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H&r Block Online Tax Filing

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H&r Block Online Tax Filing

H&r block online tax filing Publication 600 - Main Contents Table of Contents Actual Expenses Optional Sales Tax Tables Instructions for the State and Local General Sales Tax Deduction WorksheetWhat if you lived in more than one state? What if you lived in more than one locality? What if your local general sales tax rate changed during 2006? What if you lived in more than one locality in the same state during 2006? Actual Expenses Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2006 if the tax rate was the same as the general sales tax rate. H&r block online tax filing However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. H&r block online tax filing If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. H&r block online tax filing Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. H&r block online tax filing Also include any state and local general sales taxes paid for a leased motor vehicle. H&r block online tax filing Do not include sales taxes paid on items used in your trade or business. H&r block online tax filing To deduct your actual expenses, enter the amount on Schedule A, line 5, and enter “ST” on the dotted line to the left of the line 5 entry space. H&r block online tax filing You must keep your actual receipts showing general sales taxes paid to use this method. H&r block online tax filing Refund of general sales taxes. H&r block online tax filing   If you received a refund of state or local general sales taxes in 2006 for amounts paid in 2006, reduce your actual 2006 state and local general sales taxes by this amount. H&r block online tax filing If you received a refund of state or local general sales taxes in 2006 for prior year purchases, do not reduce your 2006 state and local general sales taxes by this amount. H&r block online tax filing But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. H&r block online tax filing See Recoveries in Pub. H&r block online tax filing 525 for details. H&r block online tax filing Optional Sales Tax Tables Instead of using your actual expenses, you can use the tables on pages 5 through 7 to figure your state and local general sales tax deduction. H&r block online tax filing You may also be able to add the state and local general sales taxes paid on certain specified items. H&r block online tax filing To figure your state and local general sales tax deduction using the tables, complete the worksheet below. H&r block online tax filing If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction. H&r block online tax filing State and Local General Sales Tax Deduction Worksheet (See the instructions that begin on page 3. H&r block online tax filing ) Before you begin: See the instructions for line 1 on page 3 if: You lived in more than one state during 2006, or You had any nontaxable income in 2006. H&r block online tax filing   1. H&r block online tax filing Enter your state general sales taxes from the applicable table on page 5 or 6 (see page 3 of the instructions) 1. H&r block online tax filing $     Next. H&r block online tax filing If, for all of 2006, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. H&r block online tax filing Otherwise, go to line 2       2. H&r block online tax filing Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2006?         No. H&r block online tax filing Enter -0-                   Yes. H&r block online tax filing Enter your local general sales taxes from the applicable table on page 7 (see page 3 of the instructions)     2. H&r block online tax filing $       3. H&r block online tax filing Did your locality impose a local general sales tax in 2006? Residents of California, Nevada, and Texarkana, Arkansas, see page 3 of the instructions             No. H&r block online tax filing Skip lines 3 through 5, enter -0- on line 6, and go to line 7             Yes. H&r block online tax filing Enter your local general sales tax rate, but omit the percentage sign. H&r block online tax filing For example, if your local general sales tax rate was 2. H&r block online tax filing 5%, enter 2. H&r block online tax filing 5. H&r block online tax filing If your local general sales tax rate changed or you lived in more than one locality in the same state during 2006, see page 3 of the instructions. H&r block online tax filing (If you do not know your local general sales tax rate, contact your local government. H&r block online tax filing ) 3. H&r block online tax filing . H&r block online tax filing       4. H&r block online tax filing Did you enter -0- on line 2 above?             No. H&r block online tax filing Skip lines 4 and 5 and go to line 6             Yes. H&r block online tax filing Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. H&r block online tax filing For example, if your state general sales tax rate is 6%, enter 6. H&r block online tax filing 0 4. H&r block online tax filing . H&r block online tax filing       5. H&r block online tax filing Divide line 3 by line 4. H&r block online tax filing Enter the result as a decimal (rounded to at least three places) 5. H&r block online tax filing . H&r block online tax filing       6. H&r block online tax filing Did you enter -0- on line 2 above?             