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Illinois 1040x

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Illinois 1040x

Illinois 1040x 3. Illinois 1040x   Section 501(c)(3) Organizations Table of Contents IntroductionChild care organizations. Illinois 1040x Topics - This chapter discusses: Useful Items - You may want to see: Contributions to 501(c)(3) OrganizationsCertain annuity contracts. Illinois 1040x Certain contracts held by a charitable remainder trust. Illinois 1040x Excise Taxes. Illinois 1040x Indoor tanning services. Illinois 1040x Application for Recognition of ExemptionPolitical activity. Illinois 1040x Private delivery service. Illinois 1040x Amendments to organizing documents required. Illinois 1040x How to show reasonable action and good faith. Illinois 1040x Not acting reasonably and in good faith. Illinois 1040x Prejudicing the interest of the Government. Illinois 1040x Procedure for requesting extension. Illinois 1040x More information. Illinois 1040x Organizations Not Required To File Form 1023 Articles of OrganizationOrganizational Test Dedication and Distribution of Assets Educational Organizations and Private SchoolsEducational Organizations Private Schools Organizations Providing InsuranceCharitable Risk Pools Other Section 501(c)(3) OrganizationsCharitable Organizations Religious Organizations Scientific Organizations Literary Organizations Amateur Athletic Organizations Prevention of Cruelty to Children or Animals Private Foundations and Public CharitiesPrivate Foundations Public Charities Private Operating Foundations Lobbying ExpendituresLobbying expenditures. Illinois 1040x Grass roots expenditures. Illinois 1040x Lobbying nontaxable amount. Illinois 1040x Grass roots nontaxable amount. Illinois 1040x Organization that no longer qualifies. Illinois 1040x Tax on organization. Illinois 1040x Tax on managers. Illinois 1040x Taxes on organizations. Illinois 1040x Taxes on managers. Illinois 1040x Political expenditures. Illinois 1040x Correction of expenditure. Illinois 1040x Introduction An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes. Illinois 1040x Religious. Illinois 1040x Charitable. Illinois 1040x Scientific. Illinois 1040x Testing for public safety. Illinois 1040x Literary. Illinois 1040x Educational. Illinois 1040x Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment; however, see Amateur Athletic Organizations , later in this chapter). Illinois 1040x The prevention of cruelty to children or animals. Illinois 1040x To qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. Illinois 1040x A trust is a fund or foundation and will qualify. Illinois 1040x However, an individual or a partnership will not qualify. Illinois 1040x Examples. Illinois 1040x   Qualifying organizations include: Nonprofit old-age homes, Parent-teacher associations, Charitable hospitals or other charitable organizations, Alumni associations, Schools, Chapters of the Red Cross, Boys' or Girls' Clubs, and Churches. Illinois 1040x Child care organizations. Illinois 1040x   The term educational purposes includes providing for care of children away from their homes if substantially all the care provided is to enable individuals (the parents) to be gainfully employed and the services are available to the general public. Illinois 1040x Instrumentalities. Illinois 1040x   A state or municipal instrumentality may qualify under section 501(c)(3) if it is organized as a separate entity from the governmental unit that created it and if it otherwise meets the organizational and operational tests of section 501(c)(3). Illinois 1040x Examples of a qualifying instrumentality might include state schools, universities, or hospitals. Illinois 1040x However, if an organization is an integral part of the local government or possesses governmental powers, it does not qualify for exemption. Illinois 1040x A state or municipality itself does not qualify for exemption. Illinois 1040x Topics - This chapter discusses: Contributions to 501(c)(3) organizations, Applications for recognition of exemption, Articles of Organization, Educational organizations and private schools, Organizations providing insurance, Other section 501(c)(3) organizations, Private foundations and public charities, and Lobbying expenditures. Illinois 1040x Useful Items - You may want to see: Forms (and Instructions) 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code See chapter 6 for information about getting publications and forms. Illinois 1040x Contributions to 501(c)(3) Organizations Contributions to domestic organizations described in this chapter, except organizations testing for public safety, are deductible as charitable contributions on the donor's federal income tax return. Illinois 1040x Fundraising events. Illinois 1040x   If the donor receives something of value in return for the contribution, a common occurrence with fundraising efforts, part or all of the contribution may not be deductible. Illinois 1040x This may apply to fundraising activities such as charity balls, bazaars, banquets, auctions, concerts, athletic events, and solicitations for membership or contributions when merchandise or benefits are given in return for payment of a specified minimum contribution. Illinois 1040x   If the donor receives or expects to receive goods or services in return for a contribution to your organization, the donor cannot deduct any part of the contribution unless the donor intends to, and does, make a payment greater than the fair market value of the goods or