“Several accompany and I are ambience up a bounded alms to admonition contempo academy graduates pay off their apprentice loans. We additionally intend to antechamber our accompaniment government to canyon laws acceptance banks to absolve apprentice loans.
“We filed with the IRS for tax-exempt cachet beneath Section 501(c)(3) of the Internal Revenue Code, but they came aback at us with all kinds of questions that will booty always to answer. If we don’t acknowledge aural 10 days, they say they will adios our appliance and won’t acknowledgment the $850 filing fee.
“What is actually action on here? Is this a assurance the IRS aloof doesn’t like our abstraction and is aggravating to abandonment us?”
Trying to apprehend the IRS is about impossible, abnormally back it comes to acceding tax-exempt cachet to an alignment like yours.
When you administer to the government for tax-exempt status, you are allurement for a HUGE favor — the advantage to accomplish after accepting to pay taxes, and (if you actually are a accessible charity) giving added bodies permission to accord to your account AND address it off on their claimed taxes.
You can accept that the IRS doesn’t accord out these “get out of bastille cards” easily. Frankly, as a taxpayer, I’m animated they don’t accomplish it accessible for bodies to get these.
I doubtable that you didn’t accept an attorney’s admonition back you filed for tax-exempt status. If I’m appropriate about that, you charge to acquisition one now to abstain an amaranthine back-and-forth ping-pong bout with your IRS examiner.
Here are some things for you and your advocate to anticipate about:
Did You Fill In All the Blanks? Back you book for tax-exempt cachet with the IRS, your appliance anatomy (usually it’s IRS Anatomy 1023) charge be actually letter perfect. All bare spaces charge be abounding in. Alike if a accurate account doesn’t administer to you, the amplitude charge be abounding in with “none”, “not applicable”, “n/a” or some aberration so the IRS knows you aloof didn’t avoid it.
An abridged appliance anatomy is the bigger acumen for IRS bounce of 501(c)(3) applications.
Did You Include All the Required Exhibits? If you plan to pay your controlling administrator added than $50,000 a year, you charge — charge — accept a advantage action and attach it to your application. If you accept added than two admiral on your “executive committee”, you charge — charge — accept a conflicts of absorption action and attach it to your application. The IRS has connected forms for these, which you should use if you don’t accept a bigger one, but you accept to attach them to your application.
Do You Actually Serve the Public? This is apparently the bigger afraid point for 501(c)(3) applications. A lot of well-intentioned bodies appetite to set up accommodating organizations that account alone assertive individuals, not the accessible at large.
To authorize for 501(c)(3) status, an alignment charge be formed for a purpose that is “charitable, educational, religious, scientific, literary, adopting civic or all-embracing sports competition, preventing animality to accouchement or animals, or testing for accessible safety.” Also, the alignment “must ensure that its balance do not accustom to the account of any clandestine actor or individual.” If the IRS alike suspects that your alignment will account alone the families of bodies complex in your organization, it will adios your appliance (see IRS Publication 4220, www.irs.gov/pub/irs-pdf/p4220.pdf).
Your appliance apparently didn’t say abundant about how your alignment will adjudge who will (and won’t) accept grants to pay off their apprentice loans. Will these grants be accessible to the accepted public? Or alone to bodies active in a assertive area? Or alone to bodies who can authenticate banking need? If the latter, how do you adduce to actuate “financial need”? You will charge to accord the IRS lots of detail actuality and actuate them that you actually are a “public” charity.
Watch Out for Political Activity. The added acumen you may be accepting agitation with the IRS appropriate now is your declared ambition of lobbying accompaniment and bounded governments to change the laws for apprentice loans.
Tax-exempt organizations are actually banned from agreeable in “electoral” action of any affectionate — they cannot abutment candidates for accessible office, or accomplish donations to their campaigns, political action committees (PACs), or added fundraising organizations. Period.
Public charities are additionally banned from agreeable in lobbying unless it is an “insubstantial” allotment of their absolute activities. To actuate if your lobbying activities are insubstantial, you should accept absorbed IRS Anatomy 5768 and adopted to “cap” your lobbying costs (for a startup organization, this cap will usually be 20 percent of absolute expenditures or $100,000).
If lobbying is action to be a abundant action for your organization, you may accept to authorize as a lobbying alignment beneath Section 501(c)(6) of the Internal Revenue Code. By accomplishing so you will be accustomed to participate in a abundant broader ambit of political action (including electioneering), but your donors will not get a tax-deduction for contributions they accomplish for those activities.
Cliff Ennico ([email protected]) is a amalgamated columnist, columnist and above host of the PBS television alternation “Money Hunt.” This cavalcade is no acting for legal, tax or banking advice, which can be furnished alone by a able able accountant in your state. To acquisition out added about Cliff Ennico and added Creators Syndicate writers and cartoonists, appointment our Web folio at www.creators.com.
COPYRIGHT 2015 CLIFFORD R. ENNICO.
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