Protecting Your Organization's Tax-Exempt Status

The most comprehensive and ambitious effort I've seen to compileand discuss, in one resource, all of the issues and informationabout this crucial topic. Nonprofit executives, managers, legalcounsel, and trustees all can benefit from this useful andinformative book. ?J. David Seay, vice president, secretary, and counsel, UnitedHospital Fund Bookman provides nonprofit leaders with a comprehensive examinationof federal, state, and local laws affecting nonprofit organizationsand recommAnds actions nonprofits can take to protect theirorganizations tax-exempt status. Using case studies extensively, he explains such crucial matters aspreparing for an IRS audit, reporting unrelated business income,responding to claims of unfair competition, and fighting challengesto nonprofits' property tax exemption. Protecting Your Organization's Tax Exempt Status demonstrates howfederal tax law applies to specific segments of the nonprofitsector. Discusses actual IRS audits of nonprofits, shows hownonprofits can develop positive community relations, and reviewscongressional hearings on federal tax exemptions for nonprofits.

Preface The Author Tax Exemption Under Challenge: The Context The Current Debate Over Tax Exemption 3 The Current Environment and Debate 3 The Views of the Protagonists 7 The Current Approach to Tax Laws 9 The Evolution of Government Policy Toward Nonprofit Organizations 12 A Brief History of Federal Law and Tax-Exempt Status 12 The Rationale for Tax Exemption 16 Organizations That Are Covered 20 The Unrelated Business Income Tax 23 Federal Law and the Internal Revenue Code Federal Law on Tax-Exempt Status and Unrelated Business Income 29 Gaining Tax-Exempt Status 30 Maintaining Tax-Exempt Status 36 Unrelated Business Income 38 Separating Taxable and Nontaxable Income 41 Using the Fragmentation Test 54 Taxing Passive Income 54 Convenience Exception 59 Political Activity 60 Other Exemptions 62 Special Rules for Specific Types of Income 64 Leasing Rules 65 Debt-Financed Property 67 Income from Advertising 69 Subsidiary Organizations 71 Exploitation Rule 74 Joint Ventures and Partnerships 74 Dual Use Facilities 76 Fund-Raising Activities and Solicitations 77 Mailing Lists 78 Research 79 How the Internal Revenue Code Treats Different Types of Organizations 81 Educational Organizations 82 Religious Organizations 85 Hospitals 87 Other Major Categories of Organizations 95 Potential Changes to the Internal Revenue Code 98 Posthearing Activity: Proposals Currently Under Consideration 100 Actions of the Internal Revenue Service 107 Other Tax Legislation 110 State and Local Issues Nonprofit Tax Law at the State Level 115 The Unfair Competition Debate 115 The Business Coalition for Fair Competition 116 Legislative Activity at the State Level 120 Review Commissions 124 Proposed Model State Unfair Competition Bill 125 Judicial Activity and Other State Legislation 126 The Use of Political Pressure 130 Responses in the Nonprofit Community: Policy Formulation 134 The Future 137 Local Government and Property Tax Exemptions 139 Property Tax Exemption Litigation 141 Litigation: Exemption from Other Local Government Taxes 146 Property Tax Exemption Statutes 146 Community and Nonprofit Organization Relationships: Political Alternatives 152 Options Other Than Property Tax Exemptions: State Subsidies 154 Options Other Than Property Tax Exemptions: Fees in Lieu of Taxes 155 Judicially Created Multipart Tests and Other Court Actions 157 Overview of Property Tax Exemption 159 Community Disputes Over Property Tax Exemptions: Lessons from Specific Cases 161 Higher Education 162 Case Study: The Syracuse University Carrier Dome 165 Case Study: The YMCA 168 Case Study: Voluntary Hospitals 176 Guidelines for Action Ensuring Compliance with the Law and Dealing with Potential Challenges 187 What the Law Requires 187 Developing and Implementing an Action Plan 190 The Audit Process 195 A Recommended Proactive Program: The Social Accountability Budget 200 Other Proactive Examples 207 Applicability to Individual Organizations 212 Influencing Public Policy Toward Nonprofits 213 Resource A. Unrelated Business Income Tax Cases 221 Resource B. Unfair Competition Cases 230 Resource C. Property Tax and Related Cases 232 Resource D. Internal Revenue Service Materials 239 References 247 Index 259