Filing for the Proper Tax Exemption is a presentation designed for Christian Sororities and Fraternities.

1. FILING FOR THE PROPER EXEMPTION
Section 501(c) Organizations
Presented By Freda Stevens, Chair
4/19/2013

2. Disclaimer
• This presentation is brought to you as a courtesy of
National Council of Christian Leaders.
• It is not intended to take the place of legal advice.
• For more information on applying tax exempt status
contact the IRS directly or a tax attorney.
• For more information on this presentation contact
NCCL at nationalccls@gmail.com
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3. New Sororities & Fraternities
• One of the first things you need to do is apply for an
Employer Identification Number (EIN).
• Every organization needs to have a EIN.
• To obtain an EIN takes less than 5 minutes.
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4. There are 4 ways to apply
• Apply online-
https://sa1.www4.irs.gov/modiein/individual/index.jsp
• Complete an online application and receive the EIN in
minutes. Download and print your EIN verification
letter.
• Apply over the telephone-Call 800.829.4933 and
receive an EIN in minutes.
• Apply by the mail-download form SS-4 and mail to the
address on the form.
• Apply by fax-download form SS-4 and fax to the
number on the form.
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5. What is your next step?
• Request recognition for the CORRECT tax
exemption.
• There are two ways to receive tax exempt status:
A. Formal recognition through application
(application fee, takes time to receive, definitive)
B. Treated as an exempt organization (no fee, verbal
request , no application, takes less than 10 minutes)
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6. Which exemption can my CGLO qualify for?
The best thing to do is contact the IRS directly with
any questions on which 501c exemption would best
fit your CGLO.
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7. How are most CGLO’s classified?
There are several tax exemptions which most
sororities and fraternities will qualify for; however,
determining which exemption is best for you is a
decision that must be made by your organization.
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8. Publication 557
Download Pub 557 from www.irs.gov for an
overview of each tax exemption classification
http://www.irs.gov/publications/p557/ch04.html#e
n_US_2011_publink1000200325
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9. Review of SOME 501c exemptions
• This presentation will review three common tax
exemptions for sororities and fraternities.
• This presentation does NOT contain a complete list
of available tax exemptions.
• Contact the IRS and review pub 55 for a complete
listing of available tax exemptions.
• The three exemptions explored in this presentation
are 501c3, 501c7, and 501c10.
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10. Domestic Fraternal Societies (501(c)(10))
• A domestic fraternal society, order, or association
must file an application for recognition of
exemption from federal income tax on Form 1024.
The application and accompanying statements
should establish that the organization:
• Is a domestic fraternal organization organized in the
U.S.,
• Devotes its net earnings exclusively to religious,
charitable, scientific, literary, educational, and
fraternal purposes, and
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11. Domestic Fraternal Societies (501(c)(10))
• Does not provide for the payment of life, sick,
accident, or other benefits to its members.
• The organization can arrange with insurance
companies to provide optional insurance to its
members without jeopardizing its exempt status.
• Operates under the lodge system, (See definition)
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12. Lodge system defined
Operating under the lodge system means carrying
on activities under a form of organization that
comprises local branches, chartered by a parent
organization and largely self-governing, called
lodges, chapters, or the like.
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13. Domestic Fraternal Societies (501(c)(10))
Tax treatment of donations.
Donations by an individual to a domestic fraternal
beneficiary society or a domestic fraternal society
operating under the lodge system are deductible as
charitable contributions only if used exclusively for
religious, charitable, scientific, literary, or
educational purposes or for the prevention of
cruelty to children or animals.
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14. 501(c)(7) - Social and Recreation Clubs
If your club is organized for pleasure, recreation, and other similar nonprofitable
purposes and substantially all of its activities are for these purposes, it should file
Form 1024 to apply for recognition of exemption from federal income tax.
In applying for recognition of exemption, you should submit the information
described in this section. Also see chapter 1 for the procedures to follow.
