Podcast
Questions and Answers
What distinguishes a nonprofit from a charity?
What distinguishes a nonprofit from a charity?
- Nonprofits can include social clubs and labor unions. (correct)
- Nonprofits cannot provide tax write-offs.
- All nonprofits are charities.
- Charities are not required to file paperwork with the IRS.
All charitable organizations are required to file paperwork with the IRS to provide donors with tax deductions.
All charitable organizations are required to file paperwork with the IRS to provide donors with tax deductions.
True (A)
A _____ is a type of nonprofit corporation that serves the interests of its members, rather than the general public.
A _____ is a type of nonprofit corporation that serves the interests of its members, rather than the general public.
mutual benefit organization
Match the nonprofit types with their descriptions:
Match the nonprofit types with their descriptions:
What significant change regarding nonprofits occurred in 1943?
What significant change regarding nonprofits occurred in 1943?
The 40-page 990 form used by nonprofits is considered a public document.
The 40-page 990 form used by nonprofits is considered a public document.
What is the historical origin of nonprofits tied to?
What is the historical origin of nonprofits tied to?
What is one reason for the existence of nonprofits?
What is one reason for the existence of nonprofits?
Nonprofit organizations are primarily focused on making profits for their owners.
Nonprofit organizations are primarily focused on making profits for their owners.
Who is associated with Agency Theory in the context of nonprofits?
Who is associated with Agency Theory in the context of nonprofits?
The theory that posits nonprofits provide a new contract between themselves and the public is known as _______.
The theory that posits nonprofits provide a new contract between themselves and the public is known as _______.
Match the theorists with their respective theories on nonprofits.
Match the theorists with their respective theories on nonprofits.
Which of the following is NOT a reason for nonprofit existence?
Which of the following is NOT a reason for nonprofit existence?
The non-distribution constraint allows nonprofit organizations to profit at the expense of their mission.
The non-distribution constraint allows nonprofit organizations to profit at the expense of their mission.
What does the Capital Subsidy Theory suggest about nonprofits?
What does the Capital Subsidy Theory suggest about nonprofits?
Chauncey Belknap's theory emphasizes that nonprofits help to relieve the government of its burden. This can be seen as a basis for what?
Chauncey Belknap's theory emphasizes that nonprofits help to relieve the government of its burden. This can be seen as a basis for what?
For-profit entities are excluded from fiscal exemptions because they are more efficient at delivering services.
For-profit entities are excluded from fiscal exemptions because they are more efficient at delivering services.
What are public goods in the context of nonprofit services?
What are public goods in the context of nonprofit services?
The term '________' refers to the idea that nonprofits address societal needs that government fails to meet.
The term '________' refers to the idea that nonprofits address societal needs that government fails to meet.
Who proposed that nonprofits should have exemptions based on their ability to attract substantial public donations?
Who proposed that nonprofits should have exemptions based on their ability to attract substantial public donations?
Which of the following criteria does a purely public charity need to satisfy?
Which of the following criteria does a purely public charity need to satisfy?
Nonprofit corporations are typically allowed to distribute profits to their owners.
Nonprofit corporations are typically allowed to distribute profits to their owners.
What percentage of individuals receiving services must pay a fee not greater than cost for a charity to qualify under the donation criteria?
What percentage of individuals receiving services must pay a fee not greater than cost for a charity to qualify under the donation criteria?
A major advantage of using a Limited Liability Company (LLC) is that it provides a legal shield from __________.
A major advantage of using a Limited Liability Company (LLC) is that it provides a legal shield from __________.
Match the following nonprofit types with their definitions:
Match the following nonprofit types with their definitions:
Which nonprofit organization type is often used for privacy and flexibility in assets?
Which nonprofit organization type is often used for privacy and flexibility in assets?
Partnerships are a common choice for new nonprofit organizations due to their lower tax rates.
Partnerships are a common choice for new nonprofit organizations due to their lower tax rates.
Which legal body can sue a nonprofit corporation in the state of incorporation?
Which legal body can sue a nonprofit corporation in the state of incorporation?
An LLC that combines charitable purposes with profit-making is known as an __________.
An LLC that combines charitable purposes with profit-making is known as an __________.
Match each nonprofit type to its purpose:
Match each nonprofit type to its purpose:
What is a requirement for purely public charities regarding the class of persons they serve?
What is a requirement for purely public charities regarding the class of persons they serve?
Nonprofit corporations have different regulatory oversight compared to charitable trusts.
Nonprofit corporations have different regulatory oversight compared to charitable trusts.