No. H&r block online tax filing Multiply line 2 by line 3   6. H&r block online tax filing $     Yes. H&r block online tax filing Multiply line 1 by line 5. H&r block online tax filing If you lived in more than one locality in the same state during 2006, see page 4 of the instructions           7. H&r block online tax filing Enter your state and local general sales taxes paid on specified items, if any (see page 4 of the instructions) 7. H&r block online tax filing $   8. H&r block online tax filing Deduction for general sales taxes. H&r block online tax filing Add lines 1, 6, and 7. H&r block online tax filing Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. H&r block online tax filing Be sure to enter “ST” on the dotted line to the left of the entry space 8. H&r block online tax filing $     Instructions for the State and Local General Sales Tax Deduction Worksheet Line 1. H&r block online tax filing    If you lived in the same state for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional state sales tax table for your state on page 5 or 6. H&r block online tax filing Read down the “At least-But less than” columns for your state and find the line that includes your 2006 income. H&r block online tax filing If married filing separately, do not include your spouse's income. H&r block online tax filing Your 2006 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following. H&r block online tax filing Tax-exempt interest. H&r block online tax filing Veterans' benefits. H&r block online tax filing Nontaxable combat pay. H&r block online tax filing Workers' compensation. H&r block online tax filing Nontaxable part of social security and railroad retirement benefits. H&r block online tax filing Nontaxable part of IRA, pension, or annuity distributions. H&r block online tax filing Do not include rollovers. H&r block online tax filing Public assistance payments. H&r block online tax filing The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. H&r block online tax filing Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. H&r block online tax filing What if you lived in more than one state?    If you lived in more than one state during 2006, look up the table amount for each state using the above rules. H&r block online tax filing If there is no table for your state, the table amount is considered to be zero. H&r block online tax filing Multiply the table amount for each state you lived in by a fraction. H&r block online tax filing The numerator of the fraction is the number of days you lived in the state during 2006 and the denominator is the total number of days in the year (365). H&r block online tax filing Enter the total of the prorated table amounts for each state on line 1. H&r block online tax filing However, if you also lived in a locality during 2006 that imposed a local general sales tax, do not enter the total on line 1. H&r block online tax filing Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1. H&r block online tax filing Example. H&r block online tax filing You lived in State A from January 1 through August 31, 2006 (243 days), and in State B from September 1 through December 31, 2006 (122 days). H&r block online tax filing The table amount for State A is $500. H&r block online tax filing The table amount for State B is $400. H&r block online tax filing You would figure your state general sales tax as follows. H&r block online tax filing State A: $500 x 243/365 = $333   State B: $400 x 122/365 = 134   Total = $467   If none of the localities in which you lived during 2006 imposed a local general sales tax, enter $467 on line 1 of your worksheet. H&r block online tax filing Otherwise, complete a separate worksheet for State A and State B. H&r block online tax filing Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet. H&r block online tax filing Line 2. H&r block online tax filing   If you checked the “No” box, enter -0- on line 2, and go to line 3. H&r block online tax filing If you checked the “Yes” box and lived in the same locality for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional local sales tax table for your locality on page 7. H&r block online tax filing Read down the “At least-But less than” columns for your locality and find the line that includes your 2006 income. H&r block online tax filing See the line 1 instructions on this page to figure your 2006 income. H&r block online tax filing The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. H&r block online tax filing Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. H&r block online tax filing What if you lived in more than one locality?   If you lived in more than one locality during 2006, look up the table amount for each locality using the above rules. H&r block online tax filing If there is no table for your locality, the table amount is considered to be zero. H&r block online tax filing Multiply the table amount for each locality you lived in by a fraction. H&r block online tax filing The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). H&r block online tax filing If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. H&r block online tax filing Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet. H&r block online tax filing Example. H&r block online tax filing You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). H&r block online tax filing The table amount for Locality 1 is $100. H&r block online tax filing The table amount for Locality 2 is $150. H&r block online tax filing You would figure the amount to enter on line 2 as follows. H&r block online tax