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Tax Form 1040 Ez

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Tax Form 1040 Ez

Tax form 1040 ez Publication 557 - Introductory Material Table of Contents What's New Reminders Introduction What's New Proposed regulations on “good faith determinations”. Tax form 1040 ez  Proposed regulations modify standards for making a good faith determination that a foreign organization is a charitable organization, grants to which may be qualifying distributions and not taxable expenditures. Tax form 1040 ez The proposed regulations identify a broader class of tax practitioners upon whose written advice a private foundation may base a “good faith determination. Tax form 1040 ez ” See, Proposed Regulations: Reliance Standards for Making Good Faith Determinations, REG-134974-12, 2012-47 I. Tax form 1040 ez R. Tax form 1040 ez B. Tax form 1040 ez 553. Tax form 1040 ez Prop. Tax form 1040 ez Regs. Tax form 1040 ez on Good Faith Determinations. Tax form 1040 ez New Requirements for section 501(c)(3) Hospitals Under the Affordable Care Act. Tax form 1040 ez  The Affordable Care Act (ACA), enacted March 23, 2010, added new requirements that hospital organizations must satisfy in order to be described in section 501(c)(3), as well as new reporting requirements and excise taxes. Tax form 1040 ez On June 22, 2012, the Service issued a notice of proposed rulemaking that addresses the new requirements enacted by the ACA applicable to section 501(c)(3) hospital organizations. Tax form 1040 ez See, Proposed Regulations: Additional Requirements for Charitable Hospitals, REG-13026-11, 77 Fed. Tax form 1040 ez Reg. Tax form 1040 ez 38148. Tax form 1040 ez On April 3, 2013, the Service issued proposed regulations on the ACA's community health needs assessment (CHNA) requirements. Tax form 1040 ez The proposed regulations also discuss the related reporting and excise tax requirements for charitable hospitals and the consequences for failure to satisfy the section 501(r) requirements. Tax form 1040 ez See, Proposed Regulations: Community Health Needs Assessments for Charitable Hospitals, REG-106499-12, 78 Fed. Tax form 1040 ez Reg. Tax form 1040 ez 20,523. Tax form 1040 ez Timing of when an Organization is exempt for Federal Tax Purposes. Tax form 1040 ez  As noted in section 2. Tax form 1040 ez 03(4) of Revenue Procedure 2013-9, 2013-2 I. Tax form 1040 ez R. Tax form 1040 ez B. Tax form 1040 ez 267, the provisions in section 11. Tax form 1040 ez 01 regarding the effect of determination letters or rulings recognizing exempt status of organizations described in section 501(c), other than sections 501(c)(3), (9), (17), and (29), have been revised. Tax form 1040 ez Prior to this year, and back to 1962, when such organizations applied for recognition, the IRS would usually recognize the organizations as tax exempt from the date of formation, no matter how long the interval between the date of formation and the date of application. Tax form 1040 ez In addition to the practical difficulties of ascertaining an organization's purposes and activities for this period, such recognition is now potentially inconsistent with the provisions of section 6033(j), which automatically revokes the exempt status of an organization that fails to file required Form 990 series returns or notices for three consecutive years. Tax form 1040 ez The new procedure adopts a practice similar to the rule for section 501(c)(3) organizations for these organizations, generally permitting recognition from the date of formation if the organization has: always met the requirements for exemption, has applied within 27 months from the end of the month in which it was organized, and has not failed to file required Form 990 series returns or notices for three consecutive years. Tax form 1040 ez Section 11. Tax form 1040 ez 01(3) notes: an organization that otherwise meets the requirements for tax-exempt status and the issuance of a determination letter or ruling that does not meet the requirements for recognition from date of formation will generally be recognized from the postmark date of its application. Tax form 1040 ez Exempt Organizations Select Check. Tax form 1040 ez  The IRS has developed an on-line search tool, Exempt Organizations Select Check, that allows users to select an exempt organization and check certain information about its federal tax status and filings. Tax form 1040 ez It consolidates three former search sites into one, providing expanded search capability and a more efficient way to search for organizations that: Are eligible to receive tax-deductible charitable contributions (Publication 78 data). Tax form 1040 ez Users may rely on this list in determining deductibility of contributions, just as they did when Publication 78 was a separate electronic publication rather than part of Select Check. Tax form 1040 ez Have had their tax-exempt status automatically revoked under the law