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Original Query from Ian Goodwin, Old Dominion LLI, VA
At the Old Dominion University LLI we have discovered that money passed
through the university's accounts is considered tax exempt, but money
in an account which we maintain separately is not covered by the university's
exemption. Is this the case with other LLI's ? Should we have applied
to the IRS for 501(c)3 exemption as a separate organization ? What is
the experience of others, please ?
From Budd S. Schwartz, Lifetime Learners Institute, Norwalk Community
College, CT
We applied to the IRS to qualify as a 501c(3) organization. Acceptance
by IRS exempts you from Federal income tax. However if your gross receipts
exceed $25,000 annually, you are required to file Form 990EZ (Form 990
if your gross receipts exceed $100,000). This is an information return
only. As to the State (Connecticut) there is no income tax payable if
you are recognized by IRS as a tax exempt organization. With respect to
sales tax, after we received our Determination letter from IRS, we applied
to the state for a sales tax exemption and were turned down since we were
not a "charitable" organization. A few years later, however, Connecticut
stopped reviewing applications for sales tax exemption for non-profit
organizations, instead accepting IRS determinations. If you are considering
applying to IRS you should check with your state as to income tax and
sales tax implications.
From John Webber, WALLA, Purdue University, IN
WALLA incorporated and received 501.c.3 status a couple of years ago.
It did it for a number of reasons: a to be able to solicit tax exempt
contributions, to secure a degree of independence, and to escape having
to pay sales taxes. In answer to the status question, an entity must first
be incorporated to make application for 501.c.3 status. Hope this helps.
From Stew Engle, ElderStudy, Mary Washington College, VA
Your experience matches ours exactly. ElderStudy at Mary Washington College
has just applied for 501(c)(3) status after operating in limbo for several
years. We did not know we were in a tax no man's land. The IRS informed
us verbally that it is very unlikely to lead to any problems for us since
no harm was caused to the gov't. & since we were unaware we had failed
in our reporting requirements. We did not apply for tax exempt status
with the state since our sales tax expenditures are probably less than
$15 per year. Our treasurer handled the paperwork & we paid for no professional
help. It is a tedious process but well within the capability of most LLIs
to handle themselves. It is NOT necessary to incorporate to get 501(c)(3)
status & we did not do so. The IRS has a special office (in Baltimore,
I think) to help non-profits thru the process. The people with whom I
dealt there were incredibly friendly & helpful. Strongly suggest you contact
them.
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May 12, 2008
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