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Non-Profit Accounting

How does my business qualify to be a Nonprofit Organization?

In order for a nonprofit organization to qualify for nonprofit status it must fit into one of the categories in Section 501(c) of the Internal Revenue Code. All of these qualification requirements must be met and upheld in order to avoid termination of nonprofit status.

(Link to Section 501 (c))

 R.E.J’s Accounting and Tax specialties are in 501 (c) 3 and 501 (c) 7.

 501(c) 3 organizations are usually referred to as charitable and must not be organized or operated for the benefit of private interests. No part of a section 501(c) 3 organization’s net earning may inure to the benefit of any private shareholder or individual.  If the organization engages in an excess benefit transaction with a person having substantial influence, an excise tax may be imposed on the person and any organization managers agreeing to the transaction. Also 501(c) 3 organizations are restricted by how much political and legislative lobbying activities they may conduct.

 501 (c) 7 organizations are permitted to receive up to 35% of its gross receipts, including investment income from outside its membership without losing its tax-exempt status. 

However, 15% of the organization’s gross receipts may be derived from the use of the organization’s faculties by the general public.

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