because they have not filed Form 990 series returns or notices annually as required for three consecutive years (Auto-Revocation List). Tax form 1040 ez Have filed a Form 990-N (e-Postcard) annual electronic notice. Tax form 1040 ez  In addition to searching for a particular organization, users may download a complete list of each of the three types of organizations through Exempt Organizations Select Check. Tax form 1040 ez See also Revenue Procedure 2011-33, 2011-25 I. Tax form 1040 ez R. Tax form 1040 ez B. Tax form 1040 ez 887. Tax form 1040 ez Future developments. Tax form 1040 ez . Tax form 1040 ez  The IRS has created a page on IRS. Tax form 1040 ez gov for information about Publication 557, at www. Tax form 1040 ez irs. Tax form 1040 ez gov/pub557. Tax form 1040 ez Information about any future developments affecting Publication 557 (such as legislation enacted after we release it) will be posted on that page. Tax form 1040 ez Reminders The Patient Protection and Affordable Care Act (ACA). Tax form 1040 ez   The ACA added several new laws. Tax form 1040 ez This includes a new excise tax on indoor tanning services, a small business health care tax credit, additional requirements for tax-exempt hospitals, and the section 501(c)(29) CO-OP program. Tax form 1040 ez For more information, go to IRS. Tax form 1040 ez gov and select Affordable Care Act Tax Provisions. Tax form 1040 ez Electronic filing requirement for large organizations. Tax form 1040 ez  For tax years ending on or after December 31, 2006, only organizations that file 250 returns during the calendar year and that have total assets of $10 million or more are required to file Form 990 electronically. Tax form 1040 ez For more information, go to e-file for Charities and Non-Profits. Tax form 1040 ez Section 501(c)(15) gross receipts. Tax form 1040 ez   The definition of gross receipts for purposes of determining whether small insurance companies qualify as tax-exempt under section 501(c)(15) has changed. Tax form 1040 ez See Notice 2006-42, 2006-19 I. Tax form 1040 ez R. Tax form 1040 ez B. Tax form 1040 ez 878, Notice 2006-42. Tax form 1040 ez Prohibited tax shelter transactions. Tax form 1040 ez  New excise taxes are imposed under section 4965 on certain tax-exempt organizations entering into prohibited tax shelter transactions. Tax form 1040 ez See T. Tax form 1040 ez D. Tax form 1040 ez 9492, Excise Taxes on Prohibited Tax Shelter Transactions and Related Disclosure Requirements, 2010-33 I. Tax form 1040 ez R. Tax form 1040 ez B. Tax form 1040 ez 242. Tax form 1040 ez See IRS Issues Final Regulations Regarding Excise Taxes on Prohibited Tax Shelter Transactions and Related Disclosure Requirement. Tax form 1040 ez Pension Protection Act of 2006 tax changes. Tax form 1040 ez  The Pension Protection Act of 2006 made numerous changes to the tax law provisions affecting tax-exempt organizations. Tax form 1040 ez Unless otherwise noted, most of the changes became effective on August 17, 2006. Tax form 1040 ez For key provisions, go to The Pension Protection Act of 2006. Tax form 1040 ez Section 501(c)(3) organizations must make their Form 990-T, Exempt Organization Business Tax Return (and proxy tax under section 6033(e)), open for public inspection for a period of 3 years from the date the Form 990-T is required to be filed (determined with regard to any extension of time for filing) or is actually filed, whichever is later. Tax form 1040 ez There is an increase in excise taxes relating to public charities, social welfare organizations, and private foundations. Tax form 1040 ez There are additional standards for credit counseling organizations. Tax form 1040 ez The definition of convention or association of churches has been modified. Tax form 1040 ez Entities that are not required to file Form 990 or 990-EZ must file new Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ. Tax form 1040 ez The requirements of disclosure to state officials relating to exempt organizations has been modified. Tax form 1040 ez There are excise taxes imposed on excess benefit transactions involving donor advised funds and sponsoring organizations. Tax form 1040 ez There are new excise taxes on prohibited tax shelter transactions. Tax form 1040 ez There is a modification of recordkeeping requirements for certain charitable contributions. Tax form 1040 ez Introduction This publication discusses the rules and procedures for organizations that seek recognition of exemption from federal income tax under section 501(a) of the Internal Revenue Code (the Code). Tax form 1040 ez It explains the procedures you must follow to obtain an appropriate ruling or determination letter recognizing your organization's exemption, as well as certain other information that applies generally to all exempt organizations. Tax form 1040 ez To qualify for exemption under the Code, your organization must be organized for one or more of the purposes specifically designated in