of photographs and appraisals. Free state filing income tax Assistance (see Tax help) B Bad debts, Nonbusiness bad debt. Free state filing income tax Basis Adjusted, Adjusted Basis Adjustments to, Basis adjustment to corporation's property. Free state filing income tax , Adjustments to Basis Replacement property, Basis of replacement property. Free state filing income tax Business or income-producing property, Business or income-producing property. Free state filing income tax Business purposes, property used partly for, Property used partly for business and partly for personal purposes. Free state filing income tax C Cars Accidents, Deductible losses. Free state filing income tax Fair market value of, Car value. Free state filing income tax Cash gifts, Cash gifts. Free state filing income tax Casualty losses, Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss Deductible losses, Deductible losses. Free state filing income tax Definition, Casualty Deposits, loss on, Casualty loss or ordinary loss. Free state filing income tax Nondeductible losses, Nondeductible losses. Free state filing income tax Progressive deterioration, Progressive deterioration. Free state filing income tax Proof of, Casualty loss proof. Free state filing income tax When to report, Losses. Free state filing income tax Workbooks for listing property, Workbooks for casualties and thefts. Free state filing income tax Clean up costs, Cost of cleaning up or making repairs. Free state filing income tax Condemnation, Condemnations. Free state filing income tax Corrosive drywall, Special Procedure for Damage From Corrosive Drywall Costs Appraisals, Costs of photographs and appraisals. Free state filing income tax Clean up, Cost of cleaning up or making repairs. Free state filing income tax Incidental expenses, Related expenses. Free state filing income tax Landscaping, Landscaping. Free state filing income tax Photographs taken after loss, Costs of photographs and appraisals. Free state filing income tax Protection, Cost of protection. Free state filing income tax Repair, Cost of cleaning up or making repairs. Free state filing income tax Replacement, Replacement cost. Free state filing income tax D Death of taxpayer Postponement of gain, Death of a taxpayer. Free state filing income tax Deductible losses, Deductible losses. Free state filing income tax Deduction limits, Deduction Limits $100 rule, $100 Rule 10% rule, 10% Rule 2% rule, 2% Rule Deposit losses, Mislaid or lost property. Free state filing income tax , Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss Reporting of (Table 1), Table 1. Free state filing income tax Reporting Loss on Deposits When to report, Loss on deposits. Free state filing income tax Disaster area losses, Lessee's loss. Free state filing income tax Claiming on amended return, Claiming a disaster loss on an amended return. Free state filing income tax Federal loan canceled, Federal loan canceled. Free state filing income tax Federally declared disaster, Business or income-producing property located in a federally declared disaster area. Free state filing income tax , Disaster Area Losses Figuring loss deduction, Figuring the loss deduction. Free state filing income tax Form 1040X, How to report the loss on Form 1040X. Free state filing income tax Home made unsafe, Home made unsafe by disaster. Free state filing income tax How to deduct loss in preceding year, How to deduct your loss in the preceding year. Free state filing income tax Inventory, Disaster loss to inventory. Free state filing income tax Main home rules, Main home in disaster area. Free state filing income tax , Gains. Free state filing income tax Qualified disaster mitigation payments, Qualified disaster mitigation payments. Free state filing income tax Qualified disaster relief payments, Qualified disaster relief payments. Free state filing income tax Records to keep, Records. Free state filing income tax Tax deadlines postponed, Covered disaster area. Free state filing income tax When to deduct, When to deduct the loss. Free state filing income tax Table 3, Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss Disaster mitigation payments, Qualified disaster mitigation payments. Free state filing income tax Disaster relief grants, Disaster relief. Free state filing income tax Drywall, corrosive, Special Procedure for Damage From Corrosive Drywall Due dates Tax deadlines postponed, Postponed Tax Deadlines E Employer's emergency disaster fund, Employer's emergency disaster fund. Free state filing income tax F Fair market value (FMV) Decline in value of property in or near casualty area, Decline in market value of property in or near casualty area. Free state filing income tax Measuring decrease in, Decrease in Fair Market Value Items not to consider, Figuring Decrease in FMV — Items Not To Consider Items to consider, Figuring Decrease in FMV — Items To Consider Federal disaster relief grants, Federal disaster relief grants. Free state filing income tax Federal Emergency Management Agency (FEMA), contacting, Contacting the Federal Emergency Management Agency (FEMA) Federally declared disasters, Business or income-producing property located in a federally declared disaster area. Free state filing income tax , Disaster Area Losses Figuring gain, Property used partly for business and partly for personal purposes. Free state filing income tax Figuring loss, Theft loss proof. Free state filing income tax , Figuring the Deduction Adjusted basis, Adjusted Basis Disaster area losses, Figuring the loss deduction. Free state filing income tax Insurance and other reimbursements, Insurance and Other Reimbursements Form 1040, Schedule A, Personal-use property. Free state filing income tax Form 1040, Schedule D, Personal-use property. Free state filing income tax Form 1040X Disaster area losses, How to report the loss on Form 1040X. Free state filing income tax Form 4684 Reporting gains and losses on personal-use property, Personal-use property. Free state filing income tax Free tax services, Free help with your tax return. Free state filing income tax G Gains Figuring, Figuring a Gain Postponement of, Postponement of Gain, How To Postpone a Gain Reimbursements, Gain from reimbursement. Free state filing income tax Reporting of, Contacting the Federal Emergency Management Agency (FEMA) When to report, Changing your mind. Free state filing income tax H Help (see Tax help) I Incidental