What is the minimum percentage of services that must be provided for free to qualify for charitable status?
What is the minimum percentage of services that must be provided for free to qualify for charitable status?
A general partnership is controlled by partners, where general partners have complete __________.
A general partnership is controlled by partners, where general partners have complete __________.
Which is NOT a characteristic of nonprofit corporations?
Which is NOT a characteristic of nonprofit corporations?
Which of the following types of nonprofit organizations typically operates in the charitable sector?
Which of the following types of nonprofit organizations typically operates in the charitable sector?
Nonprofits can distribute profits to shareholders.
Nonprofits can distribute profits to shareholders.
What document is crucial for establishing a nonprofit's formal organization and legal structure?
What document is crucial for establishing a nonprofit's formal organization and legal structure?
The _______________ is the form used to apply for tax-exempt status under the IRS code for nonprofit organizations.
The _______________ is the form used to apply for tax-exempt status under the IRS code for nonprofit organizations.
Match the type of nonprofit with its description:
Match the type of nonprofit with its description:
Which of the following is NOT a typical consideration when choosing the legal structure of a nonprofit?
Which of the following is NOT a typical consideration when choosing the legal structure of a nonprofit?
The 990 form is used primarily for gathering financial information about tax-exempt organizations.
The 990 form is used primarily for gathering financial information about tax-exempt organizations.
Name one component typically found in the bylaws of a nonprofit organization.
Name one component typically found in the bylaws of a nonprofit organization.
Nonprofits must file IRS forms to maintain _______________ and encourage donations.
Nonprofits must file IRS forms to maintain _______________ and encourage donations.
What is a distinguishing feature of a Limited Dividend Corporation?
What is a distinguishing feature of a Limited Dividend Corporation?
Public benefit corporations are completely unregulated in their operations.
Public benefit corporations are completely unregulated in their operations.
Why may law firms decline to be the registered agent for a nonprofit?
Why may law firms decline to be the registered agent for a nonprofit?
The form submitted by small tax-exempt organizations to demonstrate their exemption is called ______________.
The form submitted by small tax-exempt organizations to demonstrate their exemption is called ______________.
Match the following forms with their primary purpose:
Match the following forms with their primary purpose:
What is the user fee for a 1023 application?
What is the user fee for a 1023 application?
Which of the following statements about 1023-EZ applications is true?
Which of the following statements about 1023-EZ applications is true?
Nonprofit organizations can distribute profits to private shareholders.
Nonprofit organizations can distribute profits to private shareholders.
What must organizations meet to qualify for federal tax exemption under Section 501(c)(3)?
What must organizations meet to qualify for federal tax exemption under Section 501(c)(3)?
The IRS user fee for a 1023-EZ application is _____ dollars.
The IRS user fee for a 1023-EZ application is _____ dollars.
Match the following forms with their corresponding descriptions:
Match the following forms with their corresponding descriptions:
In the case of Airlie Foundation v. Commissioner, what was a potential issue raised?
In the case of Airlie Foundation v. Commissioner, what was a potential issue raised?
The operational test requires an organization to engage primarily in non-exempt activities.
The operational test requires an organization to engage primarily in non-exempt activities.
What does 'Cy Pres' allow regarding unclaimed funds?
What does 'Cy Pres' allow regarding unclaimed funds?
An organization can request an expedited letter to expedite their application, but it must be made in _____ and explain the reason.
An organization can request an expedited letter to expedite their application, but it must be made in _____ and explain the reason.
Match the following organizations with their characteristics:
Match the following organizations with their characteristics:
What is the user fee for filing form 990 EZ?
What is the user fee for filing form 990 EZ?
All expenses of a nonprofit can be directly allocated to exempt activities.
All expenses of a nonprofit can be directly allocated to exempt activities.
Which entity has the authority to determine if an organization qualifies for tax-exempt status?
Which entity has the authority to determine if an organization qualifies for tax-exempt status?
What action might members of a nonprofit take if they are dissatisfied with the leadership?
What action might members of a nonprofit take if they are dissatisfied with the leadership?
Directors of a nonprofit can be held liable for gross negligence under their duty of care.
Directors of a nonprofit can be held liable for gross negligence under their duty of care.
What does the duty of loyalty require directors to avoid?
What does the duty of loyalty require directors to avoid?
A __________ occurs when a nonprofit's activities deviate from its original mission as defined in its governing documents.
A __________ occurs when a nonprofit's activities deviate from its original mission as defined in its governing documents.
In the case of nonpublic information, which of the following describes a conflict of interest?
