An introduction to the organizational and tax aspects of operating under the Internal Revenue Code as a Tax Exempt Organization.

2. An Introduction to Exempt Organizations Brian T. Whitlock, CPA, JD, LLM

23. Permitted Activities Activity 501(c)(3) 501(c)(6) PAC Member Services Yes Yes N/A Research Yes Yes N/A Education Yes Yes N/A Certification No Yes N/A Advocacy – Legislative Limited Yes Limited Advocacy - Candidate No Limited, taxed at 35% Yes, only interest income is taxed Advocacy – Public (not related to legislation or election of candidates) YES YES Limited

34. The Public Support Test This Test is used to determine whether a charitable organization under Section 501(c)(3) is taxed as a public charity or a private foundation

36. Section 170 Deduction Limit for Public Charity Type of Property Contributed Amount Deductible Percentage of AGI Limitation Cash Cost 50% Ordinary Income Property Cost 50% STCG Property Cost 50% LTCG Property Fair Market Value 30% LTCG Property, with election to use cost Cost 50% Tangible Property, unrelated use Cost 50%

37. Section 170 Deduction Limit for Private Foundation Type of Property Contributed Amount Deductible Percentage of AGI Limitation Cash Cost 30% Ordinary Income Property Cost 30% STCG Property Cost 30% LTCG Property Cost 20% LTCG Property (qualified appreciated stock – i.e., marketable securities) Fair Market Value 20% Tangible Property, unrelated use Cost 20%

38. Private Inurement If private inurement exists an organization will be subject to Intermediate Sanctions

41. Substantiation of Charitable Contributions Both Donors and Donees need to consistently report contributions

44. Lobbying Activities Depending on the type of organization lobbying activities may be engaged in, subject to tax

50. The Unrelated Business Income Tax (UBIT) Exempt Organizations are subject to tax if they engage in activities outside of the exempt purpose