filing Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet. H&r block online tax filing Locality 1: $100 x 243/365 = $67   Locality 2: $150 x 122/365 = 50   Total = $117   Line 3. H&r block online tax filing   If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7. H&r block online tax filing 25%. H&r block online tax filing Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7. H&r block online tax filing 25%. H&r block online tax filing   If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6. H&r block online tax filing 5%. H&r block online tax filing Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6. H&r block online tax filing 5%. H&r block online tax filing   If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4. H&r block online tax filing 0” on line 3. H&r block online tax filing Your local general sales tax rate of 4. H&r block online tax filing 0% includes the additional 1. H&r block online tax filing 0% Arkansas state sales tax rate for Texarkana and the 1. H&r block online tax filing 5% sales tax rate for Miller County. H&r block online tax filing What if your local general sales tax rate changed during 2006?    If you checked the “Yes” box and your local general sales tax rate changed during 2006, figure the rate to enter on line 3 as follows. H&r block online tax filing Multiply each tax rate for the period it was in effect by a fraction. H&r block online tax filing The numerator of the fraction is the number of days the rate was in effect during 2006 and the denominator is the total number of days in the year (365). H&r block online tax filing Enter the total of the prorated tax rates on line 3. H&r block online tax filing Example. H&r block online tax filing Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2006 (273 days). H&r block online tax filing The rate increased to 1. H&r block online tax filing 75% for the period from October 1 through December 31, 2006 (92 days). H&r block online tax filing You would enter “1. H&r block online tax filing 189” on line 3, figured as follows. H&r block online tax filing January 1 - September 30: 1. H&r block online tax filing 00 x 273/365 = 0. H&r block online tax filing 748   October 1 - December 31: 1. H&r block online tax filing 75 x 92/365 = 0. H&r block online tax filing 441   Total = 1. H&r block online tax filing 189   What if you lived in more than one locality in the same state during 2006?    Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2006 and either of the following applies. H&r block online tax filing Each locality did not have the same local general sales tax rate. H&r block online tax filing You lived in Texarkana, AR, or Los Angeles County, CA. H&r block online tax filing   To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page 7 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. H&r block online tax filing The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). H&r block online tax filing Example. H&r block online tax filing You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). H&r block online tax filing The local general sales tax rate for Locality 1 is 1%. H&r block online tax filing The rate for Locality 2 is 1. H&r block online tax filing 75%. H&r block online tax filing You would enter “0. H&r block online tax filing 666” on line 3 for the Locality 1 worksheet and “0. H&r block online tax filing 585” for the Locality 2 worksheet, figured as follows. H&r block online tax filing Locality 1: 1. H&r block online tax filing 00 x 243/365 = 0. H&r block online tax filing 666   Locality 2: 1. H&r block online tax filing 75 x 122/365 = 0. H&r block online tax filing 585   Line 6. H&r block online tax filing   If you lived in more than one locality in the same state during 2006, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2006. H&r block online tax filing If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet. H&r block online tax filing Line 7. H&r block online tax filing    Enter on line 7 any state and local general sales taxes paid on the following specified items. H&r block online tax filing If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets. H&r block online tax filing A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). H&r block online tax filing Also include any state and local general sales taxes paid for a leased motor vehicle. H&r block online tax filing If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate. H&r block online tax filing An aircraft or boat, if the tax rate was the same as the general sales tax rate. H&r block online tax filing A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies. H&r block online tax filing Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation. H&r block online tax filing You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly. H&r block online tax filing Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. H&r block online tax filing The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. H&r block online tax filing In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly. H&r block online tax filing   Do not include sales taxes paid on items used in your trade or business. H&r block online tax filing If you received a refund of state or local general sales taxes in 2006, see Refund of general sales taxes on page 1. H&r block online tax filing Prev  Up  Next   Home   More Online Publications
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Uncertain Tax Positions - Schedule UTP