In the case of nonpublic information, which of the following describes a conflict of interest?
Trustees of charitable hospitals are evaluated under a less stringent standard than corporate directors.
Trustees of charitable hospitals are evaluated under a less stringent standard than corporate directors.
What needs to be disclosed by board members when a conflict of interest arises?
What needs to be disclosed by board members when a conflict of interest arises?
The duty to ensure that the organization's activities align with its stated goals is known as the duty of __________.
The duty to ensure that the organization's activities align with its stated goals is known as the duty of __________.
Match the type of breach of duty with the corresponding description:
Match the type of breach of duty with the corresponding description:
What was a significant outcome of the Nixon v. Lichtenstein case?
What was a significant outcome of the Nixon v. Lichtenstein case?
Members must not vote on matters where they have a personal interest.
Members must not vote on matters where they have a personal interest.
What is necessary for liability insurance for Directors and Officers to be effective?
What is necessary for liability insurance for Directors and Officers to be effective?
What is the primary purpose of Cy Pres in charitable trusts?
What is the primary purpose of Cy Pres in charitable trusts?
Cy Pres can only be applied in cases where the charitable interest is entirely impossible.
Cy Pres can only be applied in cases where the charitable interest is entirely impossible.
List the three elements necessary for invoking Cy Pres.
List the three elements necessary for invoking Cy Pres.
The board of directors has a duty to act in good faith and with a duty of __________ and __________.
The board of directors has a duty to act in good faith and with a duty of __________ and __________.
Which of the following statements best describes the duty of care for directors?
Which of the following statements best describes the duty of care for directors?
A deviation from a charitable trust can change its core objective.
A deviation from a charitable trust can change its core objective.
What is the purpose of the business judgment rule?
What is the purpose of the business judgment rule?
Match the following concepts with their descriptions:
Match the following concepts with their descriptions:
If the organization cannot afford liability insurance, volunteers may be protected under homeowner insurance policies up to __________.
If the organization cannot afford liability insurance, volunteers may be protected under homeowner insurance policies up to __________.
The settlor's specific intentions are always more important than their general charitable intent.
The settlor's specific intentions are always more important than their general charitable intent.
Which of the following duties is NOT typically held by a board of directors?
Which of the following duties is NOT typically held by a board of directors?
What is one major distinction between nonprofit boards and for-profit boards?
What is one major distinction between nonprofit boards and for-profit boards?
What was a key aspect of the In Re Barnes Foundation case?
What was a key aspect of the In Re Barnes Foundation case?
The duties of directors include selecting and __________ the chief executive officer.
The duties of directors include selecting and __________ the chief executive officer.
What must an organization do to avoid adverse legal action regarding donor restrictions?
What must an organization do to avoid adverse legal action regarding donor restrictions?
The UPMIFA allows for the spending of principal funds without restrictions.
The UPMIFA allows for the spending of principal funds without restrictions.
What standard is used by the government to assess if an investment is prudent?
What standard is used by the government to assess if an investment is prudent?
A fiduciary is expected to act __________ in managing funds for nonprofit organizations.
A fiduciary is expected to act __________ in managing funds for nonprofit organizations.
Match the following terms with their definitions:
Match the following terms with their definitions:
In Fitzgerald v. National Rifle Association, what was the court's ruling regarding the board's duty?
In Fitzgerald v. National Rifle Association, what was the court's ruling regarding the board's duty?
The Herzog Foundation ruling states that donors must retain a reversionary interest to enforce gift terms.
The Herzog Foundation ruling states that donors must retain a reversionary interest to enforce gift terms.
What must organizations consider before making investments according to UPMIFA?
What must organizations consider before making investments according to UPMIFA?
The doctrine requiring a prudent approach to managing charitable funds is known as the __________.
The doctrine requiring a prudent approach to managing charitable funds is known as the __________.
What happens if a board fails to act in good faith regarding donor restrictions?
What happens if a board fails to act in good faith regarding donor restrictions?
Charities have become more conservative in their investment strategies in recent years.
Charities have become more conservative in their investment strategies in recent years.
What type of legal actions can the Attorney General take concerning charitable trusts?
What type of legal actions can the Attorney General take concerning charitable trusts?
Match the following legal principles with their descriptions:
Match the following legal principles with their descriptions:
Under the UPMIFA, funds can be spent based on __________ only if they align with the purposes of the institution.
Under the UPMIFA, funds can be spent based on __________ only if they align with the purposes of the institution.
In the context of fiduciary duty, what is the expected role of nonprofit board members?
