Part two of our Believe It or Not tax oddity series – Nonprofits!
June 1, 2009
Nonprofit organizations are a crucial part of our society, providing help to the needy, education for a lifetime, funds for good causes and inspiration for many. Their services are being called on even more now due to these challenging financial times.
If you manage a non-profit, or assist in one, here is some tax information that can help you sort through what’s expected of your organization at the state level.
First, designation of the nonprofit status itself must be granted by the Internal Revenue Service – also affectionately known as the IRS. Nonprofits include specific corporations, and any community chest, fund, or foundations that are organized and operated for the following purposes.
- religious
- charitable
- scientific
- testing for public safety
- literary
- educational purposes
- civic
- to foster national or international amateur sports, or
- for the prevention of cruelty to children or animals
These organizations are formed by incorporating in the state in which they expect to do business. In fact, the act of incorporating allows the organization to enter into business dealings, form contracts and own property as any other individual or for-profit corporation may do
Tax Deduction. Chances are you have been approached by someone asking for a contribution for a particular nonprofit organization. If the organization is eligible to receive tax-deductible contributions, you may be able to take off your donation on your federal individual or business tax return. Note – Indiana does not have a similar state tax deduction for charitable contributions.
Tax exempt. Even though a nonprofit organization may not owe an income tax on funds it takes in, it still may owe tax on income that’s not directly related to its business. Indiana’s Form IT-20NP guides them through this process.
Sales tax. Special provisions apply to nonprofit organizations with respect to sales tax.
- Certain purchases made by nonprofit organizations may be exempt from sales tax. Form NP-20A must be filed to take advantage of this exemption, and Form NP-20 must be filed annually. Note –certain state and local instrumentalities are excepted from the annual filing requirement.
- Sales tax must be collected and sent to the Department on sales made by nonprofit organizations unless certain limitations are met. Get Information Bulletin #10 for details.
Charity gaming. Just about every community you drive through in Indiana has advertisements touting a local bingo game. In fact, licensed nonprofit organizations that have been in existence in Indiana for at least five years may be eligible to conduct bingo games and hold other charity gaming events (raffles, Vegas-style events [card, dice, roulette], sell pull-tabs, punchboards, and tip boards).
Visit our New and Small Business Education Center for more information regarding nonprofit organizations. Here you can learn more about and how to register nonprofit organizations, how to register for exemptions from taxes on utilities, sales and income tax, plus read frequently asked questions.
Nonprofit organizations hold a unique position in our hearts and minds. Oftentimes they promote volunteerism, which adds beautiful threads to the tapestry of our lives. We are enriched by them in many ways.
Come back in a couple of weeks for our next installment of Believe It or Not tax oddities.
Stay Connected
- Find Indiana tax forms.
- Know when I will receive my tax refund.
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- Take the renter's deduction.
- Pay my tax bill in installments.
- Claim a gambling loss on my Indiana return.
- Have more time to file my taxes and I think I will owe the Department.
