Protecting Your Organization's Tax-Exempt Status

Mark Bookman is the author of Protecting Your Organization's Tax-Exempt Status: A Guide for Nonprofit Managers, published by Wiley.

• Preface The AuthorTax Exemption Under Challenge: The ContextThe Current Debate Over Tax Exemption 3The Current Environment and Debate 3The Views of the Protagonists 7The Current Approach to Tax Laws 9The Evolution of Government Policy Toward Nonprofit Organizations 12A Brief History of Federal Law and Tax-Exempt Status 12The Rationale for Tax Exemption 16Organizations That Are Covered 20The Unrelated Business Income Tax 23Federal Law and the Internal Revenue CodeFederal Law on Tax-Exempt Status and Unrelated Business Income 29Gaining Tax-Exempt Status 30Maintaining Tax-Exempt Status 36Unrelated Business Income 38Separating Taxable and Nontaxable Income 41Using the Fragmentation Test 54Taxing Passive Income 54Convenience Exception 59Political Activity 60Other Exemptions 62Special Rules for Specific Types of Income 64Leasing Rules 65Debt-Financed Property 67Income from Advertising 69Subsidiary Organizations 71Exploitation Rule 74Joint Ventures and Partnerships 74Dual Use Facilities 76Fund-Raising Activities and Solicitations 77Mailing Lists 78Research 79How the Internal Revenue Code Treats Different Types of Organizations 81Educational Organizations 82Religious Organizations 85Hospitals 87Other Major Categories of Organizations 95Potential Changes to the Internal Revenue Code 98Posthearing Activity: Proposals Currently Under Consideration 100Actions of the Internal Revenue Service 107Other Tax Legislation 110State and Local IssuesNonprofit Tax Law at the State Level 115The Unfair Competition Debate 115The Business Coalition for Fair Competition 116Legislative Activity at the State Level 120Review Commissions 124Proposed Model State Unfair Competition Bill 125Judicial Activity and Other State Legislation 126The Use of Political Pressure 130Responses in the Nonprofit Community: Policy Formulation 134The Future 137Local Government and Property Tax Exemptions 139Property Tax Exemption Litigation 141Litigation: Exemption from Other Local Government Taxes 146Property Tax Exemption Statutes 146Community and Nonprofit Organization Relationships: Political Alternatives 152Options Other Than Property Tax Exemptions: State Subsidies 154Options Other Than Property Tax Exemptions: Fees in Lieu of Taxes 155Judicially Created Multipart Tests and Other Court Actions 157Overview of Property Tax Exemption 159Community Disputes Over Property Tax Exemptions: Lessons from Specific Cases 161Higher Education 162Case Study: The Syracuse University Carrier Dome 165Case Study: The YMCA 168Case Study: Voluntary Hospitals 176Guidelines for ActionEnsuring Compliance with the Law and Dealing with Potential Challenges 187What the Law Requires 187Developing and Implementing an Action Plan 190The Audit Process 195A Recommended Proactive Program: The Social Accountability Budget 200Other Proactive Examples 207Applicability to Individual Organizations 212Influencing Public Policy Toward Nonprofits 213Resource A. Unrelated Business Income Tax Cases 221Resource B. Unfair Competition Cases 230Resource C. Property Tax and Related Cases 232Resource D. Internal Revenue Service Materials 239References 247Index 259