In the context of fiduciary duty, what is the expected role of nonprofit board members?
What is the maximum percentage a professional fundraiser can charge without being presumed unreasonable?
What is the maximum percentage a professional fundraiser can charge without being presumed unreasonable?
A professional fundraiser is required to disclose how much of the donations go to the charity and how much they retain for themselves.
A professional fundraiser is required to disclose how much of the donations go to the charity and how much they retain for themselves.
What does the Charleston Principles primarily deal with?
What does the Charleston Principles primarily deal with?
The ________ test is used to determine if an online activity intentionally targets a jurisdiction.
The ________ test is used to determine if an online activity intentionally targets a jurisdiction.
Match the following categories of charitable purposes with their descriptions:
Match the following categories of charitable purposes with their descriptions:
Under the operational test, what is considered when determining if a nonprofit is operating consistent with its stated purposes?
Under the operational test, what is considered when determining if a nonprofit is operating consistent with its stated purposes?
All nonprofits are automatically exempt from paying taxes upon registration.
All nonprofits are automatically exempt from paying taxes upon registration.
What do crowd funding platforms often lack clarity on regarding charitable solicitation?
What do crowd funding platforms often lack clarity on regarding charitable solicitation?
A partnership between a for-profit business and a nonprofit organization where profits are shared is called ________ marketing.
A partnership between a for-profit business and a nonprofit organization where profits are shared is called ________ marketing.
Match the types of charitable organizations with their roles:
Match the types of charitable organizations with their roles:
What requirement applies to professional fundraisers under the State Charitable Solicitation Act?
What requirement applies to professional fundraisers under the State Charitable Solicitation Act?
Fundraisers are not allowed to claim they are professionals without proper licensing.
Fundraisers are not allowed to claim they are professionals without proper licensing.
What fundamental right does the regulation of commercial speech come under?
What fundamental right does the regulation of commercial speech come under?
The income generated from charitable activities that do not qualify for tax exemption is known as ______ income.
The income generated from charitable activities that do not qualify for tax exemption is known as ______ income.
Which of the following best describes the operational test for organizations?
Which of the following best describes the operational test for organizations?
An organization can be considered educational even if it advocates a particular position.
An organization can be considered educational even if it advocates a particular position.
What is one key difference between education and propaganda?
What is one key difference between education and propaganda?
Which of the following parties can typically initiate legal action against a charity?
Which of the following parties can typically initiate legal action against a charity?
The revenue procedure includes a bright line test providing that an organization will qualify for exemption if at least _____ percent of its units are occupied by low-income families.
The revenue procedure includes a bright line test providing that an organization will qualify for exemption if at least _____ percent of its units are occupied by low-income families.
Match the revenue ruling to its focus area:
Match the revenue ruling to its focus area:
The Attorney General has exclusive authority to enforce charitable trusts or corporations.
The Attorney General has exclusive authority to enforce charitable trusts or corporations.
What must donors provide to ensure their gift is used as intended?
What must donors provide to ensure their gift is used as intended?
What signifies that an organization is primarily educational in its advocacy?
What signifies that an organization is primarily educational in its advocacy?
Political organizations that meet specific conditions do not have to apply for special tax status.
Political organizations that meet specific conditions do not have to apply for special tax status.
The Attorney General cannot manage charities in their ___ affairs.
The Attorney General cannot manage charities in their ___ affairs.
What is the main goal of the Methodology Test?
What is the main goal of the Methodology Test?
Match the following legal provisions with their descriptions:
Match the following legal provisions with their descriptions:
Under which of the following conditions might a private party have standing to intervene in charity-related legal matters?
Under which of the following conditions might a private party have standing to intervene in charity-related legal matters?
Organizations that do not operate day to day in businesses are considered _____ for their charitable activities.
Organizations that do not operate day to day in businesses are considered _____ for their charitable activities.
Match the test or analysis to its description:
Match the test or analysis to its description:
Only the Attorney General is allowed to sue on behalf of charitable organizations.
Only the Attorney General is allowed to sue on behalf of charitable organizations.
Which of the following is NOT an indicator of educational activity?
Which of the following is NOT an indicator of educational activity?
What is meant by 'negative accountability' in nonprofit organizations?
What is meant by 'negative accountability' in nonprofit organizations?
Organizations advocating only one viewpoint are likely considered educational.
Organizations advocating only one viewpoint are likely considered educational.
Charitable contributions must be clearly documented to ensure they follow the donor's _____.
Charitable contributions must be clearly documented to ensure they follow the donor's _____.
