Non Profit Corporations?

Question

Under what conditions is a not for profit (non-profit) corporation required to file and pay Federal Income Taxes?

Could anyone direct me to a site that will explain, in laymen's terms, how and why a not for profit is subject to Federal Income Taxes?

Answer 1

An "exempt organization" is subject to tax on its "unrelated business taxable income".

In layman's terms, this means that a non-profit corporation is tax-exempt only on income which is related to its tax-exempt purpose, but it is taxed on "unrelated business taxable income".

Here is an example. Suppose that the Red Cross earns a profit on the sale of books about disaster preparedness, and suppose that a local church earns a profit on the sale of bibles. In these cases, neither the Red Cross nor the church would pay a tax on such profits, because the profits are _related_ to their tax-exempt functions.

However, suppose that either the Red Cross or the local church decides to purchase and operate a pizza delivery business. (This may be a bizarre example, but it serves to illustrate the point). Because the pizza delivery business has no relationship with the exempt purposes of either organization, the profits are _unrelated_ and thus taxable.

Please re-post with additional facts about your particular concern, and we will provide further information.

See IRC Section 511. See also the link below to IRS Publication 598 for more detailed information and examples.

Finally, be sure to consult competent tax counsel to advise you and your organization in this complex area.

Hope this helps.

Answer 2

A non profit corpporation is not required to file (pay income tax) if it has it's 501(c)3. It does need to file unless it is a church but it doesn't have to pay taxes. However, all employees must pay income taxes and the Non profit must withhold taxes for it's employees as well. You can visit our website for more info ans some sites to view www.ministrymaker.com

Answer 3

check this site out see if it helps any
http://www.nolo.com/article.cfm/pg/2/objectId/A6D25766-61E1-4179-8299F2726E320A5A/catId/CE94A6B3-EFB6-4036-8498D5414328FD73/111/262/FAQ/