Nonprofit Organizations Overview
175 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

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.

    True

    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:

    <p>501(c)(3) = Public benefit charities 501(c)(6) = Business chambers 501(c)(7) = Social clubs Eleemosynary = Charities aiding individual distress</p> Signup and view all the answers

    What significant change regarding nonprofits occurred in 1943?

    <p>The collection of information through form 990.</p> Signup and view all the answers

    The 40-page 990 form used by nonprofits is considered a public document.

    <p>True</p> Signup and view all the answers

    What is the historical origin of nonprofits tied to?

    <p>Charitable Trusts from England</p> Signup and view all the answers

    What is one reason for the existence of nonprofits?

    <p>Filled gaps due to market failure</p> Signup and view all the answers

    Nonprofit organizations are primarily focused on making profits for their owners.

    <p>False</p> Signup and view all the answers

    Who is associated with Agency Theory in the context of nonprofits?

    <p>Henry B. Hansmann</p> Signup and view all the answers

    The theory that posits nonprofits provide a new contract between themselves and the public is known as _______.

    <p>Contract Failure</p> Signup and view all the answers

    Match the theorists with their respective theories on nonprofits.

    <p>Henry B. Hansmann = Agency Theory Boris Bittker = Income Measurement Theory Mark Hall and John Colombo = Donative Theory Robert Atkinson = Altruism Theory</p> Signup and view all the answers

    Which of the following is NOT a reason for nonprofit existence?

    <p>Maximizing profits for investors</p> Signup and view all the answers

    The non-distribution constraint allows nonprofit organizations to profit at the expense of their mission.

    <p>False</p> Signup and view all the answers

    What does the Capital Subsidy Theory suggest about nonprofits?

    <p>Nonprofits receive exemptions due to their inability to raise capital through equity.</p> Signup and view all the answers

    Chauncey Belknap's theory emphasizes that nonprofits help to relieve the government of its burden. This can be seen as a basis for what?

    <p>501(c)(3) exemption</p> Signup and view all the answers

    For-profit entities are excluded from fiscal exemptions because they are more efficient at delivering services.

    <p>False</p> Signup and view all the answers

    What are public goods in the context of nonprofit services?

    <p>Goods or services that are difficult to provide exclusively to one user and prevent others from enjoying.</p> Signup and view all the answers

    The term '________' refers to the idea that nonprofits address societal needs that government fails to meet.

    <p>Government Failure</p> Signup and view all the answers

    Who proposed that nonprofits should have exemptions based on their ability to attract substantial public donations?

    <p>Mark Hall and John Colombo</p> Signup and view all the answers

    Which of the following criteria does a purely public charity need to satisfy?

    <p>Advance a charitable purpose</p> Signup and view all the answers

    Nonprofit corporations are typically allowed to distribute profits to their owners.

    <p>False</p> Signup and view all the answers

    What percentage of individuals receiving services must pay a fee not greater than cost for a charity to qualify under the donation criteria?

    <p>10%</p> Signup and view all the answers

    A major advantage of using a Limited Liability Company (LLC) is that it provides a legal shield from __________.

    <p>tort liability</p> Signup and view all the answers

    Match the following nonprofit types with their definitions:

    <p>Charitable trusts = Established for a charitable purpose with stricter legal oversight Nonprofit corporations = Formed for purposes like charity, education, or religion LLCs = Flexible structure for any lawful business including mission-driven L3Cs = Hybrid entity for charitable and profit motives</p> Signup and view all the answers

    Which nonprofit organization type is often used for privacy and flexibility in assets?

    <p>Limited Liability Companies (LLCs)</p> Signup and view all the answers

    Partnerships are a common choice for new nonprofit organizations due to their lower tax rates.

    <p>False</p> Signup and view all the answers

    Which legal body can sue a nonprofit corporation in the state of incorporation?

    <p>The attorney general</p> Signup and view all the answers

    An LLC that combines charitable purposes with profit-making is known as an __________.

    <p>L3C</p> Signup and view all the answers

    Match each nonprofit type to its purpose:

    <p>Nonprofit organizations = Formed for charitable or educational purposes Corporations = Created for profit-making activities Charitable trusts = Established for public good Partnerships = Typically created for profit ventures</p> Signup and view all the answers

    What is a requirement for purely public charities regarding the class of persons they serve?

    <p>Benefit a substantial and indefinite class</p> Signup and view all the answers

    Nonprofit corporations have different regulatory oversight compared to charitable trusts.