What is meant by 'public interest' in the context of tax exemption?
What is meant by 'public interest' in the context of tax exemption?
What is a common reason for the AG to decline to permit a public donor standing in legal matters against a charity?
What is a common reason for the AG to decline to permit a public donor standing in legal matters against a charity?
The Uniform Trust Code allows donors to sue if their gift is not used as intended.
The Uniform Trust Code allows donors to sue if their gift is not used as intended.
The methodology test was challenged in the case of _____ v. Commissioner.
The methodology test was challenged in the case of _____ v. Commissioner.
What issue arose in the Robertson Family and Princeton case?
What issue arose in the Robertson Family and Princeton case?
Parties lacking a discrete injury cannot challenge the government's failure to enforce ___ against charities.
Parties lacking a discrete injury cannot challenge the government's failure to enforce ___ against charities.
What is the primary purpose that a tax-exempt organization must serve?
What is the primary purpose that a tax-exempt organization must serve?
Match the following nonprofit accountability types with their definitions:
Match the following nonprofit accountability types with their definitions:
Private foundations primarily receive funding from the general public.
Private foundations primarily receive funding from the general public.
What is a potential consequence if a nonprofit does not comply with solicitation regulations?
What is a potential consequence if a nonprofit does not comply with solicitation regulations?
What is a key criterion for an organization to qualify as a 501(c)(3) entity?
What is a key criterion for an organization to qualify as a 501(c)(3) entity?
Public charities must have public support of at least ______ percent of their total support.
Public charities must have public support of at least ______ percent of their total support.
Match the IRS tax-exempt categories with their descriptions:
Match the IRS tax-exempt categories with their descriptions:
Who qualifies as a 'disqualified person'?
Who qualifies as a 'disqualified person'?
A recreational organization can fall under the category of 501(c)(3).
A recreational organization can fall under the category of 501(c)(3).
What percentage of units must be occupied by residents who are classified as 'very-low income'?
What percentage of units must be occupied by residents who are classified as 'very-low income'?
What does the public support test entail for public charities?
What does the public support test entail for public charities?
A 'qualified disaster' can only result from natural occurrences.
A 'qualified disaster' can only result from natural occurrences.
A charity's percentage of investment income may not exceed ______ percent of the total for it to qualify under the Exempt Function Income Test.
A charity's percentage of investment income may not exceed ______ percent of the total for it to qualify under the Exempt Function Income Test.
What is the primary purpose of a land trust?
What is the primary purpose of a land trust?
Match the following support tests with their requirements:
Match the following support tests with their requirements:
A __________ is a nonprofit organization that acquires and maintains ecologically significant undeveloped land.
A __________ is a nonprofit organization that acquires and maintains ecologically significant undeveloped land.
What type of organizations primarily serve educational purposes?
What type of organizations primarily serve educational purposes?
Civil disobedience is considered an educational purpose for tax-exempt organizations.
Civil disobedience is considered an educational purpose for tax-exempt organizations.
Match the following Rev.Rulings with their descriptions:
Match the following Rev.Rulings with their descriptions:
Which of the following is a requirement for providing disaster relief payments?
Which of the following is a requirement for providing disaster relief payments?
What is the threshold for a 'substantial contributor' to a private foundation?
What is the threshold for a 'substantial contributor' to a private foundation?
An organization is not considered a public charity if it is primarily __________, as opposed to serving the general public.
An organization is not considered a public charity if it is primarily __________, as opposed to serving the general public.
Organizations organized for religious purposes must file Form 1023 to qualify for tax-exempt status.
Organizations organized for religious purposes must file Form 1023 to qualify for tax-exempt status.
What does the term 'Passive Recreation' refer to?
What does the term 'Passive Recreation' refer to?
Charities are not allowed to make __________ transfers of funds.
Charities are not allowed to make __________ transfers of funds.
Match the following assistance types with their descriptions:
Match the following assistance types with their descriptions:
Which of the following reflects the required compensation for attorneys under Public Interest Legal Services?
Which of the following reflects the required compensation for attorneys under Public Interest Legal Services?
Low-income individuals do not qualify for credit counseling unless they are totally bankrupt.
Low-income individuals do not qualify for credit counseling unless they are totally bankrupt.
In the case of Bob Jones University, the organization could not qualify for tax-exempt status due to conflicts with what?
In the case of Bob Jones University, the organization could not qualify for tax-exempt status due to conflicts with what?
Assistance designation must be based on an objective determination by an __________ committee.
Assistance designation must be based on an objective determination by an __________ committee.