Third Year of Uncertain Tax Position Reporting

The IRS is currently reviewing its third year of returns filed with Schedule UTP. Beginning with Tax Year 2010, Schedule UTP was a new schedule that certain corporations  used to report uncertain tax positions. Additionally, with Announcement 2010-76, the IRS expanded its policy of restraint in connection with its decision to require certain corporations to file Schedule UTP. Directives to LB&I personnel have been issued setting forth the IRS’s planned treatment of these UTPs by examiners and other personnel.

Submit your questions, comments, or concerns regarding Schedule UTP to the IRS. Although individual responses will not be provided, the IRS will consider submissions in efforts to improve Schedule UTP.

Information about UTP Education and Outreach Efforts:

LB&I is undertaking an education and outreach effort regarding Schedule UTP. LB&I will mail letters to inform certain taxpayers that a review of their Schedule UTP determined that one or more of the concise descriptions they provided did not meet the requirements set forth in the Schedule UTP instructions. If the taxpayer has a valid Power of Attorney on file with the IRS, the Power of Attorney will also receive a copy of this letter.

While the letter requires no action by taxpayers regarding their Schedule UTP, taxpayers are advised to ensure that on any future filings of a Schedule UTP, the concise descriptions follow the Schedule UTP Instructions. All returns filed with a Schedule UTP will continue to be subject to a review in LB&I.

Taxpayers with questions about the letter or the concise descriptions are being referred to this WEB Site.

Related Documents:

Date

Document

Document Description or Originator

 

 

Forms

Instructions

2013 Form 1120 Schedule UTP Instructions for Form 1120 Schedule UTP
2012 Form 1120 Schedule UTP Instructions for Form 1120 Schedule UTP
2011 Form 1120 Schedule UTP Instructions for Form 1120 Schedule UTP
2010 Form 1120 Schedule UTP Instructions for Form 1120 Schedule UTP
 
IRS Pronouncements:
09-24-10 Announcement 2010-76, Policy of Restraint and Uncertain Tax Positions Impact of the Policy of Restraint on Uncertain Tax Positions. 
09-24-10 Announcement 2010-75, Reporting of Uncertain Tax Positions Reporting of Uncertain Tax Positions.
04-19-10 Announcement 2010-30 Schedule UTP draft form and instructions.
03-05-10 Announcement 2010-17 Extension for comment request for Uncertain Tax Position reporting requirements.
01-26-10 Announcement 2010-9 Comment request for Uncertain Tax Position reporting requirements.
 
IRS and LB&I Guidance Memorandums:
05-31-13 Guidance for Preparing UTP Concise Descriptions Specific Guidance
11-01-11

UTP Guidance and Procedures for the Field

Cover memo by Commissioner, LB&I    
11-01-11 LB&I Schedule UTP Guidance Specific guidance
08-31-11 UTP Guidance and Procedures for the Compliance Assurance Process (CAP) Program Commissioner, LB&I memo
05-11-11

Centralized Management of LB&I Returns with UTP Schedules

Commissioner, LB&I memo
03-23-11 Uncertain Tax Positions - Modified Policy of Restraint Commissioner, LB&I memo
09-24-10 Directive for LB&I: Reporting of Uncertain Tax Positions Deputy Commissioner, Services and Enforcement
 
Public Statements and Comments by IRS Executives:
03-26-12 IRS Deputy Commissioner, Service and Enforcement Remarks before Tax Executives Institute  Remarks of Steven T. Miller, Deputy Commissioner, Service and Enforcement Internal Revenue Service Before the Tax Executives Institute, Mid Year Conference
09-24-10 IRS Commissioner Shulman Remarks before the American Bar Association, 9/24/2010   
04-12-10 Remarks of IRS Commissioner Shulman at the Tax Executives Institute Mid-Year Meeting   
01-26-10 IR-2010-13 Remarks of IRS Commissioner Doug Shulman to the New York State Bar Association Taxation Section Annual Meeting
 
Other Documents:
02-04-14 UTP Filing Statistics  
03-14-13 Frequently Asked Questions  

 