    <p>True</p> Signup and view all the answers

    What is the minimum percentage of services that must be provided for free to qualify for charitable status?

    <p>20%</p> Signup and view all the answers

    A general partnership is controlled by partners, where general partners have complete __________.

    <p>control</p> Signup and view all the answers

    Which is NOT a characteristic of nonprofit corporations?

    <p>Controlled by shareholders</p> Signup and view all the answers

    Which of the following types of nonprofit organizations typically operates in the charitable sector?

    <p>501(c)(3)</p> Signup and view all the answers

    Nonprofits can distribute profits to shareholders.

    <p>False</p> Signup and view all the answers

    What document is crucial for establishing a nonprofit's formal organization and legal structure?

    <p>Articles of incorporation</p> Signup and view all the answers

    The _______________ is the form used to apply for tax-exempt status under the IRS code for nonprofit organizations.

    <p>Form 1023</p> Signup and view all the answers

    Match the type of nonprofit with its description:

    <p>501(c)(3) = Charitable organizations that can receive tax-deductible donations 501(c)(7) = Social clubs for recreational purposes 501(c)(8) = Organizations that provide benefits to their members and do not allow tax-deductible donations L3C = Low-profit limited liability company focused on social mission without profit distribution</p> Signup and view all the answers

    Which of the following is NOT a typical consideration when choosing the legal structure of a nonprofit?

    <p>Personal profit potential</p> Signup and view all the answers

    The 990 form is used primarily for gathering financial information about tax-exempt organizations.

    <p>True</p> Signup and view all the answers

    Name one component typically found in the bylaws of a nonprofit organization.

    <p>Board of directors</p> Signup and view all the answers

    Nonprofits must file IRS forms to maintain _______________ and encourage donations.

    <p>tax-exempt status</p> Signup and view all the answers

    What is a distinguishing feature of a Limited Dividend Corporation?

    <p>It does not share profits.</p> Signup and view all the answers

    Public benefit corporations are completely unregulated in their operations.

    <p>False</p> Signup and view all the answers

    Why may law firms decline to be the registered agent for a nonprofit?

    <p>Liability concerns</p> Signup and view all the answers

    The form submitted by small tax-exempt organizations to demonstrate their exemption is called ______________.

    <p>Form 990-N</p> Signup and view all the answers

    Match the following forms with their primary purpose:

    <p>Form 1023 = Application for 501(c)(3) exemption Form 990 = Annual reporting for tax-exempt organizations Form 990-T = Tax payments for unrelated business income Form 990-EZ = Simplified reporting for smaller organizations</p> Signup and view all the answers

    What is the user fee for a 1023 application?

    <p>$600</p> Signup and view all the answers

    Which of the following statements about 1023-EZ applications is true?

    <p>The user fee is $275.</p> Signup and view all the answers

    Nonprofit organizations can distribute profits to private shareholders.

    <p>False</p> Signup and view all the answers

    What must organizations meet to qualify for federal tax exemption under Section 501(c)(3)?

    <p>They must be organized and operated exclusively for exempt purposes.</p> Signup and view all the answers

    The IRS user fee for a 1023-EZ application is _____ dollars.

    <p>275</p> Signup and view all the answers

    Match the following forms with their corresponding descriptions:

    <p>990 = Annual information return for larger nonprofits 990 EZ = Simplified tax form for smaller nonprofits 990-N = e-Postcard for very small organizations 990-P = Return for private foundations</p> Signup and view all the answers

    In the case of Airlie Foundation v. Commissioner, what was a potential issue raised?

    <p>Improper financial benefits to Airlie insiders.</p> Signup and view all the answers

    The operational test requires an organization to engage primarily in non-exempt activities.

    <p>False</p> Signup and view all the answers

    What does 'Cy Pres' allow regarding unclaimed funds?

    <p>It allows the courts to award unclaimed funds to a nonprofit organization.</p> Signup and view all the answers

    An organization can request an expedited letter to expedite their application, but it must be made in _____ and explain the reason.

    <p>writing</p> Signup and view all the answers

    Match the following organizations with their characteristics:

    <p>BLM = Not a 501(c)(3) organization Oath Keepers = Lost 501(c)(3) status after Jan 6th Airlie Foundation = Tax-exempt since 1963 Universities = Questioned for financial motives</p> Signup and view all the answers

    What is the user fee for filing form 990 EZ?

    <p>No fee</p> Signup and view all the answers

    All expenses of a nonprofit can be directly allocated to exempt activities.

