Look Back Effect Projet Presentation

Non Profits Agencies
By : Mariflor Medina
Todays Presentation
I. Rules of the Game for Tax Exempt Non-

Profits
II. Getting Into the Game: How to Obtain Tax

Exempt Status
III. Playing Well with Others: Collaborating

with Other Non-Profits and For-Profits
HOW TO FORM YOUR NON-PROFIT SOCIAL
VENTURE
I. Rules of the Game
for Tax-Exempt Non-Profit
Myths about Tax Exempt Non-Profits
To get the benefit of tax exempt status, you have to

apply to the IRS (?)
For organizations that have tax exempt status:
Cant make a profit (?)
Cant engage in political activity (?)
Never have to pay taxes (?)
Always possible for donors to get tax deductions (?)
Have to pay small salaries (?)
Sum: Why Apply for Tax Exempt Status
for Your Organization?
Advantages Disadvantages
investment income, Activities must be limited to

except: 501c3 exempt purposes
income from activities No substantial Lobbying
unrelated to tax exempt
purposes No political activity on
investment income from behalf/in opposition to any
candidate
assets acquired with
debt Upon dissolution, assets
Tax Deductions for must be donated to another
501c3
Charitable Contributions
Cannot unduly benefit
Can utilize volunteers
private individuals
Exemption from other Greater scrutiny by IRS and
Taxes: State Attorney Generals
Federal Unemployment Office
Tax Limited Resources (typically)
State Property/Franchise
Whats Different about Being Tax Exempt?
A non-profit is essentially a trust A custodian of
assets that have been dedicated to the public good.
Guiding Principles (4)
1) Organized and 2) No private benefit

operated exclusively for (e.g., no profit sharing)
exempt purposes
3) Assets are permanently 4) No advocacy

dedicated to exempt for/against a candidate
purposes or legislation
HOW TO FORM YOUR NON-
PROFIT SOCIAL VENTURE
II. Getting Into the Game:

How to Obtain Tax Exempt
Status
Options for Obtaining Tax-Exempt
Status
1 - Set up a Fiscal Sponsorship Arrangement with

an Existing Tax Exempt Non-Profit
2 - Form a Non-Profit Corporation and Apply to
the IRS for Recognition
Option 1: Fiscal Sponsorship
Many non-profit organizations are not themselves tax exempt: instead, they
affiliate with an existing tax-exempt organization
The non-profit organization doesnt have to be incorporated
The non-profit DOES have to further the sponsors exempt purposes
Requires a written fiscal sponsorship agreement

Fees normally based on revenues
How it works:
3. If giving the $$ to the non-
1. Non-exempt non-profit exempt would further the 5. Sponsor reports the $$
arranges a grant or Sponsors purposes, then the on its tax return (non-
donation Sponsor grants the $$ to the exempt doesnt file a
non-exempt organization. return).
2. Grantor Donor pays the 4. Sponsor has discretion 6. Sponsor may provide
$$ to the Sponsor on non- NOT to grant the $$ (cant other supportive services to
exempts behalf just be a conduit) non-exempt (e.g.,
accounting)
IRS Sensitive Areas:
Need to Research & Describe
Activities CAREFULLY
Private Benefit
E.g., Economic Development
Leadership Conflicts of Interest
Self Dealing
3rd Party Influence on Decisionmaking
Commercial Activity
Primary Purpose Must be Non Profit
Unrelated Business Activity
Activities in Foreign Countries
Fiscal oversight required
= Application Could Go on THIRD Pile (12 mo+

Review)
OW TO FORM YOUR NON-PROFIT SOCIAL VENTURE
III. Playing Well with Others:

Collaborating with Other Non-
Profits and For-Profits
Options for Non-Profit/For-Profit
Affiliations
1. Contracting
2.Forming a subsidiary
3. Forming a Joint Venture

Contracting
Tax Exempt Organizations can enter into
written agreements with for-profits for the
sale of services or assets
- e.g., a contract for custodial
services
Agreements have to be arms-length
- Tax Exempt Org. must get reasonable
value for its services/assets
The Mozilla case
Subsidiary
Non-Profit
Entity
For-Profit
Subsidiary
Benefits from Forming a
Subsidiary
Allows tax exempt organization to:
Protect its tax-exempt status by parking
unrelated/commercial activities in Sub
Insulate itself from liability associated with
these activities
Obtain financing from conventional sources
Attract staff and board members with business
experience (with competitive wages)
Earn dividends (profits) tax-free from the
subsidiary
Work Cites
"Utah Nonprofits Association - Home." N.p., n.d. Web. 17 Apr. 2017.

"ST. JOHN LUTHERAN SEWARD, NEBRASKA."St John Child Development
Center. N.p., n.d. Web. 17 Apr. 2017.
"Keeping families with sick children close to each other and the care and
resources they need."Ronald McDonald House Charities. N.p., n.d. Web.
17 Apr. 2017.
"Big Brothers Big Sisters of Utah."Big Brother Big Sisters. N.p., n.d. Web.
17 Apr. 2017.
YWCA-Eliminating Racism, Empowering Women - YWCA USA. N.p., n.d.
Web. 17 Apr. 2017.

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Non Profits Agencies

I. Rules of the Game for Tax Exempt Non-

II. Getting Into the Game: How to Obtain Tax

III. Playing Well with Others: Collaborating

To get the benefit of tax exempt status, you have to

investment income, Activities must be limited to

Guiding Principles (4)

1) Organized and 2) No private benefit

3) Assets are permanently 4) No advocacy

II. Getting Into the Game:

1 - Set up a Fiscal Sponsorship Arrangement with

The non-profit DOES have to further the sponsors exempt purposes

Requires a written fiscal sponsorship agreement

= Application Could Go on THIRD Pile (12 mo+

III. Playing Well with Others:

3. Forming a Joint Venture

"Utah Nonprofits Association - Home." N.p., n.d. Web. 17 Apr. 2017.

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