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• An ILR can be formed in partnership with a local educational
institution. The host institution handles all of the ILR's money, writes
all their checks, and the ILR is covered by the tax-free status of the
host institution. ILR money held by the institution does not earn interest.
• An ILR can decide at the outset to be a separate entity and not
align themselves under the tax umbrella of their host institution. To
do this, they would have to submit the proper paperwork (Articles of Incorporation)
and filing fees to the IRS and the State for tax exempt status. This would
allow the ILR to control all of its money. i.e. write checks, and their
money would earn interest
• An ILR can decide at the outset to be a separate entity from
their host institution, without tax exempt status, and pay whatever taxes
are due each year. This route allows an ILR to handle their own money,
write their own checks and earn interest on their money. Of course, this
would have to be a conscientious decision on the part of the membership.
But, this may be a viable option if the actual income of the ILR, after
expenses, is so small that any taxes to be paid would be negligible or
non existent.
• If there is any doubt as to the tax status of an ILR, an ILR
officer should check with the Accounting Department of the host institution.
• If an ILR has obtained its own tax exempt, non-profit status,
separate from the host institution, then the ILR will need to file a Form
990 with the IRS on an annual basis. A full Form 990
is not required if revenue is below a certain amount. If that is the case,
then a Form 990 EZ, used for lower revenue amounts, can
be filed.
• If an ILR wants to obtain its own tax-exempt, non-profit status,
they should first consult with their host institution. The host may not
want the ILR to be a separate entity and benefits may be lost.
• If the ILR receives the approval of the host institution to file
for tax exempt status, then the ILR should first consult an attorney who
is skilled in the complicated filings necessary in order to be awarded
a tax-exempt, non-profit status.
• A few of the steps necessary to obtain a tax-exempt, non profit,
501 [c] [3] status are:
1. Get Publication 557 from the IRS “Tax Exempt Status for Your
Organization, Application for Recognition of Exemption.” This will
help explain the process.
2. Gather together the Articles of Incorporation of the ILR.
3. File a Form 1023 or 1024 as necessary.
4. Comply with all state requirements
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May 20, 2008
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