Page Last Reviewed or Updated: 26-Feb-2014

The H&r Block Online Tax Filing

H&r block online tax filing 4. H&r block online tax filing   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. H&r block online tax filing Line of business. H&r block online tax filing Examples. H&r block online tax filing Improvement of business conditions. H&r block online tax filing Exception for local legislation. H&r block online tax filing De minimis exception. H&r block online tax filing Grass roots lobbying. H&r block online tax filing 501(c)(7) - Social and Recreation ClubsLimited membership. H&r block online tax filing Support. H&r block online tax filing Facilities open to public. H&r block online tax filing Gross receipts from nonmembership sources. H&r block online tax filing Gross receipts. H&r block online tax filing Nontraditional activities. H&r block online tax filing 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. H&r block online tax filing Losses and expenses. H&r block online tax filing Distributions of proceeds. H&r block online tax filing The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. H&r block online tax filing Perpetual care organization. H&r block online tax filing Care of individual plots. H&r block online tax filing 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. H&r block online tax filing 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. H&r block online tax filing Waiver of payment of income. H&r block online tax filing 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). H&r block online tax filing Section 501(c)(3) organizations are covered in chapter 3 of this publication. H&r block online tax filing The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. H&r block online tax filing 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). H&r block online tax filing The discussion that follows describes the information you must provide when applying. H&r block online tax filing For application procedures, see chapter 1. H&r block online tax filing To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. H&r block online tax filing In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. H&r block online tax filing If the organization provides an excess benefit to certain persons, an excise tax may be imposed. H&r block online tax filing See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. H&r block online tax filing Examples. H&r block online tax filing   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. H&r block online tax filing Nonprofit operation. H&r block online tax filing   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. H&r block online tax filing However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. H&r block online tax filing Social welfare. H&r block online tax filing   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). H&r block online tax filing   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. H&r block online tax filing It therefore does not qualify as a section 501(c)(4) organization. H&r block online tax filing Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. H&r block online tax filing However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. H&r block online tax filing Political activity. H&r block online tax filing   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. H&r block online tax filing However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. H&r block online tax filing See the discussion in chapter 2 under Political Organization Income Tax Return . H&r block online tax filing Social or recreational activity. H&r block online tax filing   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). H&r block online tax filing Retirement benefit program. H&r block online tax filing   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. H&r block online tax filing It may qualify under another paragraph of section 501(c) depending on all the facts. H&r block online tax filing   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. H&r block online tax filing Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. H&r block online tax filing They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. H&r block online tax filing However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. H&r block online tax filing for more information. H&r block online tax filing For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. H&r block online tax filing gov. H&r block online tax filing Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. H&r block online tax filing Volunteer fire companies. H&r block online tax filing   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. H&r block online tax filing   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). H&r block online tax filing In this event, your organization should file Form 1023. H&r block online tax filing Homeowners' associations. H&r block online tax filing   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. H&r block online tax filing The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. H&r block online tax filing Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. H&r block online tax filing Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. H&r block online tax filing   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. H&r block online tax filing It also must show that it does not engage in exterior maintenance of private homes. H&r block online tax filing   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. H&r block online tax filing Other organizations. H&r block online tax filing   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. H&r block online tax filing 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. H&r block online tax filing You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. H&r block online tax filing In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. H&r block online tax filing Submit any additional information that may be required, as described in this section. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. H&r block online tax filing However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. H&r block online tax filing For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. H&r block online tax filing Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. H&r block online tax filing To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. H&r block online tax filing In addition, no net earnings of the organization can inure to the benefit of any member. H&r block online tax filing Composition of membership. H&r block online tax filing   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. H&r block online tax filing You must show in your application that your organization has the purposes described in the preceding paragraph. H&r block online tax filing These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. H&r block online tax filing Benefits to members. H&r block online tax filing   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. H&r block online tax filing However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. H&r block online tax filing   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. H&r block online tax filing gov. H&r block online tax filing Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. H&r block online tax filing For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. H&r block online tax filing The term harvesting, in this case, includes fishing and related pursuits. H&r block online tax filing Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. H&r block online tax filing When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. H&r block online tax filing The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. H&r block online tax filing The following list contains some examples of activities that show an agricultural or horticultural purpose. H&r block online tax filing Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. H&r block online tax filing Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. H&r block online tax filing Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. H&r block online tax filing Guarding the purity of a specific breed of livestock. H&r block online tax filing Encouraging improvements in the production of fish on privately owned fish farms. H&r block online tax filing Negotiating with processors for the price to be paid to members for their crops. H&r block online tax filing For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. H&r block online tax filing gov. H&r block online tax filing 501(c)(6) - Business Leagues, etc. H&r block online tax filing