In addition to filing the IRS application, the entity typically must also file a similar application with the state where it is located. Entities that fail to apply for exempt status can get into trouble. If the application is not filed within 15 months from the date of organization, the date on which exempt status begins may not be retroactive. If this happens, the entity is considered taxable for the period it was not recognized as exempt, and must file tax returns. Some of the fines can be assessed against board members personally.
All nonprofits are tax exempt.
But some are less tax exempt than others. These organizations receive income through membership dues and assessments. The organization with UBI must file two returns - one showing the exempt income and activities, and another reporting UBI and paying the resulting tax. An organization with substantial UBI can risk losing its exempt status. Our specialists will help prepare application packages, review relevant tax and information returns and consult with representatives and their clients in all aspects of the federal or state application process, or tax or status controversies.