services. Illinois 1040x If a deduction is allowed, the donor can deduct only the part of the contribution, if any, that is more than the fair market value of the goods or services received. Illinois 1040x You should determine in advance the fair market value of any goods or services to be given to contributors and tell them, when you publicize the fundraising event or solicit their contributions, how much is deductible and how much is for the goods or services. Illinois 1040x See Disclosure of Quid Pro Quo Contributions in chapter 2. Illinois 1040x Exemption application not filed. Illinois 1040x   Donors cannot deduct any charitable contribution to an organization that is required to apply for recognition of exemption but has not done so. Illinois 1040x Separate fund—contributions that are deductible. Illinois 1040x   An organization that is exempt from federal income tax other than as an organization described in section 501(c)(3) can, if it desires, establish a fund, separate and apart from its other funds, exclusively for religious, charitable, scientific, literary, or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. Illinois 1040x   If the fund is organized and operated exclusively for these purposes, it may qualify for exemption as an organization described in section 501(c)(3), and contributions made to it will be deductible as provided by section 170. Illinois 1040x A fund with these characteristics must be organized in such a manner as to prohibit the use of its funds upon dissolution, or otherwise, for the general purposes of the organization creating it. Illinois 1040x Personal benefit contracts. Illinois 1040x   Generally, charitable deductions will not be allowed for a transfer to, or for the use of, a section 501(c)(3) or (c)(4) organization if in connection with the transfer: The organization directly or indirectly pays, or previously paid, a premium on a personal benefit contract for the transferor, or There is an understanding or expectation that anyone will directly or indirectly pay a premium on a personal benefit contract for the transferor. Illinois 1040x   A personal benefit contract with respect to the transferor is any life insurance, annuity, or endowment contract, if any direct or indirect beneficiary under the contract is the transferor, any member of the transferor's family, or any other person designated by the transferor. Illinois 1040x Certain annuity contracts. Illinois 1040x   If an organization incurs an obligation to pay a charitable gift annuity, and the organization purchases an annuity contract to fund the obligation, individuals receiving payments under the charitable gift annuity will not be treated as indirect beneficiaries if the organization owns all of the incidents of ownership under the contract, is entitled to all payments under the contract, and the timing and amount of the payments are substantially the same as the timing and amount of payments to each person under the obligation (as such obligation is in effect at the time of the transfer). Illinois 1040x Certain contracts held by a charitable remainder trust. Illinois 1040x   An individual will not be considered an indirect beneficiary under a life insurance, annuity, or endowment contract held by a charitable remainder annuity trust or a charitable remainder unitrust solely by reason of being entitled to the payment if the trust owns all of the incidents of ownership under the contract, and the trust is entitled to all payments under the contract. Illinois 1040x Excise tax. Illinois 1040x   If the premiums are paid in connection with a transfer for which a deduction is not allowable under the deduction denial rule, without regard to when the transfer to the charitable organization was made, an excise tax will be applied that is equal to the amount of the premiums paid by the organization on any life insurance, annuity, or endowment contract. Illinois 1040x The excise tax does not apply if all of the direct and indirect beneficiaries under the contract are organizations. Illinois 1040x Excise Taxes. Illinois 1040x   A charitable organization liable for excise taxes must file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. Illinois 1040x Generally, the due date for filing Form 4720 occurs on the fifteenth day of the fifth month following the close of the organization's tax year. Illinois 1040x Indoor tanning services. Illinois 1040x   If your organization provides an indoor tanning bed service, the ACA imposed a 10% excise tax on services provided after June 30, 2010. Illinois 1040x For more information, go to IRS. Illinois 1040x gov and select Affordable Care Act Tax Provisions. Illinois 1040x Application for Recognition of Exemption This discussion describes certain information to be provided upon application for recognition of exemption by all organizations created for any of the purposes described earlier in this chapter. Illinois 1040x For example, the application must include a conformed copy of the organization's articles of incorporation, as discussed under Articles of Organization , later in this chapter. Illinois 1040x See the organization headings that follow for specific information your organization may need to provide. Illinois 1040x Form 1023. Illinois 1040x   Your organization must file its application for recognition of exemption on Form 1023. Illinois 1040x See chapter 1 and the instructions accompanying Form 1023 for the procedures to follow in applying. Illinois 1040x Some organizations are not required to file Form 1023. Illinois 