A tax-exempt entity is an organization that is exempt from paying federal and state taxes. This includes religious organizations, educational institutions, and charitable organizations. Tax-free status benefits these organizations, but nonprofits generally have less flexibility because they are subjected to greater oversight by authorities and regulators. As such, the IRS has enacted certain regulations, under which these entities are subject to federal income taxation if an entity deviates from its said purpose.

Imagine that you are the secretary of a tax-exempt organization. In your initial post, identify your organization, then research and discuss situations that might trigger taxable events. Why would these events be taxable? Explain what steps you can take to avoid such taxable events.