    <p>False</p> Signup and view all the answers

    Which entity has the authority to determine if an organization qualifies for tax-exempt status?

    <p>The IRS</p> Signup and view all the answers

    What action might members of a nonprofit take if they are dissatisfied with the leadership?

    <p>Vote to remove board members</p> Signup and view all the answers

    Directors of a nonprofit can be held liable for gross negligence under their duty of care.

    <p>True</p> Signup and view all the answers

    What does the duty of loyalty require directors to avoid?

    <p>Harming the corporation</p> Signup and view all the answers

    A __________ occurs when a nonprofit's activities deviate from its original mission as defined in its governing documents.

    <p>mission drift</p> Signup and view all the answers

    In the case of nonpublic information, which of the following describes a conflict of interest?

    <p>Using insider knowledge for personal gain</p> Signup and view all the answers

    Trustees of charitable hospitals are evaluated under a less stringent standard than corporate directors.

    <p>False</p> Signup and view all the answers

    What needs to be disclosed by board members when a conflict of interest arises?

    <p>The conflict of interest itself</p> Signup and view all the answers

    The duty to ensure that the organization's activities align with its stated goals is known as the duty of __________.

    <p>obedience</p> Signup and view all the answers

    Match the type of breach of duty with the corresponding description:

    <p>Duty of Care = Failure to manage investments properly Duty of Loyalty = Using organization assets for personal benefit Duty of Obedience = Straying from the organization's mission Duty to Disclose = Not informing the board about conflicts of interest</p> Signup and view all the answers

    What was a significant outcome of the Nixon v. Lichtenstein case?

    <p>There was a breach of income relations as outlined in the organization's articles</p> Signup and view all the answers

    Members must not vote on matters where they have a personal interest.

    <p>True</p> Signup and view all the answers

    What is necessary for liability insurance for Directors and Officers to be effective?

    <p>It must cover potential claims against them.</p> Signup and view all the answers

    What is the primary purpose of Cy Pres in charitable trusts?

    <p>To adjust the trust to meet changing circumstances</p> Signup and view all the answers

    Cy Pres can only be applied in cases where the charitable interest is entirely impossible.

    <p>False</p> Signup and view all the answers

    List the three elements necessary for invoking Cy Pres.

    <ol> <li>A valid charitable trust exists; 2. The settlor's specific charitable obligation is frustrated; 3. The settlor had a general charitable intent.</li> </ol> Signup and view all the answers

    The board of directors has a duty to act in good faith and with a duty of __________ and __________.

    <p>care, diligence</p> Signup and view all the answers

    Which of the following statements best describes the duty of care for directors?

    <p>Directors must act with diligence and make informed decisions.</p> Signup and view all the answers

    A deviation from a charitable trust can change its core objective.

    <p>False</p> Signup and view all the answers

    What is the purpose of the business judgment rule?

    <p>To protect directors from liability for decisions made in good faith.</p> Signup and view all the answers

    Match the following concepts with their descriptions:

    <p>Cy Pres = Modification of charitable trusts when intent is frustrated Duty of Care = Responsibility to act diligently and prudently Business Judgment Rule = Protection for informed decisions made by directors Deviation = Modification of administrative aspects without changing core objectives</p> Signup and view all the answers

    If the organization cannot afford liability insurance, volunteers may be protected under homeowner insurance policies up to __________.

    <p>one million dollars</p> Signup and view all the answers

    The settlor's specific intentions are always more important than their general charitable intent.

    <p>False</p> Signup and view all the answers

    Which of the following duties is NOT typically held by a board of directors?

    <p>To maximize profit for stakeholders</p> Signup and view all the answers

    What is one major distinction between nonprofit boards and for-profit boards?

    <p>Nonprofit boards focus on mission and community benefit, while for-profit boards aim to enhance stakeholder interests.</p> Signup and view all the answers

    What was a key aspect of the In Re Barnes Foundation case?

    <p>The paintings were moved for better preservation.</p> Signup and view all the answers

    The duties of directors include selecting and __________ the chief executive officer.

    <p>evaluating</p> Signup and view all the answers

    What must an organization do to avoid adverse legal action regarding donor restrictions?

    <p>Respect donor wishes</p> Signup and view all the answers

    The UPMIFA allows for the spending of principal funds without restrictions.

    <p>False</p> Signup and view all the answers

    What standard is used by the government to assess if an investment is prudent?

    <p>Prudent Person standard</p> Signup and view all the answers

    A fiduciary is expected to act __________ in managing funds for nonprofit organizations.