1040x See Organizations Not Required To File Form 1023, later. Illinois 1040x    Additional information to help you complete your application can be found online. Illinois 1040x Go to Exemption Requirement – Section 501(c)(3) Organizations and select the link at the bottom of the Web page for step by step help with the application process. Illinois 1040x See Exemption Requirements - Section 501(c)(3) Organizations. Illinois 1040x   Form 1023 and accompanying statements must show that all of the following are true. Illinois 1040x The organization is organized exclusively for, and will be operated exclusively for, one or more of the purposes (religious, charitable, etc. Illinois 1040x ) specified in the introduction to this chapter. Illinois 1040x No part of the organization's net earnings will inure to the benefit of private shareholders or individuals. Illinois 1040x You must establish that your organization will not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. Illinois 1040x The organization will not, as a substantial part of its activities, attempt to influence legislation (unless it elects to come under the provisions allowing certain lobbying expenditures) or participate to any extent in a political campaign for or against any candidate for public office. Illinois 1040x See Political activity, next, and Lobbying Expenditures , near the end of this chapter. Illinois 1040x Political activity. Illinois 1040x   If any of the activities (whether or not substantial) of your organization consist of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office, your organization will not qualify for tax-exempt status under section 501(c)(3). Illinois 1040x Such participation or intervention includes the publishing or distributing of statements. Illinois 1040x   Whether your organization is participating or intervening, directly or indirectly, in any political campaign on behalf of (or in opposition to) any candidate for public office depends upon all of the facts and circumstances of each case. Illinois 1040x Certain voter education activities or public forums conducted in a nonpartisan manner may not be prohibited political activity under section 501(c)(3), while other so-called voter education activities may be prohibited. Illinois 1040x Effective date of exemption. Illinois 1040x   Most organizations described in this chapter that were organized after October 9, 1969, will not be treated as tax exempt unless they apply for recognition of exemption by filing Form 1023. Illinois 1040x These organizations will not be treated as tax exempt for any period before they file Form 1023, unless they file the form within 27 months from the end of the month in which they were organized. Illinois 1040x If the organization files the application within this 27-month period, the organization's exemption will be recognized retroactively to the date it was organized. Illinois 1040x Otherwise, exemption will be recognized only from the date of receipt. Illinois 1040x The date of receipt is the date of the U. Illinois 1040x S. Illinois 1040x postmark on the cover in which an exemption application is mailed or, if no postmark appears on the cover, the date the application is stamped as received by the IRS. Illinois 1040x Private delivery service. Illinois 1040x   If a private delivery service designated by the IRS, rather than the U. Illinois 1040x S. Illinois 1040x Postal Service, is used to deliver the application, the date of receipt is the date recorded or marked by the private delivery service. Illinois 1040x The following private delivery services have been designated by the IRS. Illinois 1040x DHL Express (DHL): DHL “Same Day” Service. Illinois 1040x Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Illinois 1040x United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Illinois 1040x M. Illinois 1040x , UPS Worldwide Express Plus, and UPS Worldwide Express. Illinois 1040x Amendments to organizing documents required. Illinois 1040x   If an organization is required to alter its activities or to make substantive amendments to its organizing document, the ruling or determination letter recognizing its exempt status will be effective as of the date the changes are made. Illinois 1040x If only a nonsubstantive amendment is made, exempt status will be effective as of the date it was organized, if the application was filed within the 15-month period, or the date the application was filed. Illinois 1040x Extensions of time for filing. Illinois 1040x   There are two ways organizations seeking exemption can receive an extension of time for filing Form 1023. Illinois 1040x Automatic 12-month extension. Illinois 1040x Organizations will receive an automatic 12-month extension if they file an application for recognition of exemption with the IRS within 12 months of the original deadline. Illinois 1040x To get this extension, an organization must add the following statement at the top of its application: “Filed Pursuant to Section 301. Illinois 1040x 9100-2. Illinois 1040x ” Discretionary extensions. Illinois 1040x An organization that fails to file a Form 1023 within the extended 12-month period will be granted an extension to file if it submits evidence (including affidavits) to establish that: It acted reasonably and in good faith, and Granting a discretionary extension will not prejudice the interests of the government. Illinois 1040x How to show reasonable action and good faith. Illinois 1040x   An organization acted reasonably and showed good faith if at least one