Advocacy Law Midterm Study 2017

srlilly711's version from 2017-10-02 02:15


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Midterm Questions

Question Answer
The three sectors of civil societygovernmental, for profit, and nonprofit
What makes a nonprofit considered a "nonprofit?"It's not that nonprofits don't make a profit; nonprofit status depends on what the organization does with its revenues and the profit it earns
What sector is an important aspect of pluralism in the US?Nonprofit sector; all sectors must work together
What makes a for profit considered a "for profit?"For profits earn a profit for their owners (PRIVATE INUREMENT)
What is the private inurement doctrine? Can nonprofits engage in private inurement?NPOs can't use profits/assets/income to benefit an individual/owners; no, nonprofits cannot engage in private inurement. Nonprofits are expected to use their profits for public purpose.
Which entity creates nonprofit organizations - federal or state law?State law
Nonprofits are generally one of three types of organizations1) corporation 2) unincorporated association 3) trust
What is the role of directors of nonprofit organizations?- set policy - general administration
What is the role of officers and employees of nonprofit organizations?manage day to day operations , implement policies
(True OR False) Being tax exempt means the organization doesn't have to pay taxesFalse, an organization may be exempt from federal taxes, but may be subject to state/local taxes
Can nonprofit organizations engage in political activities?Yes, they can participate in certain political activities and have political action committees, NOT campaign committees
What are 2 activities federal tax law recognizes that an NPO can participate in to be considered charitable?- relief of poverty - relief of distress - advancement of religion, education, OR science - lessening burden of gov't - promotion of health - promotion of social welfare(lots more)
How many types of 501(c)3 organizations are tax exempt?28
True/false all nonprofit organizations have charity as their primary purpose.False; there are several types of NPOs
Why can't NPOs engage in private inurement?- insider might influence/control the actions of the NPO to create a private benefit - the benefit is intentionally conferred by the NPO
True/false an organization is considered charitable if its primary purpose is the provision of benefits to individuals in their private capacity.:False; an organization is not considered charitable if serving a private benefit to anyone. Nonprofits are not allowed to engage in private inurement.
What is the penalty for violating the private inurement doctrine?- Loss/denial of tax exempt status - As of 1996, penalty to the responsible individuals was developed
What is an excess benefit?An economic benefit that's received by a person of substantial influence over the affairs of the organization and is in excess value received
What reasonable expenses can a nonprofit pay? (4)- compensation and benefits - loan - rent - services
Who/what entity determines tax exemption?Federal law
Who/what entity recognizes tax exemption?the IRS
Can an organization be tax exempt without recognition from the IRS?Yes; examples are social welfare organizations, labor organizations, trade and professional associations, social clubs, veteran's organizations
What types of nonprofit organizations are required to be recognized by the IRS for tax exemption status?Charitable organizations, credit counseling entities, some employee benefit orgs, & qualified health insurers
Tax exemption status includes exemption from which type of tax?Income taxes
True/false an organization with annual gross receipts of no more than $5,000 per tax year (that isn't a private foundation or supporting organization) is exempt from filing for an application for tax exemption.:True
Is a church exempt from filing for an application for tax exemption?Yes
How is a private foundation defined?Private foundations are defined by what they are not - public charities - any tax exempt charitable entity that is not a public charity
True/false private foundations are funded from multiple sources.:False; private foundations are funded from a single source.
Every tax exempt charitable organization is automatically presumed to be a public charity or a private foundation?Private foundation; must prove it is, otherwise, a public charity
Why isn't a public charity considered a private foundation?Because of its function
Public charities must receive its ongoing financial support from which two entities?- donative type (grants) - service provider type (gifts, membership fees, grants, gross receipts from program revenue)
True/false public charities can be considered supported organizations.:True
What is a supported organization?Related structurally/operationally to one or more institutions of public supported charities
How much percentage holdings are prohibited for private foundations in business enterprises?No more than 20% holdings
Private foundations must have what percentage of excise tax on net investment income?2% excise tax