Flashcards
Nonprofit vs. Charity
Nonprofit vs. Charity
Not all nonprofits are charities. Charities are a specific type of nonprofit focused on providing public good or relief from distress, with specific IRS requirements.
501(c)(3) Public Charity
501(c)(3) Public Charity
A type of recognized charity under U.S. tax code, specifically for public good and community support.
501(c)(3) School Charity
501(c)(3) School Charity
Another recognized (c)(3) charity. These are educational institutions.
Public Benefit Nonprofit
Public Benefit Nonprofit
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Eleemosynary
Eleemosynary
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IRS Form 990
IRS Form 990
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(c)(7) Social Clubs
(c)(7) Social Clubs
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Mutual Benefit Nonprofit
Mutual Benefit Nonprofit
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Nonprofit vs. Tax-exempt
Nonprofit vs. Tax-exempt
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Nonprofit Rationales
Nonprofit Rationales
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Hansmann's Agency Theory
Hansmann's Agency Theory
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Contract Failure (Nonprofits)
Contract Failure (Nonprofits)
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Capital Subsidy Theory
Capital Subsidy Theory
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Non-distribution Constraint
Non-distribution Constraint
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Pluralism in Nonprofits
Pluralism in Nonprofits
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Public Goods
Public Goods
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For-profit Charities
For-profit Charities
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Income Measurement Theory
Income Measurement Theory
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Donative Theory
Donative Theory
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Altruism Theory
Altruism Theory
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Market Failure
Market Failure
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Government Failure
Government Failure
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Nonprofit Organization Types
Nonprofit Organization Types
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Charitable Trust
Charitable Trust
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Nonprofit Corporation
Nonprofit Corporation
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Limited Liability Company (LLC)
Limited Liability Company (LLC)
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LLC for Advocacy
LLC for Advocacy
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L3C (Low-Profit Limited Liability Company)
L3C (Low-Profit Limited Liability Company)
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Partnership
Partnership
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Trustees
Trustees
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Directors
Directors
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Shareholders
Shareholders
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Members
Members
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Public Information
Public Information
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Operating Agreement
Operating Agreement
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Tax-Exempt Status
Tax-Exempt Status
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Nonprofit Compliance
Nonprofit Compliance
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Articles of Incorporation
Articles of Incorporation
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Registered Agent
Registered Agent
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Nonprofit with Stock?
Nonprofit with Stock?
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Membership Rights
Membership Rights
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Teleconferencing Requirements
Teleconferencing Requirements
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Subverters
Subverters
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Personal Liability for Nonprofits
Personal Liability for Nonprofits
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501(c)(3) Charitable Organizations
501(c)(3) Charitable Organizations
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501(c)(8) Social and Recreational Clubs
501(c)(8) Social and Recreational Clubs
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What is a 1023?
What is a 1023?
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Disregarded Entity, Partnership, C Corporation, or S Corporation
Disregarded Entity, Partnership, C Corporation, or S Corporation
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What is a 1023-EZ?
What is a 1023-EZ?
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Nonprofit Constraint: No Equity
Nonprofit Constraint: No Equity
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Expedited Letter Request
Expedited Letter Request
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Bylaw Components
Bylaw Components
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Annual Information Returns
Annual Information Returns
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Form 990
Form 990
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Form 990-P
Form 990-P
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Lawful Purpose for a Nonprofit
Lawful Purpose for a Nonprofit
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Non-commercial Purpose
Non-commercial Purpose
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What was the Airlie Foundation case about?
What was the Airlie Foundation case about?