the Code. Tax form 1040 ez Organizations that are exempt under section 501(a) include those organizations described in section 501(c). Tax form 1040 ez Section 501(c) organizations are covered in this publication. Tax form 1040 ez Chapter 1, Application, Approval, and Appeal Procedures, provides general information about the procedures for obtaining recognition of tax-exempt status. Tax form 1040 ez Chapter 2, Filing Requirements and Required Disclosures, contains information about annual filing requirements and other matters that may affect your organization's tax-exempt status. Tax form 1040 ez Chapter 3, Section 501(c)(3) Organizations, contains detailed information on various matters affecting section 501(c)(3) organizations, including a section on the determination of private foundation status. Tax form 1040 ez Chapter 4, Other Section 501(c) Organizations, includes separate sections for specific types of organizations described in section 501(c). Tax form 1040 ez Chapter 5, Excise Taxes, provides information on when excise taxes may be imposed. Tax form 1040 ez Organizations not discussed in this publication. Tax form 1040 ez   Certain organizations that may qualify for exemption are not discussed in this publication, although they are included in the Organization Reference Chart. Tax form 1040 ez These organizations (and the Code sections that apply to them) are as follows. Tax form 1040 ez Corporations organized under Acts of Congress 501(c)(1) Teachers' retirement fund associations 501(c)(11) Mutual insurance companies 501(c)(15) Corporations organized to finance crop operations 501(c)(16) Employee funded pension trusts (created before June 25, 1959) 501(c)(18) Withdrawal liability payment fund 501(c)(22) Veterans' organizations (created before 1880) 501(c)(23) National Railroad Retirement Investment Trust 501(c)(28) Religious and apostolic associations 501(d) Cooperative hospital service organizations 501(e) Cooperative service organizations of operating educational organizations 501(f)   Section 501(c)(24) organizations (section 4049 ERISA trusts) are neither discussed in the text nor listed in the Organization Reference Chart. Tax form 1040 ez   Similarly, farmers' cooperative associations that qualify for exemption under section 521, qualified state tuition programs described in section 529, and pension, profit-sharing, and stock bonus plans described in section 401(a) are not discussed in this publication. Tax form 1040 ez If you think your organization falls within one of these categories, contact the IRS for any additional information you need. Tax form 1040 ez For telephone assistance, call 1-877-829-5500. Tax form 1040 ez   Check the Table of Contents at the beginning of this publication to determine whether your organization is described in this publication. Tax form 1040 ez If it is, read the chapter (or section) that applies to your type of organization for the specific information you must give when applying for recognition of exemption. Tax form 1040 ez Organization Reference Chart. Tax form 1040 ez   The Organization Reference Chart enables you to locate at a glance the section of the Code under which your organization might qualify for exemption. Tax form 1040 ez It also shows the required application form and, if your organization meets the exemption requirements, the annual return to be filed (if any), and whether or not a contribution to your organization will be deductible by a donor. Tax form 1040 ez It also describes each type of qualifying organization and the general nature of its activities. Tax form 1040 ez   You may use the Organization Reference Chart to determine the Code section that you think applies to your organization. Tax form 1040 ez Any correspondence with the IRS (in requesting forms or otherwise) will be expedited if you indicate in your correspondence the appropriate Code section. Tax form 1040 ez Check the IRS website, IRS. Tax form 1040 ez gov, for the latest updates, Tax Information for Charities & Other Non-Profits, www. Tax form 1040 ez irs. Tax form 1040 ez gov/charities/index. Tax form 1040 ez html. Tax form 1040 ez Comments and suggestions. Tax form 1040 ez   We welcome your comments about this publication and your suggestions for future editions. Tax form 1040 ez   You can e-mail us while visiting our website at IRS. Tax form 1040 ez gov. Tax form 1040 ez   You can send your comments to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Tax form 1040 ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Tax form 1040 ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Tax form 1040 ez   If you wish telephone assistance, please call 1-877-829-5500. Tax form 1040 ez This toll-free telephone service is available Monday through Friday. Tax form 1040 ez Prev  Up  Next   Home   More Online Publications
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This is a reminder notice required by law informing you that you owe overdue tax.