    <p>unselfishly</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Fiduciary Duty = Obligation to act in the best interest of the organization. Prudent Person Standard = Expected norm of care in managing investments. UPMIFA = Legislation governing the management of institutional funds. Attorney General = Enforcer of state laws regarding charitable trusts.</p> Signup and view all the answers

    In Fitzgerald v. National Rifle Association, what was the court's ruling regarding the board's duty?

    <p>Fiduciary duty extends to members and their interests.</p> Signup and view all the answers

    The Herzog Foundation ruling states that donors must retain a reversionary interest to enforce gift terms.

    <p>True</p> Signup and view all the answers

    What must organizations consider before making investments according to UPMIFA?

    <p>Duration and preservation of the endowment fund</p> Signup and view all the answers

    The doctrine requiring a prudent approach to managing charitable funds is known as the __________.

    <p>Prudent Investor Rule</p> Signup and view all the answers

    What happens if a board fails to act in good faith regarding donor restrictions?

    <p>They could be sued by unhappy donors.</p> Signup and view all the answers

    Charities have become more conservative in their investment strategies in recent years.

    <p>False</p> Signup and view all the answers

    What type of legal actions can the Attorney General take concerning charitable trusts?

    <p>Supervision and oversight</p> Signup and view all the answers

    Match the following legal principles with their descriptions:

    <p>UMIFA = Focuses on historic value of funds UPMIFA = Encourages considering multiple factors for investment Prudent Person Standard = Ensures responsible money management Attorney General's Role = Oversight of charitable entities</p> Signup and view all the answers

    Under the UPMIFA, funds can be spent based on __________ only if they align with the purposes of the institution.

    <p>seven factors</p> Signup and view all the answers

    In the context of fiduciary duty, what is the expected role of nonprofit board members?

    <p>To act in the best interests of the nonprofit and its constituents.</p> Signup and view all the answers

    What is the maximum percentage a professional fundraiser can charge without being presumed unreasonable?

    <p>35%</p> Signup and view all the answers

    A professional fundraiser is required to disclose how much of the donations go to the charity and how much they retain for themselves.

    <p>False</p> Signup and view all the answers

    What does the Charleston Principles primarily deal with?

    <p>Personal jurisdiction in electronic solicitations.</p> Signup and view all the answers

    The ________ test is used to determine if an online activity intentionally targets a jurisdiction.

    <p>Calder</p> Signup and view all the answers

    Match the following categories of charitable purposes with their descriptions:

    <p>Relief of the poor = Support those in distress Advancement of education = Enhancing educational institutions Promotion of social welfare = Improving community living conditions Advancement of religion = Supporting religious organizations</p> Signup and view all the answers

    Under the operational test, what is considered when determining if a nonprofit is operating consistent with its stated purposes?

    <p>Mission compliance</p> Signup and view all the answers

    All nonprofits are automatically exempt from paying taxes upon registration.

    <p>False</p> Signup and view all the answers

    What do crowd funding platforms often lack clarity on regarding charitable solicitation?

    <p>Registration and reporting requirements.</p> Signup and view all the answers

    A partnership between a for-profit business and a nonprofit organization where profits are shared is called ________ marketing.

    <p>cause-related</p> Signup and view all the answers

    Match the types of charitable organizations with their roles:

    <p>501(c)(3) = Charitable organizations serving public interest 501(c)(4) = Organizations promoting social welfare 501(c)(6) = Business leagues and associations 501(c)(7) = Social clubs and recreational organizations</p> Signup and view all the answers

    What requirement applies to professional fundraisers under the State Charitable Solicitation Act?

    <p>They must have a license</p> Signup and view all the answers

    Fundraisers are not allowed to claim they are professionals without proper licensing.

    <p>True</p> Signup and view all the answers

    What fundamental right does the regulation of commercial speech come under?

    <p>First Amendment</p> Signup and view all the answers

    The income generated from charitable activities that do not qualify for tax exemption is known as ______ income.

    <p>unrelated business</p> Signup and view all the answers

    Which of the following best describes the operational test for organizations?

    <p>Determination of the actual activities aimed at accomplishing exempt purposes</p> Signup and view all the answers

    An organization can be considered educational even if it advocates a particular position.

    <p>True</p> Signup and view all the answers

    What is one key difference between education and propaganda?

    <p>Education promotes critical thinking while propaganda uses selective information.</p> Signup and view all the answers

    Which of the following parties can typically initiate legal action against a charity?

