1. Most organizations seeking recognition of exemption from federal income tax must use specific application forms prescribed by the IRS. To seek recognition of exemption the IRS currently requires you to file
a.
Form 1023.
b.
Form 1024.
c. A
letter request.
d.
Both A and B above.
2. Every exempt organization must have an EIN, whether or not it has any employees. An EIN
a. Is received once exemption status is approved.
b. Is
required before an exemption application is submitted.
c. Is
not required for exempt organizations since they are exempt from paying taxes.
d. None
of the above.
3. Each application for exemption must be accompanied by
a.
A conformed copy of your organization's Articles of incorporation (and the
Certificate of incorporation, if available).
b.
A conformed copy of your organization's Articles of Association.
c. A
conformed copy of your organization's trust indenture, constitution, or other
enabling document.
d.
Any of the above.
4. If your organization does not have an organizing document, it will not qualify for exempt status.
True False
5. A copy that agrees with the original and all amendments to it.
a.
Original document.
b.
Written declaration.
c.
Conformed copy.
d.
None of the above.
6. The IRS may require you to provide additional information necessary to clarify the nature of your organization such as
a. Representative copies of advertising placed or copies of publications, such
as magazines.
b.
Distributed written material used for expressing views on proposed legislation.
c.
Copies of leases, contracts, or agreements into which your organization has
entered.
d. Any
of the above.
7. A ruling or determination letter will be issued to your organization if its application and supporting documents establish that it meets the particular requirements of the section under which it is claiming exemption. If during the period before the date of the ruling or determination letter, its purposes and activities were those required by law, a ruling or determination letter recognizing exemption is usually
a.
Effective as of the date of formation of an organization.
b.
Effective as of the date specified in the letter.
c.
Both A and B above.
d.
None of the above.
8. A ruling or determination letter issued to a central organization recognizing on a group basis the exemption under section 501(c) of subordinate organizations on whose behalf the central organization has applied for recognition of exemption. This is a (an)
a.
Group exemption letter.
b.
Adverse notice of determination.
c.
Power of attorney.
d.
Disclosure statement.
9. A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when
a. The
central organization notifies the IRS that it is going out of business.
b. The
central organization notifies the IRS, by its annual submission or otherwise,
that any of its subordinates will no longer fulfill the conditions for continued
effectiveness.
c.
The IRS notifies the central organization or the affected subordinate that the
the group exemption letter will no longer have effect for some or all of the
group because the conditions for continued effectiveness of a group exemption
letter have not been fulfilled.
d. Any
of the above.
10. The following are organizations exempt from federal income tax under section 501(c) that are not required to file an annual information return, except
a.
A church.
b. A
school below college level affiliated with a church.
c. A
political organization that has $25,000 or more in gross receipts for the tax
year.
d.
All
of the above.
11. Exempt organization, other than private foundations, must file their annual information returns on
a. Form
1023.
b. Form
8868.
c.
Form 990.
d.
Form 1024.
12. Employers of organizations exempt form federal income tax, who pay wages to employees are also exempt from withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA).
True False
13. A payment a donor makes to a charity partly as a contribution and partly for goods or services.
a.
Charitable contribution.
b. Quid pro quo contribution.
c. Tax exempt organization donation.
d.
Exchange donation.
14. If an organization receives charitable deduction property and within 3 years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282 unless the property is consumed or distributed for charitable purposes or the property is valued at
a.
$75.
b. $250 or more.
c. $500 or less.
d.
$10,000 or less.
15. Solicitations for contributions or other payments by certain exempt organizations (including lobbying groups and political action committees) must included a statement that
a.
States that they are exempt form federal tax.
b. States that they should not overstate the property's value.
c. Payments to those organizations are not deductible as charitable
contributions for federal income tax purpose.
d.
All of the above.
16. Certain exempt organizations must disclose to the IRS or to the public certain information about their activities. The disclosure requirement applies to a fund-raising solicitation if
a. The organization soliciting the funds normally has gross receipts over
$100,000 per year.
b. The solicitation is part of a coordinated fundraising campaign that is
soliciting more than 10 persons during the year.
c. The solicitation is made in written or printed form, by television or radio,
or by telephone.
d.
All of the above.
17. To qualify for exemption from federal income tax, the organization can be an individual or a partnership.
True False
18. An organization may qualify for exemption from federal income tax if its organized and operated exclusively for educational services.
True False
19. To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains
a. That the
particular religious beliefs of the organization are truly and sincerely held.
b. That the
practices and rituals associated with the organization's religious belief or
creed are not illegal or contrary to clearly defined public policy.
c. Whether there
is an reason to provide, directly or indirectly, a deduction for the cost of
litigation that is for the private benefit of the donor.
d. Both A and B
above.
