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Monday, January 22, 2007


Section 501(c)(3) status for an organization provides many benefits. Key among them are:

• Exemption from Federal income tax
• Tax-deductible contributions
• Possible exemption from state income, sales, and employment taxes
• Reduced postal rates
• Exemption from Federal unemployment tax
• Tax-exempt financing.

Qualifying for and obtaining recognition of Section 501(c)(3) status requires meeting stringent IRS requirements. Further, once status is recognized, the organization must operate within IRS parameters to maintain their exemption. There are also special IRS tax return requirements, the vagaries of taxable unrelated business income, and special treatment of employees, that must be dealt with. Few individuals new to the area are conversant with these rules, and indeed, many tax practitioners who do not regularly practice in the area may only have generalized knowledge of the rules.

The IRS has put out an excellent resource to educate those involved in the exempt organizations world on all of these issues. Two words that almost never are used together in the same sentence are "tax" and "entertaining," but I am about to do so. At a new website,, the IRS has created an entertaining method of educating interested persons about these tax issues. Avoiding a mere dry recitation of rules and regulations, the Service is to be applauded for attempting to ease the burden of learning about these rules by including games, challenges, graphics, and sound files to make the education process as painless as possible.

This is an excellent website for practitioners to direct their clients, to help them with their exempt organizations and applicable compliance burdens. Tax practitioners may also benefit from a visit, if only for a refresher on some aspects of exempt organizations they may not have thought about recently.

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