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If you are already working with us to resolve the balance, no action is required. You should contact us if you have unanswered questions about the overdue taxes or wrote or called us over 30 days ago and have not received a response. If you are able to pay the amount owed, send us full payment as outlined in the letter. If you are unable to full pay or believe that the overdue tax is incorrect, call us to resolve the account.

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Page Last Reviewed or Updated: 03-Feb-2014

The Tax Form 1040 Ez

Tax form 1040 ez 4. Tax form 1040 ez   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. Tax form 1040 ez Line of business. Tax form 1040 ez Examples. Tax form 1040 ez Improvement of business conditions. Tax form 1040 ez Exception for local legislation. Tax form 1040 ez De minimis exception. Tax form 1040 ez Grass roots lobbying. Tax form 1040 ez 501(c)(7) - Social and Recreation ClubsLimited membership. Tax form 1040 ez Support. Tax form 1040 ez Facilities open to public. Tax form 1040 ez Gross receipts from nonmembership sources. Tax form 1040 ez Gross receipts. Tax form 1040 ez Nontraditional activities. Tax form 1040 ez 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. Tax form 1040 ez Losses and expenses. Tax form 1040 ez Distributions of proceeds. Tax form 1040 ez The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. Tax form 1040 ez Perpetual care organization. Tax form 1040 ez Care of individual plots. Tax form 1040 ez 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. Tax form 1040 ez 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. Tax form 1040 ez Waiver of payment of income. Tax form 1040 ez 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). Tax form 1040 ez Section 501(c)(3) organizations are covered in chapter 3 of this publication. Tax form 1040 ez 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. Tax form 1040 ez 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). Tax form 1040 ez The discussion that follows describes the information you must provide when applying. Tax form 1040 ez For application procedures, see chapter 1. Tax form 1040 ez To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. Tax form 1040 ez In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. Tax form 1040 ez If the organization provides an excess benefit to certain persons, an excise tax may be imposed. Tax form 1040 ez See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. Tax form 1040 ez Examples. Tax form 1040 ez   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. Tax form 1040 ez Nonprofit operation. Tax form 1040 ez   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. Tax form 1040 ez 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. Tax form 1040 ez Social welfare. Tax form 1040 ez   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). Tax form 1040 ez   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. Tax form 1040 ez It therefore does not qualify as a section 501(c)(4) organization. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Political activity. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez See the discussion in chapter 2 under Political Organization Income Tax Return . Tax form 1040 ez Social or recreational activity. Tax form 1040 ez   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). Tax form 1040 ez Retirement benefit program. Tax form 1040 ez   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. Tax form 1040 ez It may qualify under another paragraph of section 501(c) depending on all the facts. Tax form 1040 ez   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). Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. Tax form 1040 ez Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. Tax form 1040 ez They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. Tax form 1040 ez However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Tax form 1040 ez for more information. Tax form 1040 ez For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. Tax form 1040 ez gov. Tax form 1040 ez 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. Tax form 1040 ez Volunteer fire companies. Tax form 1040 ez   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. Tax form 1040 ez   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). Tax form 1040 ez In this event, your organization should file Form 1023. Tax form 1040 ez Homeowners' associations. Tax form 1040 ez   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. Tax form 1040 ez The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. Tax form 1040 ez Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. Tax form 1040 ez 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. Tax form 1040 ez   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. Tax form 1040 ez It also must show that it does not engage in exterior maintenance of private homes. Tax form 1040 ez   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. Tax form 1040 ez Other organizations. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. Tax form 1040 ez Submit any additional information that may be required, as described in this section. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez In addition, no net earnings of the organization can inure to the benefit of any member. Tax form 1040 ez Composition of membership. Tax form 1040 ez   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. Tax form 1040 ez You must show in your application that your organization has the purposes described in the preceding paragraph. Tax form 1040 ez These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. Tax form 1040 ez Benefits to members. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. Tax form 1040 ez gov. Tax form 1040 ez 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. Tax form 1040 ez For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. Tax form 1040 ez The term harvesting, in this case, includes fishing and related pursuits. