Question: What does it mean to be tax exempt?
Answer: To be tax exempt means that an organization has been granted favorable taxation treatment by the government. Tax exempt status is usually extended to certain non-profit organizations.
Question: What is a non-profit organization?
Answer: A non-profit organization is one that does not conduct business solely for the purpose of making profits for the personal use of it's owners.
Question: What types of organizations are given tax exempt status?
Answer: Tax exempt status is given to many religious and charitable organizations.
•Churches, synogogues, temples, and other religious institutions.
•The Salvation Army, YWCA, YMCA, Boy Scouts, Girl Scouts, the American Red Cross, Community funds and certain cancer and other medical societies and hospitals.
•Research institutions, colleges, universities, and other schools that do not practice descrimination along racial, religious, or ethnic lines.
•Certain military organizations.
•Fraternal organizations, trade associations, and labor unions.
Questions: Are all incomes produced by non-profit organizations exempt from taxation?
Answer: Although an organization may have a tax exempt status, certain unrelated business earnings may be taxed if it is derived from sources not protected by it's non-profit status such as investment income and rental income arrangements.
Question: How do I find out if a particular organization is non-profit?
Answer: If an organization is non-profit, you can find it under section 501(c)(3) of the Internal Revenue Service Code, or call 1 (800) 829-1040 for information.