Becoming what you claim to be!

Some really well known entities are registered non-profit ones; names you know like the National Football Players Association with gross receipts of $423,975,288; Lancaster General Hospital with gross receipts of $1,131,452,020 and the Columbia Borough Fire Department with gross receipts of $1,107,432. These figures are listed at the GuideStar Website.

exempt

Nonprofit corporations are those corporations whose members or shareholders may not receive any of the pecuniary [monetary] profits of the corporation. A nonprofit corporation may be formed for any lawful purpose or purposes, including, but not limited to: athletic; any lawful business purpose to be conducted on a not-for-profit basis; beneficial; benevolent; cemetery; charitable; civic; control of fire; cultural; educational; encouragement of agriculture or horticulture; fraternal; health; literary; missionary; musical; mutual improvement; patriotic; political; prevention of cruelty to persons or animals; professional, commercial, industrial, trade, service or business associations; promotion of the arts; protection of natural resources; religious; research; scientific and social. A nonprofit corporation must be able to fulfill its purpose without financial benefit to its members, director or officers, except as salaries and expenses.”

“Organizations that meet the requirements of Internal Revenue Code section 501(a) are exempt from federal income taxation. In addition, charitable contributions made to some section 501(a) organizations by individuals and corporations are deductible under Code section 170.

This website provides information about points of intersection between organizations and the IRS. The content includes explanatory information, and links to forms that an organization may need to file with the IRS. This Webpage covers five stages in an organization’s life cycle.”

tax exemt

Open disclosure of certain information is required of all 501 (c) organizations. “Your organization must be a legal entity (corporation, trust or association) separate from its organizers and must have written articles of organization. Depending upon the type of entity, its articles organization may be a corporate charter (filed articles of incorporation), trust instrument, articles of association, or any other written instrument by which the organization was created. If applying for recognition of exemption using Form 1023, a conformed copy of the articles of organization must be submitted
with the application for recognition of exemption. An organization applying for exemption using Form 1023-EZ does not submit a copy of the articles of organization with its application; however, the organization could be asked to provide a copy at any time as part of a compliance check or examination.

Organizational Test | The articles of organization must limit the organization’s purposes to one or more of those described at the beginning of this chapter and mustn’t expressly empower it to engage, other than as an insubstantial part of its activities, in activities that don’t further one or more of those purposes. These conditions for exemption are
referred to as the organizational test.

Section 501(c)(3) is the provision of law that grants exemption to the organizations described in this chapter. Therefore, the organizational test may be met if the purposes stated in the articles of organization are limited in some way by reference to section 501(c)(3). -SOURCE: IRS Publication: Tax-Exempt Status for Your Organization


Pennsylvania law requires nonprofit corporations to have a board of directors, which is responsible for managing the organization. Every board must have a president, secretary, and a treasurer, although one individual may perform more than one role. The board may draft bylaws, which will provide how new board members may be added or removed from the board. If no bylaws are in place, Pennsylvania law provides that each board member will only serve for one year. Board members have the responsibility of acting in the best interest of the nonprofit, meaning they may not advance their own financial interests while serving the board, and they must make informed financial decisions for the organization.

To be recognized as an “exempt” 501(c)(3) organization, nonprofits must file an application with the Internal Revenue Service. Once exempt, the nonprofit is not responsible for paying federal income tax, and donations made to the organization are tax deductible for the donor. Nonprofits must file Form 1023 with the IRS, which will include detailed information about the finances and activities of the organization and must include the bylaws and any organizing documents, such as the Articles of Incorporation. The IRS will make a determination as to whether or not the nonprofit meets the requirements for an exempt organization based on the application.

3 comments

  1. After years in “The Business World” I came to this conclusion:
    NO ONE should be tax exempt.

    It’s rigged. It’s abused.

    Right now, one of the mechanisms for political outrage is: Amazon And Other Billionaires Pay No Taxes! So Let’s Tax Them More!

    How ’bout this: REFORM IRS tax laws that allow people and business to do such things.

    That might help alleviate INCOME INEQUALITY.

    (Face Palm)

    Either way, the IRS is essentially an entity for the ruling and banker class.

  2. Mr./Ms. Observer, we wholeheartedly agree. There are so many enterprises in the not-for-profit sector that find ways to skirt the IRS specifications.

    Some years ago in another part of PA, we knew a guy who was a steel executive. When “the steel” went down the crapper, the guy, connected with others via his country club got a position with the local not-for-profit hospital. Get that: he went from the steel industry to health care.

    In his new role with the hospital, his “higher salary” was paid more that he had been, got a company car and a paid country club membership.

    See, one difference between for profit and not for profit is to not show a profit … but it’s really possible to pay handsomely. So you can buy player pianos, splurge on bars and clubs and fancy perks for some people (including boards of directors).

    You’re so right, Mr. / Ms. Observer. This nation needs a tax makeover that is equitable, just and simplified. Will we see that? We doubt it. Maybe we’ll just convert our little business enterprise into a not for profit. How’s this sound? News Association of Columbia.

  3. Let’s see, not for profits include hospitals, which are certainly for profit. It wasn’t until a year of two ago that the NFL(National Football League), was a not for profit organization. Can you imagine that? It’s a little mind-boggling, is it not?

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