True/false self-dealing with a disqualified person is prohibited within a private foundation.:True; private foundations must not engage in self-dealings that would pose a conflict of interest with a person that is significantly involved with the organization.
What is the penalty for a disqualified person and the manager who participated in the self-dealing within a private foundation?- disqualified person: prohibited by law not to conduct business w/ the foundation - manager subject to sanctions in the form of an excise tax
Who must manage a charitable organization?Board of directors or board of trustees
What is the contemporary general standard of a board member of a nonprofit organization? (3 standards)- perform their duties in good faith - perform duties with care - perform duties in the best interest of the organization's mission, goals, and purpose
What is self-dealing?Transaction between a private foundation and a disqualifed person
Why would someone be subject to personal liability? (4 reasons)- person failed to meet their responsibility - person had a responsibility to refrain from doing something but did it anyway - person failed to disassociate from the wrongdoing of others - person actively participated in wrongful conduct
What are the 3 duties a board member has?Duty of care, duty of loyalty, duty of obedience (to the law and org rules)
What brings about protection against personal liability? (4 I's)- incorporation - indemnification (security against legal responsibility) - insurance - immunity
True/false A tax exempt organization must make its application for recognition of tax exemption and annual information return (Form 990) available to the public.:True
True/false Churches/religious institutions are required to file an annual information return.:False, they are not required
True/false State institutions and governmental units are not required to file an annual information return.:True, they are not required
What is the per day penalty for an organization that is required to file an annual information return (Form 990)?- $20 per day, up to $10,000 total -For larger organizations, the penalty is $100 per day, up to $50,000 total (with annual receipts of $1 mill)
What are the reporting requirements for the state of Georgia? (2 requirements)- Corporation annual report - Report under the Georgia Charitable Solicitation Act of 1988
True/false Watchdog organizations address financial oversight and expenditures for programs and fundraising.:True
Are organizations at risk if they fail to comply with watchdog agency standards?Yes, their ratings can have a negative impact on NPOs
True/false The IRS does not insist that NPOs have a conflict of interest policy.:False; the IRS does insist that NPOs have a conflict of interest policy, but there is some tension surrounding the issue.
Is it recommended that an organization adopt a whistleblower policy?Yes, to handle employee complaints and report illegal practices
Who should determine the executive director's compensation and review the compensation structure of the organization?The board of directors
What could happen if an organization pays more than reasonable compensation for services rendered?Could lead to private inurement based on the actual amount and how the amount was determined
What is a joint venture?Partnership with individuals or for profit entities (i.e. Girl Scouts & Dell)
What is the most common type of joint venture?Real estate ventures, where the charitable organization is the general partner in a limited partnership
Why is it important to have a joint venture policy?- avoid private benefit - tax exempt orgs can't lose control of its facilities/programs to a for profit joint venture
When is a gift considered a gift? (2 elements)- voluntary - nothing is received in return
What are "interest donors?" (i.e. how often do they donate?)Interest donors are considered regular donors that have ongoing involvement with the organization
True/false the IRS audits of tax exempt organizations are decreasing.:False, the IRS audits of tax exempt orgs are increasing and managers should be ready for an audit if necessary.
Why might the IRS choose to audit an organization? Provide 2 reasons.- size of the organization - length of time since the last audit - review of a return - media reports about the org - state investigation of the org - third party reports wrongdoing
True/false a charitable contribution is a gift for one or more qualified donees.:True, qualified donees are charitable organizations
What is integrated giving?A gift that is planned as part of a donor's financial and tax affairs; usually a large contribution (i.e. trusts, contracts, wills, etc.)
True/false the value of a charitable contribution of a property is not its fair market value.:False, the value of a charitable contribution of property IS often its fair market value.
What does federal income tax treatment depend on in terms of charitable gifts?Depends on if the property is capital gain property
What are the typical forms of capital gain property? (3)Stocks, bonds, real estate
What is the most common form of private inurement?Compensation b/c unreasonable compensation can lead to private inurement

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