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez The following list contains some examples of activities that show an agricultural or horticultural purpose. Tax form 1040 ez Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. Tax form 1040 ez Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. Tax form 1040 ez 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. Tax form 1040 ez Guarding the purity of a specific breed of livestock. Tax form 1040 ez Encouraging improvements in the production of fish on privately owned fish farms. Tax form 1040 ez Negotiating with processors for the price to be paid to members for their crops. Tax form 1040 ez For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. Tax form 1040 ez gov. Tax form 1040 ez 501(c)(6) - Business Leagues, etc. Tax form 1040 ez 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. Tax form 1040 ez For a discussion of the procedure to follow, see chapter 1. Tax form 1040 ez 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). Tax form 1040 ez In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. Tax form 1040 ez It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. Tax form 1040 ez 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. Tax form 1040 ez Trade associations and professional associations are considered business leagues. Tax form 1040 ez Chamber of commerce. Tax form 1040 ez   A chamber of commerce usually is composed of the merchants and traders of a city. Tax form 1040 ez Board of trade. Tax form 1040 ez   A board of trade often consists of persons engaged in similar lines of business. Tax form 1040 ez 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. Tax form 1040 ez   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. Tax form 1040 ez Real estate board. Tax form 1040 ez   A real estate board consists of members interested in improving the business conditions in the real estate field. Tax form 1040 ez It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. Tax form 1040 ez Professional football leagues. Tax form 1040 ez   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). Tax form 1040 ez They are exempt whether or not they administer a pension fund for football players. Tax form 1040 ez General purpose. Tax form 1040 ez   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. Tax form 1040 ez It must be shown that the conditions of a particular trade or the interests of the community will be advanced. Tax form 1040 ez 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. Tax form 1040 ez Line of business. Tax form 1040 ez   This term generally refers either to an entire industry or to all components of an industry within a geographic area. Tax form 1040 ez It does not include a group composed of businesses that market a particular brand within an industry. Tax form 1040 ez Common business interest. Tax form 1040 ez   A common business interest of all members of the organization must be established by the application documents. Tax form 1040 ez Examples. Tax form 1040 ez   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). Tax form 1040 ez Improvement of business conditions. Tax form 1040 ez   Generally, this must be shown to be the purpose of the organization. Tax form 1040 ez 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. Tax form 1040 ez Stock or commodity exchange. Tax form 1040 ez   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). Tax form 1040 ez Legislative activity. Tax form 1040 ez   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. Tax form 1040 ez Deduction not allowed for dues used for political or legislative activities. Tax form 1040 ez   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. Tax form 1040 ez Influencing legislation. Tax form 1040 ez Participating or intervening in a political campaign for, or against, any candidate for public office. Tax form 1040 ez 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). Tax form 1040 ez Communicating directly with certain executive branch officials to try to influence their official actions or positions. Tax form 1040 ez See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. Tax form 1040 ez Exception for local legislation. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez De minimis exception. Tax form 1040 ez   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. Tax form 1040 ez Grass roots lobbying. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. Tax form 1040 ez They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. Tax form 1040 ez   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. Tax form 1040 ez gov. Tax form 1040 ez 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. Tax form 1040 ez In applying for recognition of exemption, you should submit the information described in this section. Tax form 1040 ez Also see chapter 1 for the procedures to follow. Tax form 1040 ez 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. Tax form 1040 ez Discrimination prohibited. Tax form 1040 ez   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. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez Private benefit prohibited. Tax form 1040 ez   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. Tax form 1040 ez For purposes of this requirement, it is not necessary that net earnings be actually distributed. Tax form 1040 ez Even undistributed earnings can benefit members. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Purposes. Tax form 1040 ez   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. Tax form 1040 ez You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. Tax form 1040 ez 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. Tax form 1040 ez Limited membership. Tax form 1040 ez   The membership in a social club must be limited. Tax form 1040 ez 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. Tax form 1040 ez   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. Tax form 1040 ez Corporate members of a club are not the kind of members contemplated by the law. Tax form 1040 ez Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. Tax form 1040 ez See Gross receipts from nonmembership sources , later. Tax form 1040 ez Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez Support. Tax form 1040 ez   In general, your club should be supported solely by membership fees, dues, and assessments. Tax form 1040 ez 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. Tax form 1040 ez Business activities. Tax form 1040 ez   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. Tax form 1040 ez 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. Tax form 1040 ez Facilities open to public. Tax form 1040 ez   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. Tax form 1040 ez This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. Tax form 1040 ez Gross receipts from nonmembership sources. Tax form 1040 ez   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. Tax