of the following is true. Illinois 1040x The organization requests relief before its failure to file is discovered by the IRS. Illinois 1040x The organization failed to file because of intervening events beyond its control. Illinois 1040x The organization exercised reasonable diligence (taking into account the complexity of the return or issue and the organization's experience in these matters) but was not aware of the filing requirement. Illinois 1040x The organization reasonably relied upon the written advice of the IRS. Illinois 1040x The organization reasonably relied upon the advice of a qualified tax professional who failed to file or advise the organization to file Form 1023. Illinois 1040x An organization cannot rely on the advice of a tax professional if it knows or should know that he or she is not competent to render advice on filing exemption applications or is not aware of all the relevant facts. Illinois 1040x Not acting reasonably and in good faith. Illinois 1040x   An organization has not acted reasonably and in good faith under the following circumstances. Illinois 1040x It seeks to change a return position for which an accuracy-related penalty has been or could be imposed at the time the relief is requested. Illinois 1040x It was informed of the requirement to file and related tax consequences, but chose not to file. Illinois 1040x It uses hindsight in requesting relief. Illinois 1040x The IRS will not ordinarily grant an extension if specific facts have changed since the due date that makes filing an application advantageous to an organization. Illinois 1040x Prejudicing the interest of the Government. Illinois 1040x   Prejudice to the interest of the Government results if granting an extension of time to file to an organization results in a lower total tax liability for the years to which the filing applies than would have been the case if the organization had filed on time. Illinois 1040x Before granting an extension, the IRS can require the organization requesting it to submit a statement from an independent auditor certifying that no prejudice will result if the extension is granted. Illinois 1040x The interests of the Government are ordinarily prejudiced if the tax year in which the application should have been filed (or any tax year that would have been affected had the filing been timely) are closed by the statute of limitations before relief is granted. Illinois 1040x The IRS can condition a grant of relief on the organization providing the IRS with a statement from an independent auditor certifying that the interests of the Government are not prejudiced. Illinois 1040x Procedure for requesting extension. Illinois 1040x   To request a discretionary extension, an organization must submit (to the IRS address shown on Form 1023 and Notice 1382) the following. Illinois 1040x A statement showing the date Form 1023 was required to have been filed and the date it was actually filed. Illinois 1040x Any documents relevant to the application. Illinois 1040x An affidavit describing in detail the events that led to the failure to apply and to the discovery of that failure. Illinois 1040x If the organization relied on a tax professional's advice, the affidavit must describe the engagement and responsibilities of the professional and the extent to which the organization relied on him or her. Illinois 1040x This affidavit must be accompanied by a dated declaration, signed by an individual who has personal knowledge of the facts and circumstances, who is authorized to act for the organization, which states, “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. Illinois 1040x ” Detailed affidavits from individuals having knowledge or information about the events that led to the failure to make the application and to the discovery of that failure. Illinois 1040x This includes the organization's return preparer, and any accountant or attorney, knowledgeable in tax matters, who advised the taxpayer on the application. Illinois 1040x The affidavits must describe the engagement and responsibilities of the individual and the advice that he or she provided. Illinois 1040x These affidavits must include the name, current address, and taxpayer identification number of the individual, and be accompanied by a dated declaration, signed by the individual, which states: “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. Illinois 1040x ” The organization must state whether the returns for the tax year in which the application should have been filed or any tax years that would have been affected by the application had it been timely made are being examined by the IRS, an appeals office, or a federal court. Illinois 1040x The organization must notify the IRS office considering the request for relief if the IRS starts an examination of any such return while the organization's request for relief is pending. Illinois 1040x The organization, if requested, has to submit copies of its tax returns, and copies of the returns of other affected taxpayers. Illinois 1040x   A request for this relief in connection with an application for exemption does not require payment of an additional user fee. Illinois 1040x Also, a request for relief under the automatic 12-month extension does not require payment of a user fee. Illinois 1040x More information. Illinois 1040x   For more information about these procedures, see Regulations sections 301. Illinois 1040x 9100-1, 301. Illinois 1040x 9100-2, 301. Illinois 1040x 9100-3, Revenue Procedure 2013-4, section 6. Illinois 1040x 