Typical organizations that should file for recognition of exemption as social clubs
include:
•College alumni associations that are not described in chapter 3 under Alumni
association ,
•College fraternities or sororities operating chapter houses for students,
•Country clubs,
•Amateur hunting, fishing, tennis, swimming, and other sport clubs,
•Dinner clubs that provide a meeting place, library, and dining room for members,
•Hobby clubs,
•Garden clubs, and
•Variety clubs.
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15. 501(c)(7) - Social and Recreation Clubs
• Discrimination prohibited. Your organization will not be recognized as tax
exempt if its charter, bylaws, or other governing instrument, or any written
policy statement provides for discrimination against any person on the basis
of race, color, or religion.
• However, a club that in good faith limits its membership to the members
of a particular religion to further the teachings or principles of that religion
and not to exclude individuals of a particular race or color will not be
considered as discriminating on the basis of religion. Also, the restriction on
religious discrimination does not apply to a club that is an auxiliary of a
fraternal beneficiary society (discussed later) if that society is described in
section 501(c)(8) and exempt from tax under section 501(a) and limits its
membership to the members of a particular religion.
• Tax treatment of donations. Donations to exempt social and recreation
clubs are not deductible as charitable contributions on the donor's federal
income tax return.
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16. 501(c)(3)-Charitable Organizations
• To be tax-exempt under section 501(c)(3) of the Internal
Revenue Code, an organization must be organized and
operated exclusively for exempt purposes set forth in section
501(c)(3), and none of its earnings may inure to any private
shareholder or individual. In addition, it may not be an action
organization, i.e., it may not attempt to influence legislation
as a substantial part of its activities and it may not participate
in any campaign activity for or against political candidates.
• Organizations described in section 501(c)(3) are commonly
referred to as charitable organizations. Organizations
described in section 501(c)(3), other than testing for public
safety organizations, are eligible to receive tax-deductible
contributions in accordance with Code section 170.
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17. Exempt Purposes defined
The exempt purposes set forth in section 501(c)(3) are
charitable, religious, educational, scientific, literary, testing
for public safety, fostering national or international amateur
sports competition, and preventing cruelty to children or
animals. The term charitable is used in its generally
accepted legal sense and includes relief of the poor, the
distressed, or the underprivileged; advancement of religion;
advancement of education or science; erecting or
maintaining public buildings, monuments, or works;
lessening the burdens of government; lessening
neighborhood tensions; eliminating prejudice and
discrimination; defending human and civil rights secured by
law; and combating community deterioration and juvenile
delinquency.
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18. Filing Requirements
Generally, tax-exempt organizations must file an annual
information return ( Form 990 or Form 990-EZ). Tax-
exempt organizations that have annual gross receipts
not normally in excess of $25,000 ($50,000 for tax
years ending on or after December 31, 2010) are not
required to file the annual information return; they
may be required to file an annual electronic notice,
however. In addition, churches and certain church-
affiliated organizations are excepted from filing.
Failure to file the annual return for 3 consecutive years
may result in automatic revocation of exemption.
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19. Annual Electronic Notice-e-Postcard
• The e-Postcard is due every year by the 15th day of the
5th month after the close of your tax year. For example,
if your tax year ended on December 31, the e-Postcard
is due May 15 of the following year. If the due date falls
on a Saturday, Sunday, or legal holiday, the due date is
the next business day.
• You cannot file the e-Postcard until after your tax year
ends.
• http://www.irs.gov/Charities-&-Non-Profits/Annual-
Electronic-Filing-Requirement-for-Small-Exempt-
Organizations--Form-990-N-%28e-Postcard%29
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20. Contacts
• Charities & Non-Profits
• For answers to technical and procedural questions about charities and other
non-profit organizations, call IRS Tax Exempt and Government Entities
Customer Account Services at (877) 829-5500 (toll-free number). If you
prefer to write, use the address below.
• For answers to employment tax questions, call the Business and Specialty
Tax Line at (800) 829-4933 (toll-free).
• To obtain a determination letter that applies the principles and precedents
previously announced to a specific set of facts, or to transmit copies of
amended documents, write to:
Internal Revenue Service
Exempt Organizations Determinations
P.O. Box 2508
Cincinnati, OH 45201
4/19/2013