20. In determining whether an admittedly religious organization is also a church, the IRS accepts any and every assertion that the organization is also a church because beliefs and practices vary so widely.
True False
21. In general, if a substantial part of the activities of your organization consists of carrying on propaganda or otherwise attempting to influence legislation, your organization's exemption from federal income tax will be denied. Attempting to influence legislation means
a. Any attempt to
influence any legislation through an effort to examine and discuss broad social,
economic, and similar problems.
b. Any attempt to
influence any legislation through an effort to affect the opinions of the
general public or any segment thereof.
c. Any attempt to
influence any legislation through communication with any member or employee of a
legislative body or with any government official or employee who may participate
in the formation of legislation.
d. Both B and C
above.
22. If your organization is not organized for profit and will be operated only to promote social welfare, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). To qualify for exemption under section 501(c)(4), the organization's net earnings must be
a. Devoted only to charitable purposes.
b. Devoted only to educational purposes.
c. Devoted only to recreational purposes.
d. Any of the
above.
23. A club that in good faith limits its membership to the members of a particular religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion.
True False
24. If tax is imposed on a disqualified person for any excess benefit transaction, an excise tax equal to _____ of the excess benefit is imposed on an organization manager who knowingly participated in an excess benefit transaction, unless such participation was not willful and was due to reasonable cause.
a. 200%.
b. 35%.
c. 10%.
d. 25%.
25. A transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received for providing such benefit.
a. An excess
benefit transaction.
b. An additional
tax transaction.
c. Tax-exempt
transaction.
d. None of the
above.
26. A state-sponsored workers' compensation reinsurance organization should apply by letter for recognition of exemption from federal income tax under section 501 (c)(27). To qualify for exemption, any membership organization must
a. Have been
established by a state because June 1, 1996, exclusively to reimburse by a state
before June 1, 1996, exclusively to reimburse its members for losses under
worker' compensation acts.
b. Have a state
requirement that the membership consist of all persons who issue insurance
covering workers' compensation losses in the state and all persons and
government entities who self-insure against those losses.
c. Operate as a
nonprofit organization by returning surplus income to its members or workers'
compensation policyholders on a periodic basic and by reducing initial premiums
in anticipation of investment income.
d. All of the
above.
27. Section 4965 imposes an excise tax on certain tax-exempt entities that are partly to prohibited tax shelter transactions.
True False
28. A person who benefits from an excess benefit transaction such as compensational, fringe benefits, or contract payments from a section 501(c)(3) or 501(c)(4) organization may have to pay an excise tax under section 4958.
True False
29. Donations to exempt social and recreation clubs are deductible as charitable contributions on the donor's federal income tax return.
True False
30. An organization that is identified or designed as a terrorist organization within the meaning of section 501(p)(2) is not eligible to apply for recognition of exemption.
True False
31. People commonly refer to tax-exempt organizations as "nonprofit organizations". While tax-exempt entities are usually nonprofit, some of them are, in fact, for profit entities.
True False
32. A corporation, unincorporated association, or trust that has applied for and received a determination letter from FTB Stating it is exempt from California Franchise and income tax.
a. A
"tax-exempt" entity.
b. A "non-profit"
entity.
c. "Nonprofit"
religious corporation.
d. All of the
above.
33. Most California laws dealing with tax exemption are patterned after the Internal Revenue Code so obtaining state exemption is an automatic process after obtaining federal exemption and no separate application needs to submitted.
True False
34. Regardless of the total amount of gross receipts private foundations must file Form 199 every year. The following organization (s) must also file Form 199.
a. Churches.
b. Pension Trusts
and IRAs.
c. Political
organizations.
d. None of the
above.
35. Incorporating under the California Nonprofit Corporation Law means that the organization is exempt from California Corporation taxes.
True False
36. A nonprofit corporation that does not have a determination of exemption from FTB is subject to the Franchise tax laws the same as for any for-profit corporation.
True False
37. The requirement to file Form 199 is generally based upon the normal amount of total gross receipts and pledges. "Normal" is defined as a three-year average. You are not required to file Form 199 if your gross receipts and pledges are normally not more than
a. $37,500.
b. $30,000.
c. $25,000.
d. $1,000.
38. Generally, an exempt organization must file Form 109 when it has income in excess of
a.
$37,500.
b. $30,000.
c. $25,000.
d. $1,000.
39. Homeowners' associations and political organizations file Form 100 rather than Form 109 if they have income that is taxable.
True False
40. Tax-exempt organizations must obtain a tax clearance from FTB to complete their dissolution or surrender with the Secretary of State. If you have not filed all required returns and paid all liabilities, FTB will advise you of what you must do before you can be issued a Tax Clearance Certificate.
True False