04, 2013-1 I. Illinois 1040x R. Illinois 1040x B. Illinois 1040x 126, and Revenue Procedure 2013-8, 2013-1 I. Illinois 1040x R. Illinois 1040x B. Illinois 1040x 237. Illinois 1040x See Revenue Procedure 2013-4 and Revenue Procedure 2013-8. Illinois 1040x Notification from the IRS. Illinois 1040x   Organizations filing Form 1023 and satisfying all requirements of section 501(c)(3) will be notified of their exempt status in writing. Illinois 1040x Organizations Not Required To File Form 1023 Some organizations are not required to file Form 1023. Illinois 1040x These include: Churches, interchurch organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of a church, such as a men's or women's organization, religious school, mission society, or youth group. Illinois 1040x Any organization (other than a private foundation) normally having annual gross receipts of not more than $5,000 (see Gross receipts test, later). Illinois 1040x These organizations are exempt automatically if they meet the requirements of section 501(c)(3). Illinois 1040x Filing Form 1023 to establish exemption. Illinois 1040x   If the organization wants to establish its exemption with the IRS and receive a ruling or determination letter recognizing its exempt status, it should file Form 1023. Illinois 1040x By establishing its exemption, potential contributors are assured by the IRS that contributions will be deductible. Illinois 1040x A subordinate organization (other than a private foundation) covered by a group exemption letter does not have to submit a Form 1023 for itself. Illinois 1040x Private foundations. Illinois 1040x   See Private Foundations and Public Charities, later in this chapter, for more information about the additional notice required from an organization in order for it not to be presumed to be a private foundation and for the additional information required from a private foundation claiming to be an operating foundation. Illinois 1040x Gross receipts test. Illinois 1040x   For purposes of the gross receipts test, an organization normally does not have more than $5,000 annually in gross receipts if: During its first tax year the organization received gross receipts of $7,500 or less, During its first 2 years the organization had a total of $12,000 or less in gross receipts, and In the case of an organization that has been in existence for at least 3 years, the total gross receipts received by the organization during the immediately preceding 2 years, plus the current year, are $15,000 or less. Illinois 1040x   An organization with gross receipts more than the amounts in the gross receipts test, unless otherwise exempt from filing Form 1023, must file a Form 1023 within 90 days after the end of the period in which the amounts are exceeded. Illinois 1040x For example, an organization's gross receipts for its first tax year were less than $7,500, but at the end of its second tax year its gross receipts for the 2-year period were more than $12,000. Illinois 1040x The organization must file Form 1023 within 90 days after the end of its second tax year. Illinois 1040x   If the organization had existed for at least 3 tax years and had met the gross receipts test for all prior tax years but fails to meet the requirement for the current tax year, its tax-exempt status for the prior years will not be lost even if Form 1023 is not filed within 90 days after the close of the current tax year. Illinois 1040x However, the organization will not be treated as a section 501(c)(3) organization for the period beginning with the current tax year and ending with the filing of Form 1023. Illinois 1040x Example. Illinois 1040x   An organization is organized and operated exclusively for charitable purposes and is not a private foundation. Illinois 1040x It was incorporated on January 1, 2009, and files returns on a calendar-year basis. Illinois 1040x It did not file a Form 1023. Illinois 1040x The organization's gross receipts during the years 2009 through 2012 were as follows: 2009 $3,600 2010 2,900 2011 400 2012 12,600   The organization's total gross receipts for 2009, 2010, and 2011 were $6,900. Illinois 1040x Therefore, it did not have to file Form 1023 and is exempt for those years. Illinois 1040x However, for 2010, 2011, and 2012 the total gross receipts were $15,900. Illinois 1040x Therefore, the organization must file Form 1023 within 90 days after the end of its 2012 tax year. Illinois 1040x If it does not file within this time period, it will not be exempt under section 501(c)(3) for the period beginning with tax year 2012 ending when the Form 1023 is received by the IRS. Illinois 1040x The organization, however, will not lose its exempt status for the tax years ending before January 1, 2012. Illinois 1040x   The IRS will consider applying the Commissioner's discretionary authority to extend the time for filing Form 1023. Illinois 1040x See the procedures for this extension discussed earlier. Illinois 1040x Articles of Organization Your organization must include a conformed copy of its articles of organization with the application for recognition of exemption. Illinois 1040x This may be its trust instrument, corporate charter, articles of association, or any other written instrument by which it is created. Illinois 1040x Organizational Test The articles of organization must limit the organization's purposes to one or more of those described at the beginning of this chapter and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further one or more of those purposes. Illinois 