form 1040 ez Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Gross receipts. Tax form 1040 ez   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. Tax form 1040 ez These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. Tax form 1040 ez Receipts do not include initiation fees and capital contributions. Tax form 1040 ez 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. Tax form 1040 ez Nontraditional activities. Tax form 1040 ez   Activities conducted by a social club need to further its exempt purposes. Tax form 1040 ez Traditional business activities are those that further a social club's exempt purposes. Tax form 1040 ez Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. Tax form 1040 ez Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. Tax form 1040 ez Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. Tax form 1040 ez Fraternity foundations. Tax form 1040 ez   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. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez , purposes. Tax form 1040 ez The procedures to follow in applying for recognition of exemption are described in chapter 1. Tax form 1040 ez 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. Tax form 1040 ez If so, your organization need not apply for individual recognition of exemption. Tax form 1040 ez For more information, see Group Exemption Letter in chapter 1 of this publication. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Lodge system. Tax form 1040 ez   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. Tax form 1040 ez Payment of benefits. Tax form 1040 ez   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. Tax form 1040 ez 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. Tax form 1040 ez   The benefits must be limited to members and their dependents. Tax form 1040 ez If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. Tax form 1040 ez Whole-life insurance. Tax form 1040 ez   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. Tax form 1040 ez Reinsurance pool. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. Tax form 1040 ez S. Tax form 1040 ez , 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. Tax form 1040 ez The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Tax form 1040 ez 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. Tax form 1040 ez Both the application form to file and the information to provide are discussed later under the section that describes your employee association. Tax form 1040 ez Chapter 1 describes the procedures to follow in applying for exemption. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. Tax form 1040 ez 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. Tax form 1040 ez A local employees' association must apply for recognition of exemption by filing Form 1024. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Note. Tax form 1040 ez 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. Tax form 1040 ez Notice requirement. Tax form 1040 ez   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. Tax form 1040 ez The organization gives notice by filing Form 1024. Tax form 1040 ez 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. Tax form 1040 ez 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 . Tax form 1040 ez Membership. Tax form 1040 ez   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. Tax form 1040 ez 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. Tax form 1040 ez   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. Tax form 1040 ez For example, the owner of a business whose employees are members of the association can be a member. Tax form 1040 ez 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. Tax form 1040 ez Employees. Tax form 1040 ez   Employees include individuals who became entitled to membership because they are or were employees. Tax form 1040 ez 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. Tax form 1040 ez   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. Tax form 1040 ez Conversely, membership is involuntary if the designation as a member is due to employee status. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Payment of benefits. Tax form 1040 ez   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. Tax form 1040 ez 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). Tax form 1040 ez Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. Tax form 1040 ez Nondiscrimination requirements. Tax form 1040 ez   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. Tax form 1040 ez 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. Tax form 1040 ez   A plan meets the nondiscrimination requirements only if both of the following statements are true. Tax form 1040 ez 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. Tax form 1040 ez The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. Tax form 1040 ez 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. Tax form 1040 ez   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. Tax form 1040 ez This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. Tax form 1040 ez   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. Tax form 1040 ez The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. Tax form 1040 ez 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). Tax form 1040 ez Excluded employees. Tax form 1040 ez   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. Tax form 1040 ez 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. Tax form 1040 ez Highly compensated individual. Tax form 1040 ez   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. Tax form 1040 ez Go to IRS. Tax form 1040 ez gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. Tax form 1040 ez However, the employer can choose not to have (3) apply. Tax form 1040 ez Aggregation rules. Tax form 1040 ez   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. Tax form 1040 ez 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. Tax form 1040 ez Leased employees are treated as employees of the recipient. Tax form 1040 ez One employee. Tax form 1040 ez   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). Tax form 1040 ez 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. Tax form 1040 ez The trust must be a valid, existing trust under local law and must be evidenced by an executed document. Tax form 1040 ez A conformed copy of the plan of which the trust is a part should be attached to the application. Tax form 1040 ez 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. Tax form 1040 ez Note. Tax form 1040 ez 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. Tax form 1040 ez Notice requirement. Tax form 1040 ez   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. Tax form 1040 ez The organization gives notice by filing Form 1024. Tax form 1040 ez 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. Tax form 1040 ez 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 . Tax form 1040 ez Types of payments. