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AAD 650, Unit 6: Not-for-Profit Organizations

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UK Arts Administration

on 17 December 2013

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Transcript of AAD 650, Unit 6: Not-for-Profit Organizations

Not-for-Profit Organizations
Unit 6:
I. Forming a NFP Organization
II. Obtaining a Tax Exemption
III. Public Charities v. Private Foundations
IV. Obligations and Liabilities of a NFP Board
V. Unrelated Business Income Taxation
Determine who will be the directors of the NFP
Choose the name of the corporation
File the NFP incorporation certificate
Write the corporate bylaws
Hold the initial meeting of the board of directors
Duty of Care
Duty of Loyalty
Duty of Obedience
What constitutes “a trade or business”?
What constitutes “regularly carried on”?
What constitutes “not substantially related”?
leasing a facility for a significant period of time
publishing a book when book publication does not relate to the exempt purposes of the organization
selling membership lists to direct mail organizations
Choose the name of the corporation
A tax exempt organization is exempt from paying federal income tax (and state income tax, if it has also obtained a state exemption), and each year instead files an informational tax return, called a Form 990.
Most grant-making organizations will only provide grants to tax-exempt organizations.
Private donors can claim income tax deductions for donations made to tax-exempt organizations.
Be organized as a corporation, trust, or unincorporated association
Have organizational documents - such as the articles of incorporation -- which:
Restrict the organization’s purposes to those permitted under 501(c)(3)
Must not permit activities that do not further the organization’s exempt purpose
Must dedicate all the assets of the organization to exempt purposes in perpetuity
Must not participate in political campaigns at any level
Must restrict lobbying activities to “an insubstantial part of its total activities”
May not engage in private inurement
May not operate for the benefit of private interests
May not operate for the primary purpose of conducting a business unrelated to its exempt purposes
Greater than 50% of the board members must be unrelated (by blood, marriage, or business ties) and may not be paid employees of the organization (such as a managing director)
A substantial part of the NFP’s income must come from the public, other public charities, or the government, and this public support must continue on an ongoing basis (commencing with the sixth year of operations, a public charity must prove to the IRS that it meets this requirement, or it may be reclassified as a private foundation).
Foundations must distribute at least 5% of their assets to other organizations each year;
Donors making donations to foundations may deduct those donations only up to 30% of their adjusted gross income, while donors who make donations to public charities may use them to offset 50% of their adjusted gross income.
http://www.bloomberg.org/
http://www.bostonballet.org/support.html
Be organized as a corporation, trust, or unincorporated association
Have organizational documents - such as the articles of incorporation -- which:
Restrict the organization’s purposes to those permitted under 501(c)(3)
Must not permit activities that do not further the organization’s exempt purpose
Must dedicate all the assets of the organization to exempt purposes in perpetuity
Be organized as a corporation, trust, or unincorporated association
Have organizational documents - such as the articles of incorporation -- which:
Restrict the organization’s purposes to those permitted under 501(c)(3)
Must not permit activities that do not further the organization’s exempt purpose
Must dedicate all the assets of the organization to exempt purposes in perpetuity
Must not participate in political campaigns at any level
Must restrict lobbying activities to “an insubstantial part of its total activities”
May not engage in private inurement
May not operate for the benefit of private interests
May not operate for the primary purpose of conducting a business unrelated to its exempt purposes
Full transcript