    <p>A special interest individual, like a director</p> Signup and view all the answers

    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.

    <p>75</p> Signup and view all the answers

    Match the revenue ruling to its focus area:

    <p>Revenue Ruling 74-587 = Relief of poverty and community rebuilding Revenue Ruling 70-585 = Housing for low and moderate-income families</p> Signup and view all the answers

    The Attorney General has exclusive authority to enforce charitable trusts or corporations.

    <p>False</p> Signup and view all the answers

    What must donors provide to ensure their gift is used as intended?

    <p>Specific evidence of donative intent</p> Signup and view all the answers

    What signifies that an organization is primarily educational in its advocacy?

    <p>Presenting different perspectives based on factual information</p> Signup and view all the answers

    Political organizations that meet specific conditions do not have to apply for special tax status.

    <p>True</p> Signup and view all the answers

    The Attorney General cannot manage charities in their ___ affairs.

    <p>everyday</p> Signup and view all the answers

    What is the main goal of the Methodology Test?

    <p>To determine if advocacy can be considered educational under section 501(c)(3).</p> Signup and view all the answers

    Match the following legal provisions with their descriptions:

    <p>§ 501(c)(3) = Tax-exempt status for charitable organizations Charitable Solicitation Acts = Regulations governing fundraising activities United Cancer Council, Inc. v. Commissioner = Case addressing private benefit in charities 4958 of the code = Imposes taxes on unreasonable compensation in charities</p> Signup and view all the answers

    Under which of the following conditions might a private party have standing to intervene in charity-related legal matters?

    <p>If the Attorney General is not acting to protect charitable assets</p> Signup and view all the answers

    Organizations that do not operate day to day in businesses are considered _____ for their charitable activities.

    <p>charitable</p> Signup and view all the answers

    Match the test or analysis to its description:

    <p>Vagueness Analysis = Concerns with legal clarity for enforcement Full and Fair Exposition test = Requires comprehensive facts for opinion formation</p> Signup and view all the answers

    Only the Attorney General is allowed to sue on behalf of charitable organizations.

    <p>False</p> Signup and view all the answers

    Which of the following is NOT an indicator of educational activity?

    <p>Failure to provide a factual foundation for viewpoints</p> Signup and view all the answers

    What is meant by 'negative accountability' in nonprofit organizations?

    <p>Failures that allow self-dealing or quasi-looting.</p> Signup and view all the answers

    Organizations advocating only one viewpoint are likely considered educational.

    <p>False</p> Signup and view all the answers

    Charitable contributions must be clearly documented to ensure they follow the donor's _____.

    <p>intent</p> Signup and view all the answers

    What is meant by 'public interest' in the context of tax exemption?

    <p>Relief of the poor and distressed or community rebuilding.</p> Signup and view all the answers

    What is a common reason for the AG to decline to permit a public donor standing in legal matters against a charity?

    <p>To avoid entanglements in political issues</p> Signup and view all the answers

    The Uniform Trust Code allows donors to sue if their gift is not used as intended.

    <p>True</p> Signup and view all the answers

    The methodology test was challenged in the case of _____ v. Commissioner.

    <p>National Movement</p> Signup and view all the answers

    What issue arose in the Robertson Family and Princeton case?

    <p>Misuse of donated funds meant to train students.</p> Signup and view all the answers

    Parties lacking a discrete injury cannot challenge the government's failure to enforce ___ against charities.

    <p>§ 501(c)(3)</p> Signup and view all the answers

    What is the primary purpose that a tax-exempt organization must serve?

    <p>Public benefit</p> Signup and view all the answers

    Match the following nonprofit accountability types with their definitions:

    <p>Negative accountability = Failures leading to self-dealing Positive accountability = Effectiveness in executing mission Charitable Solicitation Acts = Regulations for fundraising Uniform Trust Code = Legal framework for trusts</p> Signup and view all the answers

    Private foundations primarily receive funding from the general public.

    <p>False</p> Signup and view all the answers

    What is a potential consequence if a nonprofit does not comply with solicitation regulations?

    <p>Civil penalties and return of donations</p> Signup and view all the answers

    What is a key criterion for an organization to qualify as a 501(c)(3) entity?

    <p>Operate for religious, charitable, scientific, literary, or educational purposes</p> Signup and view all the answers

    Public charities must have public support of at least ______ percent of their total support.

