May a nonprofit that makes loans to private individuals and businesses qualify as a Section 501(c)(3) organization? Or is making a loan a “business,” not suitable for public charity status? In the world of microfinance—making small loans to those who lack ready access to funds— the IRS allows for such public charity qualification, albeit within restrictive parameters. Charitable microfinance activities are well grounded in historical practice, they can provide significant societal benefits to disadvantaged communities, and thus they can fulfill tax requirements for “charity.”
Does your nonprofit owe income tax on multiple “silos” of unrelated business taxable income (UBTI)? This has been a difficult question for many tax-exempt organizations to answer due to the lack of guidance on what constitutes one unrelated trade or business, or one “silo.” On August 21, 2018, the Internal Revenue Service (“IRS”) issued Notice 2018-67 (“Notice”), providing interim guidance, and greatly needed clarity, on how to identify separate trades or businesses in connection with unrelated business income tax (“UBIT”) liability. This article provides six of the most notable take-aways from Notice 2018-67.
What is religious enough for the government to recognize a ministry’s tax exemption? Within the unemployment tax context, Illinois and other state laws exempt churches and “church-controlled” nonprofits “operated primarily for religious purposes.” If they meet either definition, then they are not “employers” for unemployment purposes and therefore need not participate in the state unemployment system. But how does the government determine whether the “primarily” religious element is met?