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez Diversion of funds. Tax form 1040 ez   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). Tax form 1040 ez Discrimination in benefits. Tax form 1040 ez   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. Tax form 1040 ez However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. Tax form 1040 ez Prohibited transactions and exemption. Tax form 1040 ez   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. Tax form 1040 ez It must file the claim on Form 1024. Tax form 1040 ez The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. Tax form 1040 ez An authorized principal officer of your organization must make this declaration under the penalties of perjury. Tax form 1040 ez   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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. Tax form 1040 ez 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. Tax form 1040 ez Benevolent life insurance associations of a purely local character and like organizations. Tax form 1040 ez Mutual ditch or irrigation companies and like organizations. Tax form 1040 ez Mutual or cooperative telephone companies and like organizations. Tax form 1040 ez A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. Tax form 1040 ez The information to be provided upon application by each of these organizations is described in this section. Tax form 1040 ez For information as to the procedures to follow in applying for exemption, see chapter 1. Tax form 1040 ez General requirements. Tax form 1040 ez   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. Tax form 1040 ez They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. Tax form 1040 ez Mutual character. Tax form 1040 ez   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. Tax form 1040 ez 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. Tax form 1040 ez The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. Tax form 1040 ez Membership. Tax form 1040 ez   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. Tax form 1040 ez In a stock company, the stockholders are members. Tax form 1040 ez However, a mutual life insurance organization cannot have policyholders other than its members. Tax form 1040 ez Losses and expenses. Tax form 1040 ez   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Distributions of proceeds. Tax form 1040 ez   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. Tax form 1040 ez Such distribution represents a refund in the costs of services rendered to the member. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Mutual or cooperative telephone company. Tax form 1040 ez   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. Tax form 1040 ez Mutual or cooperative electric company. Tax form 1040 ez   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. Tax form 1040 ez   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. Tax form 1040 ez Qualified pole rental. Tax form 1040 ez   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. Tax form 1040 ez   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). Tax form 1040 ez The 85% requirement is applied on the basis of an annual accounting period. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. Tax form 1040 ez Example. Tax form 1040 ez   The books of an organization reflect the following for the calendar year. Tax form 1040 ez 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. Tax form 1040 ez   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. Tax form 1040 ez   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. Tax form 1040 ez   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. Tax form 1040 ez Tax treatment of donations. Tax form 1040 ez   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. Tax form 1040 ez 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. Tax form 1040 ez A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. Tax form 1040 ez Organizations similar to local benevolent life insurance companies. Tax form 1040 ez   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. Tax form 1040 ez 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. Tax form 1040 ez Burial and funeral benefit insurance organization. Tax form 1040 ez   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. Tax form 1040 ez An organization that provides its benefits in the form of supplies and service is not a life insurance company. Tax form 1040 ez Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. Tax form 1040 ez 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. Tax form 1040 ez They can serve noncontiguous areas. Tax form 1040 ez Like organization. Tax form 1040 ez   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. Tax form 1040 ez 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. Tax form 1040 ez A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. Tax form 1040 ez 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. Tax form 1040 ez 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. Tax form 1040 ez Operating a mortuary is not permitted. Tax form 1040 ez 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. Tax form 1040 ez How income can be used. Tax form 1040 ez   You should show that your organization's earnings are or will be used only in one or more of the following ways. Tax form 1040 ez To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. Tax form 1040 ez To buy cemetery property. Tax form 1040 ez 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. Tax form 1040 ez No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. Tax form 1040 ez 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. Tax form 1040 ez Buying cemetery property. Tax form 1040 ez   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. Tax form 1040 ez 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. Tax form 1040 ez   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. Tax form 1040 ez Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not