AboutHarvey Mechanic Expertise Federal tax issues of nonprofit 501(c)(3) public charities only. Establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer question about Nonprofit's Unrelated Business or how to fill out forms. This forum is only for legal questions about a specific nonprofit asked by members or those otherwise directly effected by the specific nonprofit organization.
Experience I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar.
Expert: Harvey Mechanic Date: 7/5/2008 Subject: advanced ruling period ends
Question At the end of our advanced ruling period, if we file the forms and the IRS decides we didn't do a good enough job at our 501(c)(3) purpose, besides not being exempt anymore, will the organization owe back taxes? What other bad things could happen? What penalties, if any, does the organization face if it does not apply for a definitive ruling at the end of the period and basically gives up on being a 501(c)(3) organization?
Answer The organization will not owe back taxes simply because it did not do a good job. It would, however, owe back taxes if insiders gained more than reasonable compensation (known by the IRS as excess benefits). If you do not file the forms after the advanced ruling period, generally that means that the IRS will withdraw exemption from your organization and it will be treated, in the future, as a normal business.
Harvey Mechanic
Attorney At Law
Harvey108@hotmail.com
