Maintaining Exemption

There's more to tax issues of non-profit organizations that just obtaining exemption. Non-profit organizations are required to be organized and operated for one or more exempt purposes. The Service has denied tax-exempt status to at least one organization that was organized for the appropriate purposes, but was not operated at all. It was organized to serve as a "shelf" organization to be activated in the future. The Service ruled privately that the organization could never maintain tax-exempt status if it was not operated.

Maintaining tax-exempt status involves being operated for tax-exempt purposes, maintaining the appropriate private foundation status, avoiding conflicts of interests with disqualified persons, paying reasonable compensation to officers, directors, employees, and independent contractors, making all required reports and disclosures, making all required distributions or expenditures, avoiding unrelated business taxable income, exercising appropriate oversight of affiliates, exercising fiduciary responsibility over the organization's assets, avoiding restricted (lobbying) or prohibited (participation in a political campaign) activities, and otherwise operating within the guidelines by which the organization was granted exemption. Given increased oversight by Congress, IRS, the states attorney general, "watchdog" organizations, the media, and the public at-large maintaining tax-exempt status is no mean task. Rather, it's a challenge.

We are familiar with all of these issues and keep our clients informed of changes in legislative, judicial, and administrative law that affect their favored status as tax-exempt, non-profit organizations. Because of the importance of tax-exempt organizations to our nation and our people, it's a task we relish.

©2008 Ronnie C. McClure, PhD, CPA