Discussion:Non-Profit = Tax-exempt ??
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Discussion Forum Index --> Basic Tax Questions --> Non-Profit = Tax-exempt ??
Discussion Forum Index --> Tax Questions --> Non-Profit = Tax-exempt ??
Cdcrockett (talk|edits) said: | 1 July 2008 |
| I have a client who runs a business networking group where they pass leads to the other members. The only source of income is membership dues. They are going to apply for a 'non-profit corporation' in the state of Texas. My understanding is that this does not give them 'tax-exempt' status for either the federal or state level. My question is: Can they form a non-profit corp and not seek tax-exempt status? (there is probably about $1000 or less net income) If they are not required to seek tax-exempt status, what federal tax form would be used - 1120 or 990? At this point in time, they probably would not want to pay the $300 fee to apply for tax-exempt status and I don't expect their income to be such that it would be that much of an advantage. Any one have any ideas?
Charles | |
| 1 July 2008 | |
| Sure they can be a not-for-profit and not apply for tax exempt status. They would file a normal Form 1120.
If they seek a tax exempt status, they would be classified as a 501(c)(6) organization [business league] and file Form 990. Personally, I wouldn't do that. Administrative costs can become prohibitive. | |
| July 1, 2008 | |
| What confuses you is that they're not charitable. That's a 501c3, which permits folks to donate and deduct it. You can be a nonprofit, which is the same as tax exempt, but not charitable. | |
| 1 July 2008 | |
| Not-for-profit organizations are set up under state laws. The federal government does not recognize that term. It uses the term "exempt organization" (EO for short).
You may be organized as NFP for state purposes, but not an EO for federal. You may elect to file for exempt status with IRS, but you don't have to. EOs file Form 990, otherwise, assuming it's a NFP corporation, file Form 1120. | |
| 1 July 2008 | |
| Chiming in to agree with Marcilio -- I think JR misspoke. Nonprofit is not the same as tax exempt, and not all tax exempt organizations are eligible to receive tax-deductible contributions under IRC Sec. 170. | |
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