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- Title
Nonprofits: Are You at Risk of Losing Your Tax-Exempt Status?
- Authors
Lavarda, Gina M.
- Abstract
In 2004, the Internal Revenue Service ("IRS") studied 110 § 501(c)(3) organizations and found that seventy-five percent of them had violated federal tax law by engaging in political-campaign activities during the 2004 campaign period. The IRS learned that many of these organizations did not understand the broad scope of the political-campaign prohibition and that organizations' leaders mistakenly spoke on behalf of their organizations rather than in their personal capacities separate from their organizations. Following the study, the IRS stated that any § 501(c)(3) organization that did not comply with federal tax law's statutory requirements and restrictions risked losing its tax-exempt status. As the 2008 campaign was in full swing, the IRS promised to step up its enforcement of § 501(c)(3) requirements. As a result, courts likely will face increased litigation related to § 501(c)0) organization violations. This Note reviews the requirements and restrictions that are placed on § 501(c)(3) organizations, including the political-campaign prohibition. In addition, this Note proposes a test to assist courts, § 501(c)(3) organizations, and leaders of § 501(c)0) organizations in determining when organizations' leaders are acting or speaking on behalf of their organizations and when they are speaking in their personal capacities, exercising their First Amendment free-speech rights.
- Subjects
UNITED States; TAXATION of nonprofit organizations; TAX exemption; UNITED States tax laws; NONPROFIT organizations -- Political activity; UNITED States presidential election, 2008; FREEDOM of speech; UNITED States. Internal Revenue Service
- Publication
Iowa Law Review, 2009, Vol 94, Issue 4, p1473
- ISSN
0021-0552
- Publication type
Article