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Exam 15: Exempt Entities

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Question 1

Multiple Choice

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Which of the following statements is correct?

A) Exempt organizations cannot engage in significant levels of lobbying activities.
B) Certain exempt organizations can elect to engage in lobbying activities on a limited basis.
C) Churches can engage in lobbying activities on an unlimited basis because of the separation of church and state provision.
D) Only a.and b.are correct.
E) Only a.and c.are correct.

F) All of the above
G) A) and D)

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D

Question 2

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If an exempt organization conducts a trade or business that is regularly carried on by the organization,it is subject to the unrelated business income tax (UBIT).

A) True
B) False

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Question 3

Multiple Choice

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Which of the following are exempt organizations?

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT)unless it is profitable.

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

Define a qualified corporate sponsorship payment.

George is running for mayor of Culpepper.The members of Third Church adamantly oppose his candidacy.They would like to run a political advertisement in the local newspaper opposing his candidacy.The newspaper ad would have no effect on Third Church's exempt status because the ad opposes George;it does not support his opponent.

Which of the following statements regarding exempt organization filing requirements is incorrect?

The League of Women Voters is a § 501(c)(3)organization.

The Dispensary is a pharmacy that is part of a § 501(c)(3)hospital.Its primary mission is to dispense medicines for hospital patients.In addition,the pharmacy dispenses medicines to former hospital patients for a period of up to 30 days after discharge from the hospital.It does this for the dual purpose of convenience to the former patients (i.e. ,the closest pharmacy is 6 miles away),and to ensure that the former patients receive the medicines that have been prescribed for them. The Dispensary carefully carries out the policy of the hospital board that no more than 20% of its gross revenues come from former-patient medicine sales.If necessary,in December of each year,sales to former patients are curtailed to assure compliance with this policy.Sales revenue from each of the two sources is as follows for 2010. Calculate the amount of The Dispensary's unrelated business gross income.

What are intermediate sanctions and to what types of exempt organizations do they apply?

Unless the "widely available" provision is satisfied,a § 501(c)(3)exempt organization (excluding churches and private foundations)must make copies of the following available to the general public: Form 990 (Return of Organization Exempt from Income Tax)and Form 1023 [Application for Recognition of Exemption under § 501(c)(3)] or Form 1024 [Application for Recognition of Exemption under § 501(a)].

While engaging in a prohibited transaction can result in an exempt organization being subject to tax,it will not result in an exempt organization losing its exempt status.

If an exempt organization owns a feeder organization,the exempt organization is not taxed on the profits of the feeder organization under the unrelated business income tax (UBIT)rules.

Certain exempt organizations can engage in lobbying to the same extent as for-profit corporations.

Blue,Inc. ,receives its support from the following sources. Which of the following statements is correct?

The unrelated business income tax (UBIT)is designed to treat the entity as if it were subject to the corporate income tax,with the highest corporate tax rate (35%)applying.

Discuss benefits for which an exempt organization may be eligible,other than exemption from Federal income tax.

Is the taxation of a feeder organization influenced by the percentage of its earnings that it remits to an exempt organization?

An exempt organization can be subject to the Federal income tax.