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Operational Test for Non-profit Activities
Operational Test for Non-profit Activities
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BSW Group Case
BSW Group Case
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Universities as Non-profits
Universities as Non-profits
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Rev Rul 75-384
Rev Rul 75-384
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Cy Pres
Cy Pres
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Cy Pres Doctrine
Cy Pres Doctrine
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Cy Pres Application
Cy Pres Application
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Cy Pres Elements
Cy Pres Elements
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Cy Pres Policy
Cy Pres Policy
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Deviation Doctrine
Deviation Doctrine
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Deviation vs Cy Pres
Deviation vs Cy Pres
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Board of Directors' Roles
Board of Directors' Roles
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Duty of Care for Directors
Duty of Care for Directors
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Business Judgement Rule
Business Judgement Rule
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Void Business Judgement Rule
Void Business Judgement Rule
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PA Board Duty of Inquiry
PA Board Duty of Inquiry
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Board Duty of Attendance
Board Duty of Attendance
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Volunteer Protection Insurance
Volunteer Protection Insurance
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Member-Based Org Voting
Member-Based Org Voting
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Dissolution of Membership Orgs
Dissolution of Membership Orgs
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Duty of Care (Nonprofit)
Duty of Care (Nonprofit)
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George Pepperdine Foundation Case
George Pepperdine Foundation Case
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Stern v. Lucy Webb Hayes Case
Stern v. Lucy Webb Hayes Case
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Mission Drift
Mission Drift
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Directors' & Officers' Liability Insurance
Directors' & Officers' Liability Insurance
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Duty of Loyalty (Nonprofit)
Duty of Loyalty (Nonprofit)
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Interested Transactions
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Usurpation of Business Opportunity
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Insider Advantages
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Competing with the Organization
Competing with the Organization
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Nixon v. Lichtenstein Case
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Conflict of Interest (Nonprofit)
Conflict of Interest (Nonprofit)
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Disclosure of Conflict of Interest
Disclosure of Conflict of Interest
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Annual Record of Conflicts
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Board Member Responsibilities in Conflicts
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Commercial Speech Regulation
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Content-Based Regulation
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Intermediate Scrutiny
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Charleston Principles
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Sliding Scale Test (Zippo)
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Calder or 'Effects' Test
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Crowd Funding and Charities
Crowd Funding and Charities
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Cause-Related Marketing
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501(c)(3) Tax Exemption
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Community Benefit Standard
Community Benefit Standard
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Organizational Test (501(c)(3))
Organizational Test (501(c)(3))
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Operational Test (501(c)(3))
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Incorporation to Filing Coverage (501(c)(3))
Incorporation to Filing Coverage (501(c)(3))
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IHC Health Plans, Inc. v. Commissioner
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Standing
Standing
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Organizational Test
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Operational Test
Operational Test
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Vagueness Analysis
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Full and Fair Exposition Test
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Methodology Test
Methodology Test
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Education vs. Propaganda
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Political Organizations (Section 527)
Political Organizations (Section 527)
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Tax Exemption and Public Policy
Tax Exemption and Public Policy
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Revenue Ruling 74-587
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Revenue Ruling 70-585
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Bright Line Test (Housing)
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Nonprofit Advocacy
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Public Charity
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School Charity
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Land Trusts
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Rev. Ruling 76-204
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Rev. Ruling 78-384
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Public Interest Legal Services
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Rev.Pro 92-59
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Qualified Disaster Relief Payment
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Distressed Test
Distressed Test
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Charitable Class of Beneficiaries
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Employer-Related Assistance
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Credit Counseling
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Internal Rev.Code 501(q)
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Religious Schools
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Bob Jones University Case
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Attorney General's Role in Charity Oversight
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Standing to Sue a Charity
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What is a 'Special Interest'?
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Can Anyone Sue a Charity?
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Donors' Rights to Sue Charities
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Donative Intent
Donative Intent
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Naming Rights Disputes
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Protection of Donor-Restricted Gifts
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Types of Nonprofit Accountability
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Charitable Solicitation Acts
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Who Regulates Charitable Solicitations?
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Multistate Charitable Solicitation
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Federal Impact on Charitable Misconduct
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Excise Taxes for Improper Charitable Giving
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Enforcement Challenges in Nonprofits
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501(c)(3)
501(c)(3)
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Private Foundation
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Public Support Test
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509(a)(1)
509(a)(1)
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Disqualified Person
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Tax Exemption
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Educational Orgs
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Non-Discriminatory Statement
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Big Mama Rag v. United States
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Donor Restricted Gifts
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Prudent Person Standard
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UMIFA
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UPMIFA
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Fiduciary Duty
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Attorney General's Role
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Fitzgerald v. National Rifle Association
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Herzog Foundation
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Duty of Care
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Duty of Loyalty
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Conflict of Interest
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Study Notes
Nonprofit Organizations: Structure, Function, and Regulation
- Nonprofits are distinct from charities; social clubs, labor unions, and homeowner associations are examples of nonprofits that aren't charities.
- Charities (specifically 501(c)(3) organizations) are required to file paperwork with the IRS, creating a record for donors' tax breaks.
- State-specific requirements exist for establishing a charity: Pennsylvania uses Articles of Incorporation, while New Jersey uses a Certificate of Incorporation.
- Two key categories of 501(c)(3) charities exist: public charities (509(a)(1)) and schools (509(a)(2)).
- Public service organizations rely on community support and donations, and are a focus of assistance.