1040x These conditions for exemption are referred to as the organizational test. Illinois 1040x Section 501(c)(3) is the provision of law that grants exemption to the organizations described in this chapter. Illinois 1040x Therefore, the organizational test may be met if the purposes stated in the articles of organization are limited in some way by reference to section 501(c)(3). Illinois 1040x The requirement that your organization's purposes and powers must be limited by the articles of organization is not satisfied if the limit is contained only in the bylaws or other rules or regulations. Illinois 1040x Moreover, the organizational test is not satisfied by statements of your organization's officers that you intend to operate only for exempt purposes. Illinois 1040x Also, the test is not satisfied by the fact that your actual operations are for exempt purposes. Illinois 1040x In interpreting an organization's articles, the law of the state where the organization was created is controlling. Illinois 1040x If an organization contends that the terms of its articles have a different meaning under state law than their generally accepted meaning, such meaning must be established by a clear and convincing reference to relevant court decisions, opinions of the state attorney general, or other appropriate state authorities. Illinois 1040x The following are examples illustrating the organizational test. Illinois 1040x Example 1. Illinois 1040x Articles of organization state that an organization is formed exclusively for literary and scientific purposes within the meaning of section 501(c)(3). Illinois 1040x These articles appropriately limit the organization's purposes. Illinois 1040x The organization meets the organizational test. Illinois 1040x Example 2. Illinois 1040x An organization, by the terms of its articles, is formed to engage in research without any further description or limitation. Illinois 1040x The organization will not be properly limited as to its purposes since all research is not scientific. Illinois 1040x The organization does not meet the organizational test. Illinois 1040x Example 3. Illinois 1040x An organization's articles state that its purpose is to receive contributions and pay them over to organizations that are described in section 501(c)(3) and exempt from taxation under section 501(a). Illinois 1040x The organization meets the organizational test. Illinois 1040x Example 4. Illinois 1040x If a stated purpose in the articles is the conduct of a school of adult education and its manner of operation is described in detail, such a purpose will be satisfactorily limited. Illinois 1040x Example 5. Illinois 1040x If the articles state the organization is formed for charitable purposes, without any further description, such language ordinarily will be sufficient since the term charitable has a generally accepted legal meaning. Illinois 1040x On the other hand, if the purposes are stated to be charitable, philanthropic, and benevolent, the organizational requirement will not be met since the terms philanthropic and benevolent have no generally accepted legal meaning and, therefore, the stated purposes may, under the laws of the state, permit activities that are broader than those intended by the exemption law. Illinois 1040x Example 6. Illinois 1040x If the articles state an organization is formed to promote American ideals, or to foster the best interests of the people, or to further the common welfare and well-being of the community, without any limitation or provision restricting such purposes to accomplishment only in a charitable manner, the purposes will not be sufficiently limited. Illinois 1040x Such purposes are vague and may be accomplished other than in an exempt manner. Illinois 1040x Example 7. Illinois 1040x A stated purpose to operate a hospital does not meet the organizational test since it is not necessarily charitable. Illinois 1040x A hospital may or may not be exempt depending on the manner in which it is operated. Illinois 1040x Example 8. Illinois 1040x An organization that is expressly empowered by its articles to carry on social activities will not be sufficiently limited as to its power, even if its articles state that it is organized and will be operated exclusively for charitable purposes. Illinois 1040x Dedication and Distribution of Assets Assets of an organization must be permanently dedicated to an exempt purpose. Illinois 1040x This means that should an organization dissolve, its assets must be distributed for an exempt purpose described in this chapter, or to the Federal Government or to a state or local government for a public purpose. Illinois 1040x If the assets could be distributed to members or private individuals or for any other purpose, the organizational test is not met. Illinois 1040x Dedication. Illinois 1040x   To establish that your organization's assets will be permanently dedicated to an exempt purpose, the articles of organization should contain a provision ensuring their distribution for an exempt purpose in the event of dissolution. Illinois 1040x Although reliance can be placed upon state law to establish permanent dedication of assets for exempt purposes, your organization's application probably can be processed much more rapidly if its articles of organization include a provision ensuring permanent dedication of assets for exempt purposes. Illinois 1040x Distribution. Illinois 1040x   Revenue Procedure 82-2, 1982-1 C. Illinois 1040x B. Illinois 1040x 367, identifies the states and circumstances