expenses, Related expenses. Free state filing income tax Insurance, Insurance and Other Reimbursements Living expenses, payments for, Insurance payments for living expenses. Free state filing income tax Interest abatement, Abatement of interest and penalties. Free state filing income tax Inventory losses, Loss of inventory. Free state filing income tax Disaster area losses, Disaster loss to inventory. Free state filing income tax L Landscaping, Landscaping. Free state filing income tax Leased property, Leased property. Free state filing income tax When to report, Lessee's loss. Free state filing income tax Losses Casualty (see Casualty losses) Deposits (see Deposit losses) Disaster areas (see Disaster area losses) Figuring amount (see Figuring loss) Proof of, Deducted loss recovered. Free state filing income tax Records of, Theft loss proof. Free state filing income tax Reporting of, Contacting the Federal Emergency Management Agency (FEMA) Theft (see Theft losses) When to report, Changing your mind. Free state filing income tax (Table 3), Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss M Married taxpayers Deduction limits, Married taxpayers. Free state filing income tax , Married taxpayers. Free state filing income tax Mislaid or lost property, Mislaid or lost property. Free state filing income tax Missing children, photographs of, Reminders N Nonbusiness bad debts, Nonbusiness bad debt. Free state filing income tax Nondeductible losses, Nondeductible losses. Free state filing income tax P Payments for living expenses, Insurance payments for living expenses. Free state filing income tax Penalty abatement, Abatement of interest and penalties. Free state filing income tax Personal property Loss deduction, figuring of, Personal property. Free state filing income tax Personal-use property Reporting gains and losses, Personal-use property. Free state filing income tax Personal-use real property, Exception for personal-use real property. Free state filing income tax Photographs Documentation of loss, Costs of photographs and appraisals. Free state filing income tax Ponzi-type investment schemes, Losses from Ponzi-type investment schemes. Free state filing income tax Postponed tax deadlines, Postponed Tax Deadlines Postponement of gain, Postponement of Gain, How To Postpone a Gain Amended return, Amended return. Free state filing income tax Changing mind, Changing your mind. Free state filing income tax Replacement property acquired after return filed, Replacement property acquired after return filed. Free state filing income tax Replacement property acquired before return filed, Replacement property acquired before return filed. Free state filing income tax Required statement, Required statement. Free state filing income tax Substituting replacement property, Substituting replacement property. Free state filing income tax Three-year limit, Three-year limit. Free state filing income tax Proof of loss, Proof of Loss Protection costs, Cost of protection. Free state filing income tax Publications (see Tax help) R Records of loss, Theft loss proof. Free state filing income tax Recovered stolen property, Recovered stolen property. Free state filing income tax Reimbursements Cash gifts, Cash gifts. Free state filing income tax Disaster relief, Disaster relief. Free state filing income tax Employer's emergency disaster fund, Employer's emergency disaster fund. Free state filing income tax Failure to file a claim, Failure to file a claim for reimbursement. Free state filing income tax Received after deducting loss, Reimbursement Received After Deducting Loss Types of, Types of Reimbursements Related expenses, Related expenses. Free state filing income tax Related person, replacement property bought from, Buying replacement property from a related person. Free state filing income tax Repair costs, Cost of cleaning up or making repairs. Free state filing income tax Replacement cost, Replacement cost. Free state filing income tax Replacement period, Replacement Period Extension of, Extension. Free state filing income tax Replacement property, Replacement Property Advance payment, Advance payment. Free state filing income tax Basis adjustment to corporation's property, Basis adjustment to corporation's property. Free state filing income tax Basis of, Basis of replacement property. Free state filing income tax Main home, Main home replaced. Free state filing income tax In disaster area, Main home in disaster area. Free state filing income tax Postponement of gain, Replacement property acquired before return filed. Free state filing income tax Reporting gains and losses, Reporting a gain. Free state filing income tax , How To Report Gains and Losses Basis, adjustments to, Adjustments to Basis Business and income-producing property, Business and income-producing property. Free state filing income tax Deductions exceeding income, If Deductions Are More Than Income Deposits, How to report. Free state filing income tax Table 1, Table 1. Free state filing income tax Reporting Loss on Deposits Disaster area losses, How to report the loss on Form 1040X. Free state filing income tax Personal-use property, Personal-use property. Free state filing income tax Timing of, When To Report Gains and Losses S Sentimental value, Sentimental value. Free state filing income tax State disaster relief grants for businesses, State disaster relief grants for businesses. Free state filing income tax Stolen property (see Theft losses) T Tables and figures Reporting loss on deposits (Table 1), Table 1. Free state filing income tax Reporting Loss on Deposits When to deduct losses (Table 3), Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss Tax help, How To Get Tax Help Theft losses, Theft FMV of stolen property, FMV of stolen property. Free state filing income tax Mislaid or lost property, Mislaid or lost property. Free state filing income tax Proof of, Theft loss proof. Free state filing income tax When to deduct (Table 3), Table 3. Free state filing income tax When To Deduct a Casualty or Theft Loss When to report, Losses. Free state filing income tax Workbooks for listing property, Workbooks for casualties and thefts. Free state filing income tax Timber loss, Timber loss. Free state filing income tax W Workbooks for property lost due to casualties and thefts, Workbooks for casualties and thefts. Free state filing income tax Prev  Up     Home   More Online Publications