If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. H&r block online tax filing For a discussion of the procedure to follow, see chapter 1. H&r block online tax filing Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). H&r block online tax filing In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. H&r block online tax filing It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. H&r block online tax filing A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. H&r block online tax filing Trade associations and professional associations are considered business leagues. H&r block online tax filing Chamber of commerce. H&r block online tax filing   A chamber of commerce usually is composed of the merchants and traders of a city. H&r block online tax filing Board of trade. H&r block online tax filing   A board of trade often consists of persons engaged in similar lines of business. H&r block online tax filing For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. H&r block online tax filing   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. H&r block online tax filing Real estate board. H&r block online tax filing   A real estate board consists of members interested in improving the business conditions in the real estate field. H&r block online tax filing It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. H&r block online tax filing Professional football leagues. H&r block online tax filing   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). H&r block online tax filing They are exempt whether or not they administer a pension fund for football players. H&r block online tax filing General purpose. H&r block online tax filing   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. H&r block online tax filing It must be shown that the conditions of a particular trade or the interests of the community will be advanced. H&r block online tax filing Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. H&r block online tax filing Line of business. H&r block online tax filing   This term generally refers either to an entire industry or to all components of an industry within a geographic area. H&r block online tax filing It does not include a group composed of businesses that market a particular brand within an industry. H&r block online tax filing Common business interest. H&r block online tax filing   A common business interest of all members of the organization must be established by the application documents. H&r block online tax filing Examples. H&r block online tax filing   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). H&r block online tax filing Improvement of business conditions. H&r block online tax filing   Generally, this must be shown to be the purpose of the organization. H&r block online tax filing This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. H&r block online tax filing Stock or commodity exchange. H&r block online tax filing   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). H&r block online tax filing Legislative activity. H&r block online tax filing   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. H&r block online tax filing Deduction not allowed for dues used for political or legislative activities. H&r block online tax filing   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. H&r block online tax filing Influencing legislation. H&r block online tax filing Participating or intervening in a political campaign for, or against, any candidate for public office. H&r block online tax filing Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). H&r block online tax filing Communicating directly with certain executive branch officials to try to influence their official actions or positions. H&r block online tax filing See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. H&r block online tax filing Exception for local legislation. H&r block online tax filing   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. H&r block online tax filing Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. H&r block online tax filing De minimis exception. H&r block online tax filing   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. H&r block online tax filing Grass roots lobbying. H&r block online tax filing   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. H&r block online tax filing Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. H&r block online tax filing They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. H&r block online tax filing   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. H&r block online tax filing gov. H&r block online tax filing 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. H&r block online tax filing In applying for recognition of exemption, you should submit the information described in this section. H&r block online tax filing Also see chapter 1 for the procedures to follow. H&r block online tax filing Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. H&r block online tax filing Discrimination prohibited. H&r block online tax filing   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. H&r block online tax filing   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. H&r block online tax filing Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. H&r block online tax filing Private benefit prohibited. H&r block online tax filing   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. H&r block online tax filing For purposes of this requirement, it is not necessary that net earnings be actually distributed. H&r block online tax filing Even undistributed earnings can benefit members. H&r block online tax filing Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. H&r block online tax filing However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. H&r block online tax filing Purposes. H&r block online tax filing   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. H&r block online tax filing You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. H&r block online tax filing   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. H&r block online tax filing A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. H&r block online tax filing   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. H&r block online tax filing For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. H&r block online tax filing Limited membership. H&r block online tax filing   The membership in a social club must be limited. H&r block online tax filing To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. H&r block online tax filing   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. H&r block online tax filing Corporate members of a club are not the kind of members contemplated by the law. H&r block online tax filing Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. H&r block online tax filing See Gross receipts from nonmembership sources , later. H&r block online tax filing Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. H&r block online tax filing   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. H&r block online tax filing However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. H&r block online tax filing Support. H&r block online tax filing   In general, your club should be supported solely by membership fees, dues, and assessments. H&r block online tax filing However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. H&r block online tax filing Business activities. H&r block online tax filing   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. H&r block online tax filing However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. H&r block online tax filing Facilities open to public. H&r block online tax filing   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. H&r block online tax filing This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. H&r block online tax filing Gross receipts from nonmembership sources. H&r block online tax filing   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. H&r block online tax filing Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. H&r block online tax filing Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. H&r block online tax filing If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. H&r block online tax filing Gross receipts. H&r block online tax filing   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. H&r block online tax filing These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. H&r block online tax filing Receipts do not include initiation fees and capital contributions. H&r block online tax filing Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. H&r block online tax filing Nontraditional activities. H&r block online tax filing   Activities conducted by a social club need to further its exempt purposes. H&r block online tax filing Traditional business activities are those that further a social club's exempt purposes. H&r block online tax filing Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. H&r block online tax filing Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. H&r block online tax filing Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. H&r block online tax filing Fraternity foundations. H&r block online tax filing   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. H&r block online tax filing 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. H&r block online tax filing The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. H&r block online tax filing , purposes. H&r block online tax filing The procedures to follow in applying for recognition of exemption are described in chapter 1. H&r block online tax filing If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. H&r block online tax filing If so, your organization need not apply for individual recognition of exemption. H&r block online tax filing For more information, see Group Exemption Letter in chapter 1 of this publication. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. H&r block online tax filing Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. H&r block online tax filing The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. H&r block online tax filing Lodge system. H&r block online tax filing   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. H&r block online tax filing Payment of benefits. H&r block online tax filing   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. H&r block online tax filing An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. H&r block online tax filing   The benefits must be limited to members and their dependents. H&r block online tax filing If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. H&r block online tax filing Whole-life insurance. H&r block online tax filing   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. H&r block online tax filing Reinsurance pool. H&r block online tax filing   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. H&r block online tax filing Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. H&r block online tax filing The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. H&r block online tax filing S. H&r block online tax filing , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. H&r block online tax filing The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. H&r block online tax filing 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. H&r block online tax filing Both the application form to file and the information to provide are discussed later under the section that describes your employee association. H&r block online tax filing Chapter 1 describes the procedures to follow in applying for exemption. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. H&r block online tax filing Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. H&r block online tax filing A local employees' association must apply for recognition of exemption by filing Form 1024. H&r block online tax filing The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. H&r block online tax filing A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. H&r block online tax filing Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. H&r block online tax filing Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. H&r block online tax filing The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. H&r block online tax filing To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. H&r block online tax filing Note. H&r block online tax filing Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. H&r block online tax filing Notice requirement. H&r block online tax filing   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. H&r block online tax filing The organization gives notice by filing Form 1024. H&r block online tax filing If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. H&r block online tax filing An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . H&r block online tax filing Membership. H&r block online tax filing   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. H&r block online tax filing This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. H&r block online tax filing   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. H&r block online tax filing For example, the owner of a business whose employees are members of the association can be a member. H&r block online tax filing An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. H&r block online tax filing Employees. H&r block online tax filing   Employees include individuals who became entitled to membership because they are or were employees. H&r block online tax filing For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. H&r block online tax filing   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. H&r block online tax filing Conversely, membership is involuntary if the designation as a member is due to employee status. H&r block online tax filing However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. H&r block online tax filing An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. H&r block online tax filing Payment of benefits. H&r block online tax filing   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. H&r block online tax filing The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). H&r block online tax filing Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. H&r block online tax filing Nondiscrimination requirements. H&r block online tax filing   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. H&r block online tax filing However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. H&r block online tax filing   A plan meets the nondiscrimination requirements only if both of the following statements are true. H&r block online tax filing Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. H&r block online tax filing The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. H&r block online tax filing A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. H&r block online tax filing   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. H&r block online tax filing This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. H&r block online tax filing   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. H&r block online tax filing The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. H&r block online tax filing For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). H&r block online tax filing Excluded employees. H&r block online tax filing   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. H&r block online tax filing These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. H&r block online tax filing Highly compensated individual. H&r block online tax filing   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. H&r block online tax filing Go to IRS. H&r block online tax filing gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. H&r block online tax filing However, the employer can choose not to have (3) apply. H&r block online tax filing Aggregation rules. H&r block online tax filing   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. H&r block online tax filing Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. H&r block online tax filing Leased employees are treated as employees of the recipient. H&r block online tax filing One employee. H&r block online tax filing   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). H&r block online tax filing Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. H&r block online tax filing The trust must be a valid, existing trust under local law and must be evidenced by an executed document. H&r block online tax filing A conformed copy of the plan of which the trust is a part should be attached to the application. H&r block online tax filing To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. H&r block online tax filing Note. H&r block online tax filing Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. H&r block online tax filing Notice requirement. H&r block online tax filing   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. H&r block online tax filing The organization gives notice by filing Form 1024. H&r block online tax filing If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. H&r block online tax filing An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . H&r block online