in which the IRS will not require an express provision for the distribution of assets upon dissolution in the articles of organization. Illinois 1040x The procedure also provides a sample of an acceptable dissolution provision for organizations required to have one. Illinois 1040x   If a named beneficiary is to be the distributee, it must be one that would qualify and would be exempt within the meaning of section 501(c)(3) at the time the dissolution takes place. Illinois 1040x Since the named beneficiary at the time of dissolution may not be qualified, may not be in existence, or may be unwilling or unable to accept the assets of the dissolving organization, a provision should be made for distribution of the assets for one or more of the purposes specified in this chapter in the event of any such contingency. Illinois 1040x Sample articles of organization. Illinois 1040x   See sample articles of organization in the Appendix in the back of this publication. Illinois 1040x Educational Organizations and Private Schools If your organization wants to obtain recognition of exemption as an educational organization, you must submit complete information as to how your organization carries on or plans to carry on its educational activities, such as by conducting a school, by panels, discussions, lectures, forums, radio and television programs, or through various cultural media such as museums, symphony orchestras, or art exhibits. Illinois 1040x In each instance, you must explain by whom and where these activities are or will be conducted and the amount of admission fees, if any. Illinois 1040x You must submit a copy of the pertinent contracts, agreements, publications, programs, etc. Illinois 1040x If you are organized to conduct a school, you must submit full information regarding your tuition charges, number of faculty members, number of full-time and part-time students enrolled, courses of study and degrees conferred, together with a copy of your school catalog. Illinois 1040x See also Private Schools , discussed later. Illinois 1040x Educational Organizations The term educational relates to: The instruction or training of individuals for the purpose of improving or developing their capabilities, or The instruction of the public on subjects useful to individuals and beneficial to the community. Illinois 1040x Advocacy of a position. Illinois 1040x   Advocacy of a particular position or viewpoint may be educational if there is a sufficiently full and fair exposition of pertinent facts to permit an individual or the public to form an independent opinion or conclusion. Illinois 1040x The mere presentation of unsupported opinion is not educational. Illinois 1040x Method not educational. Illinois 1040x   The method used by an organization to develop and present its views is a factor in determining if an organization qualifies as educational within the meaning of section 501(c)(3). Illinois 1040x The following factors may indicate that the method is not educational. Illinois 1040x The presentation of viewpoints unsupported by facts is a significant part of the organization's communications. Illinois 1040x The facts that purport to support the viewpoint are distorted. Illinois 1040x The organization's presentations make substantial use of inflammatory and disparaging terms and express conclusions more on the basis of emotion than of objective evaluations. Illinois 1040x The approach used is not aimed at developing an understanding on the part of the audience because it does not consider their background or training. Illinois 1040x   Exceptional circumstances, however, may exist where an organization's advocacy may be educational even if one or more of the factors listed above are present. Illinois 1040x Qualifying organizations. Illinois 1040x   The following types of organizations may qualify as educational: An organization, such as a primary or secondary school, a college, or a professional or trade school, that has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled student body in attendance at a place where the educational activities are regularly carried on, An organization whose activities consist of conducting public discussion groups, forums, panels, lectures, or other similar programs, An organization that presents a course of instruction by correspondence or through the use of television or radio, A museum, zoo, planetarium, symphony orchestra, or other similar organization, A nonprofit children's day-care center, and A credit counseling organization. Illinois 1040x College book stores, cafeterias, restaurants, etc. Illinois 1040x   These and other on-campus organizations should submit information to show that they are controlled by and operated for the convenience of the faculty and student body or by whom they are controlled and whom they serve. Illinois 1040x Alumni association. Illinois 1040x   An alumni association should establish that it is organized to promote the welfare of the university with which it is affiliated, is subject to the control of the university as to its policies and destination of funds, and is operated as an integral part of the university or is otherwise organized to promote the welfare of the college or university. Illinois 1040x If your association does not have these characteristics, it may still be exempt as a social club if it meets the requirements described in chapter 4, under 501(c)(7) - Social and Recreation Clubs . Illinois 1040x Athletic organization. Illinois 1040x   This type of organization must submit