- Other types of charities (501(c) entities) include social clubs (501(c)(7)), and business chambers (501(c)(6)), which are voluntary associations for mutual benefit.
- Historical context traces charitable organizations back to English charitable trusts, influencing American practice even after the Revolution.
- The modern 501(c)(3) structure emerged around the early 1900s, coinciding with the 16th Amendment's introduction of income tax.
- The need for oversight of charities grew, leading to annual reporting requirements, like Form 990.
- Nonprofit vs. tax-exempt status are not the same.
Rationales for Nonprofit Existence
- Historical role: Nonprofits fill gaps in social support, evolving as societies move beyond close-knit family structures.
- Market failure: Nonprofits address collective goods that individuals can't afford but prefer.
- Government failure: Nonprofits address needs government can't or won't fulfill.
- Pluralism/freedom: Nonprofits promote diverse viewpoints and options for the public good.
- Solidarity: Nonprofits foster shared action and collective identities.
Theories About Nonprofits
- Hansmann's Agency Theory/Contract Failure: Nonprofits address market failures in service delivery (third-party payments, public goods, complex personal services) through specialized contracts, emphasizing nondistribution constraints.
- Belknap emphasized nonprofit exemptions relieve government burdens.
- Bittker's Income Measurement Theory: Tax exemptions are justified because measuring nonprofit income accurately is difficult, especially for donations-based services.
- Hall and Colombo's Donative Theory: Nonprofits that attract significant donations are best suited for tax-exempt status.
- Atkinson's Altruism Theory: Nonprofits are rewarded for prioritizing altruistic missions over profits.
- Posner and Malani advocate for for-profit, benefit corporations in lieu of nonprofits claiming higher cost efficiency.
- Leff counters, emphasizing that government oversight is necessary to ensure nonprofits serve public good.
Types of Nonprofit Organizations
- Nonprofit corporations: Focus on charitable purposes without distributing profits.
- Charitable trusts: Established for specific charitable purposes, overseen by trustees.
- LLCs: Provide flexibility for businesses, but are not automatically tax-exempt.
- L3Cs (Low-Profit Limited Liability Companies): Hybrid entities that seek social impact and can generate profits .
- Partnerships: Often used for profit-making, but with complexities for taxation
- Unincorporated associations: A broader category of groups, less formally structured.
Legal Structure & Requirements
- Articles of incorporation (PA), certificate of incorporation (other states) are key documents in forming nonprofits.
- Nonprofits cannot issue stock to define membership of shareholders.
- Members may be given memberships without voting rights.
- Specific procedures must be followed for tax-exempt status (Form 1023 application).
- Annual returns (Form 990) must be filed.
- Various forms of charitable solicitation acts are regulated according to states.
Duties and Liabilities of Nonprofit Boards
- Duty of due care: Directors must act diligently, following the best interests of the organization. This includes appropriate procedures for decision-making and assessing potential conflicts of interest.
- Duty of obedience: Directors must act within the scope of the organization's mission and bylaws.
- Duty of loyalty: Directors must act in the best interests of the organization, avoiding self-dealing, conflicts of interest, and improper use of corporate assets.
Enforcement Mechanisms
- Attorney General oversight: Plays a critical role in ensuring nonprofits operate in the public interest.
- Standing for other parties: When the AG is not involved, specific parties with a sufficient interest may initiate legal actions.
- Donor enforcement: Donors generally lack direct enforcement power compared to the AG.
Specific Nonprofits and Policy Issues
- Educational institutions, churches, environmental organizations, hospitals, disaster relief organizations and others face unique considerations and regulatory standards relating to tax-exempt status
- The organizational and operational test are criteria.
Other Key Concepts
- Cy pres doctrine: Permits courts to modify a charitable trust or foundation's purpose when the original purpose is impossible or impractical in order to maintain the spirit of the donor’s intent.
- Deviation: Allows modifications to the administrative aspects of an organization without changing the core charitable purpose.
- Community benefit standard: Specific criteria apply to hospitals, including their service of the wider community
- Public support tests: Nonprofits must have a significant portion of their support from the general public or government.
- Cause-related marketing: Companies and nonprofits can enter into partnerships to achieve mutually beneficial marketing and financial goals.
- Various tax rules, exemptions, and regulations for specific organizations are examined as well as their exemptions.
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Description
Explore the structure, function, and regulation of nonprofit organizations, distinguishing them from charities. Learn about the filing requirements for different states and the types of 501(c)(3) organizations, including public charities and schools. This quiz will enhance your understanding of the historical context and current legal landscape of nonprofit entities.
