New IRS Form 1023EZ Helps Small Charities Apply for 501(c)(3) Tax-Exempt Status

Question: Is there a faster way to obtain tax-exempt status for my charity? Answer: Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months. IRS Form 1023 is a 26-page monster and requires on average 100 hours of time to complete for layman and a… [Read More]

What are “directly connected” expenses?

Question: What are “directly connected” expenses? Answer: Deductions incurred solely because of the unrelated business are known as directly connected expenses. These are expenses that wouldn’t be incurred if the unrelated business didn’t exist.  For example, the costs of maintaining a building that’s used solely for a gift shop (the unrelated business) could be a directly… [Read More]

When is Unrelated Business Income Taxable?

If your nonprofit engages in inactivity unrelated to its exempt purpose, you may have Unrelated Business Income that is taxable. Unrelated Business Income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that… [Read More]

What are “dual use” expenses?

Question: What are “dual use” expenses? Answer: If an expense is incurred both to carry on exempt functions of your nonprofit and to conduct an unrelated business, then you have what is known as a dual use expense. For example, let’s assume your nonprofit’s president is paid $80,000 per year. If he devotes 90% of his… [Read More]

Why is a 501(h) election important to nonprofits engaged in lobbying?

Many nonprofits are under the impression that lobbying is forbidden or severely restricted, but that is not entirely the case. The fact is that nonprofits need to be very careful about blindly engaging in lobbying activity, but they may freely engage in lobbying as long as that activity amounts to only an “insubstantial” amount of the… [Read More]