evidence that it is engaged in activities such as directing and controlling interscholastic athletic competitions, conducting tournaments, and prescribing eligibility rules for contestants. Illinois 1040x If it is not so engaged, your organization may be exempt as a social club described in chapter 4. Illinois 1040x Raising funds to be used for travel and other activities to interview and persuade prospective students with outstanding athletic ability to attend a particular university does not show an exempt purpose. Illinois 1040x If your organization is not exempt as an educational organization, see Amateur Athletic Organizations , later in this chapter. Illinois 1040x Private Schools Every private school filing an application for recognition of tax-exempt status must supply the IRS (on Schedule B, Form 1023) with the following information. Illinois 1040x The racial composition of the student body, and of the faculty and administrative staff, as of the current academic year. Illinois 1040x (This information also must be projected, so far as may be feasible, for the next academic year. Illinois 1040x ) The amount of scholarship and loan funds, if any, awarded to students enrolled and the racial composition of students who have received the awards. Illinois 1040x A list of the school's incorporators, founders, board members, and donors of land or buildings, whether individuals or organizations. Illinois 1040x A statement indicating whether any of the organizations described in item (3) above have an objective of maintaining segregated public or private school education at the time the application is filed and, if so, whether any of the individuals described in item (3) are officers or active members of those organizations at the time the application is filed. Illinois 1040x The public school district and county in which the school is located. Illinois 1040x How to determine racial composition. Illinois 1040x   The racial composition of the student body, faculty, and administrative staff can be an estimate based on the best information readily available to the school, without requiring student applicants, students, faculty, or administrative staff to submit to the school information that the school otherwise does not require. Illinois 1040x Nevertheless, a statement of the method by which the racial composition was determined must be supplied. Illinois 1040x The identity of individual students or members of the faculty and administrative staff should not be included with this information. Illinois 1040x   A school that is a state or municipal instrumentality (see Instrumentalities , near the beginning of this chapter), whether or not it qualifies for exemption under section 501(c)(3), is not considered to be a private school for purposes of the following discussion. Illinois 1040x Racially Nondiscriminatory Policy To qualify as an organization exempt from federal income tax, a private school must include a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy as to students and that it does not discriminate against applicants and students on the basis of race, color, or national or ethnic origin. Illinois 1040x Also, the school must circulate information that clearly states the school's admission policies. Illinois 1040x A racially nondiscriminatory policy toward students means that the school admits the students of any race to all the rights, privileges, programs, and activities generally accorded or made available to students at that school and that the school does not discriminate on the basis of race in administering its educational policies, admission policies, scholarship and loan programs, and athletic and other school-administered programs. Illinois 1040x The IRS considers discrimination on the basis of race to include discrimination on the basis of color or national or ethnic origin. Illinois 1040x The existence of a racially discriminatory policy with respect to the employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students. Illinois 1040x Conversely, the absence of racial discrimination in the employment of faculty and administrative staff is indicative of a racially nondiscriminatory policy as to students. Illinois 1040x A policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance is not discrimination on the basis of race when the purpose and effect of this policy is to promote establishing and maintaining the school's nondiscriminatory policy. Illinois 1040x A school that selects students on the basis of membership in a religious denomination or unit is not discriminating if membership in the denomination or unit is open to all on a racially nondiscriminatory basis. Illinois 1040x Policy statement. Illinois 1040x   The school must include a statement of its racially nondiscriminatory policy in all its brochures and catalogs dealing with student admissions, programs, and scholarships. Illinois 1040x Also, the school must include a reference to its racially nondiscriminatory policy in other written advertising that it uses to inform prospective students of its programs. Illinois 1040x Publicity requirement. Illinois 1040x   The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school. Illinois 1040x Selective communication of a racially nondiscriminatory policy that a school provides solely to leaders of racial groups will not be considered an effective means of communication to make the policy known to all segments of the community. Illinois 1040x To satisfy this requirement, the school must use one of the following two methods. