Multiple Choice. Choose the best answer.
1. State regulation of not-for-profit organizations derives from the state’s power to:
a. Grant exemption from income taxes.
b. Give legal life to a not-for-profit corporation.
c. Grant exemption from sales taxes.
d. Grant licenses for charitable solicitation.
2. A typical reason why an NPO might not be exempt from federal taxes is:
a. The NPO expects to spend all of its annual revenue and, therefore, will have no “income” on which to be taxed.
b. The NPO is primarily organized to influence political legislation.
c. The NPO chooses not to apply to the federal government for tax-exempt status.
d. All of the above.
3. The “ongoing compliance” stage of the life cycle of a tax-exempt organization that interacts with the IRS includes:
a. Intermediate sanctions.
b. Application for exempt status with Form 1023.
c. Notifying the IRS about a merger.
d. Filing unrelated business income tax returns.
4. Federal regulation of not-for-profit organizations derives from the federal government’s power to:
a. Grant licenses for charitable solicitation.
b. Grant exemption from federal income taxes.
c. Grant exemption from sales taxes.
d. Give legal life to a not-for-profit corporation.
5. A term used to indicate that a not-for-profit organization is communicating directly with a public official in either the executive or legislative branch of the state government for the purpose of influencing legislation is:
a. Influencing.
b. Grass-roots lobbying.
c. Direct lobbying.
d. Propagandizing.
6. A not-for-profit organization that is exempt from federal income taxes under IRC Sec. 501(c)(3), exists to make grants to public charities, and receives its support from a small number of individuals or corporations and investment income rather than from the public at large is called a:
a. Private foundation.
b. Public charity.
c. Nongovernmental organization.
d. Governmental, not-for-profit organization.
7. A measure of performance of a not-for-profit organization that captures whether contributions received are appropriately higher than the cost of raising those funds is:
a. Unrestricted net assets divided by operating expenses.
b. Revenues divided by expenses.
c. Public support divided by fund-raising expenses.
d. Program expenses divided by total expenses.
8. An example of unrelated business income for which a tax-exempt entity may have to pay taxes at corporate rates is:
a. An environmental organization that offers advertising to nonmembers in its annual catalog.
b. A university that offers health club memberships in its intramural facilities to local residents.
c. A credit union that offers insurance and travel agency services to members and nonmembers.
d. All of the above.
9. The tool the IRS most likely will use when key officers in a tax-exempt entity receive excess economic benefits from transactions with the not-for-profit organization is:
a. Fines and forfeits.
b. Revocation of the organization’s tax-exempt status.
c. Intermediate sanctions.
d. Public display on the IRS’s Web site.
10. When a tax-exempt organization dissolves, the managers must ensure that:
a. All assets are appropriately transferred to another tax-exempt organization.
b. All creditors get paid.
c. All federal, state, and local taxes are paid.
d. All of the above.