tax filing Types of payments. H&r block online tax filing   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. H&r block online tax filing In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. H&r block online tax filing Diversion of funds. H&r block online tax filing   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). H&r block online tax filing Discrimination in benefits. H&r block online tax filing   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. H&r block online tax filing However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. H&r block online tax filing Prohibited transactions and exemption. H&r block online tax filing   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. H&r block online tax filing It must file the claim on Form 1024. H&r block online tax filing The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. H&r block online tax filing An authorized principal officer of your organization must make this declaration under the penalties of perjury. H&r block online tax filing   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. H&r block online tax filing However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. H&r block online tax filing Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. H&r block online tax filing For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. H&r block online tax filing 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. H&r block online tax filing Benevolent life insurance associations of a purely local character and like organizations. H&r block online tax filing Mutual ditch or irrigation companies and like organizations. H&r block online tax filing Mutual or cooperative telephone companies and like organizations. H&r block online tax filing A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. H&r block online tax filing The information to be provided upon application by each of these organizations is described in this section. H&r block online tax filing For information as to the procedures to follow in applying for exemption, see chapter 1. H&r block online tax filing General requirements. H&r block online tax filing   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. H&r block online tax filing They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. H&r block online tax filing Mutual character. H&r block online tax filing   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. H&r block online tax filing They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. H&r block online tax filing To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. H&r block online tax filing   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. H&r block online tax filing Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. H&r block online tax filing The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. H&r block online tax filing Membership. H&r block online tax filing   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. H&r block online tax filing In a stock company, the stockholders are members. H&r block online tax filing However, a mutual life insurance organization cannot have policyholders other than its members. H&r block online tax filing Losses and expenses. H&r block online tax filing   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. H&r block online tax filing Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. H&r block online tax filing If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. H&r block online tax filing Distributions of proceeds. H&r block online tax filing   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. H&r block online tax filing Such distribution represents a refund in the costs of services rendered to the member. H&r block online tax filing The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. H&r block online tax filing Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. H&r block online tax filing Mutual or cooperative telephone company. H&r block online tax filing   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. H&r block online tax filing Mutual or cooperative electric company. H&r block online tax filing   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. H&r block online tax filing   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. H&r block online tax filing Qualified pole rental. H&r block online tax filing   The term qualified pole rental means any rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. H&r block online tax filing   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). H&r block online tax filing The 85% requirement is applied on the basis of an annual accounting period. H&r block online tax filing Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. H&r block online tax filing Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. H&r block online tax filing Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. H&r block online tax filing Example. H&r block online tax filing   The books of an organization reflect the following for the calendar year. H&r block online tax filing Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. H&r block online tax filing   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. H&r block online tax filing   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. H&r block online tax filing   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. H&r block online tax filing Tax treatment of donations. H&r block online tax filing   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. H&r block online tax filing Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. H&r block online tax filing If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. H&r block online tax filing To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. H&r block online tax filing If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. H&r block online tax filing A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. H&r block online tax filing A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. H&r block online tax filing Organizations similar to local benevolent life insurance companies. H&r block online tax filing   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. H&r block online tax filing However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. H&r block online tax filing Burial and funeral benefit insurance organization. H&r block online tax filing   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. H&r block online tax filing An organization that provides its benefits in the form of supplies and service is not a life insurance company. H&r block online tax filing Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. H&r block online tax filing Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. H&r block online tax filing They can serve noncontiguous areas. H&r block online tax filing Like organization. H&r block online tax filing   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. H&r block online tax filing Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. H&r block online tax filing 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. H&r block online tax filing For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. H&r block online tax filing A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. H&r block online tax filing A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. H&r block online tax filing The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. H&r block online tax filing If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. H&r block online tax filing Operating a mortuary is not permitted. H&r block online tax filing However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. H&r block online tax filing How income can be used. H&r block online tax filing   You should show that your organization's earnings are or will be used only in one or more of the following ways. H&r block online tax filing To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. H&r block online tax filing To buy cemetery property. H&r block online tax filing To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. H&r block online tax filing No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. H&r block online tax filing Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. H&r block online tax filing Buying cemetery property. H&r block online tax filing   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. H&r block online tax filing You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. H&r block online tax filing   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. H&r block online tax filing Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not