    <p>33.3</p> Signup and view all the answers

    Match the IRS tax-exempt categories with their descriptions:

    <p>501(c)(3) = Operates for charitable purposes 501(c)(4) = Promotes social welfare 501(c)(5) = Represents labor and agricultural associations 501(c)(7) = Supports recreational organizations</p> Signup and view all the answers

    Who qualifies as a 'disqualified person'?

    <p>Substantial contributors and their family members</p> Signup and view all the answers

    A recreational organization can fall under the category of 501(c)(3).

    <p>False</p> Signup and view all the answers

    What percentage of units must be occupied by residents who are classified as 'very-low income'?

    <p>20%</p> Signup and view all the answers

    What does the public support test entail for public charities?

    <p>At least 33.3% of their total support must come from the public.</p> Signup and view all the answers

    A 'qualified disaster' can only result from natural occurrences.

    <p>False</p> Signup and view all the answers

    A charity's percentage of investment income may not exceed ______ percent of the total for it to qualify under the Exempt Function Income Test.

    <p>33.3</p> Signup and view all the answers

    What is the primary purpose of a land trust?

    <p>To protect land for its natural, recreational, scenic, historical, or productive value.</p> Signup and view all the answers

    Match the following support tests with their requirements:

    <p>509(a)(1) = Public support must be one-third or more of total support 509(a)(2) = Public support must be at least 10% of total support with other criteria Public Support Test = Not more than one-third of income is derived from specific sources Disqualified Person Test = Includes substantial donors and their family members</p> Signup and view all the answers

    A __________ is a nonprofit organization that acquires and maintains ecologically significant undeveloped land.

    <p>land trust</p> Signup and view all the answers

    What type of organizations primarily serve educational purposes?

    <p>501(c)(3)</p> Signup and view all the answers

    Civil disobedience is considered an educational purpose for tax-exempt organizations.

    <p>False</p> Signup and view all the answers

    Match the following Rev.Rulings with their descriptions:

    <p>Rev.Rul. 76-204 = Acquisition of ecologically significant undeveloped land Rev.Rul. 78-384 = Restrictions on farmland use for ecological purposes Rev.Pro 92-59 = Public interest legal services</p> Signup and view all the answers

    Which of the following is a requirement for providing disaster relief payments?

    <p>The beneficiaries must be part of a defined charitable class.</p> Signup and view all the answers

    What is the threshold for a 'substantial contributor' to a private foundation?

    <p>$5,000 or 2% of Total Support</p> Signup and view all the answers

    An organization is not considered a public charity if it is primarily __________, as opposed to serving the general public.

    <p>supported by one donor</p> Signup and view all the answers

    Organizations organized for religious purposes must file Form 1023 to qualify for tax-exempt status.

    <p>False</p> Signup and view all the answers

    What does the term 'Passive Recreation' refer to?

    <p>Activities such as walking on clear trails.</p> Signup and view all the answers

    Charities are not allowed to make __________ transfers of funds.

    <p>outright</p> Signup and view all the answers

    Match the following assistance types with their descriptions:

    <p>Credit Counseling = Helping individuals gain control over finances Employer Related Assistance = Aid based on objective determination of need Disaster Relief = Aid provided after an incident deemed a qualified disaster</p> Signup and view all the answers

    Which of the following reflects the required compensation for attorneys under Public Interest Legal Services?

    <p>Attorneys are compensated based on the board's decision.</p> Signup and view all the answers

    Low-income individuals do not qualify for credit counseling unless they are totally bankrupt.

    <p>False</p> Signup and view all the answers

    In the case of Bob Jones University, the organization could not qualify for tax-exempt status due to conflicts with what?

    <p>Public policy.</p> Signup and view all the answers

    Assistance designation must be based on an objective determination by an __________ committee.

    <p>independent</p> Signup and view all the answers

    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.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    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.

    More Like This

    NGOs and Non-Profit Organizations
    9 questions

    NGOs and Non-Profit Organizations

    WorldFamousCalcite avatar
    WorldFamousCalcite
    Nonprofit Organizations Quiz
    10 questions

    Nonprofit Organizations Quiz

    JovialHeliotrope1030 avatar
    JovialHeliotrope1030
    Nonprofit Organizations Quiz
    5 questions

    Non Profit Organization Quiz: Test Your Knowledge

    UnderstandableComprehension avatar
    UnderstandableComprehension
    Nonprofit Organizations Quiz
    16 questions

    Non Profit Organization Quiz: Test Your Knowledge

    SufficientCanto avatar
    SufficientCanto
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser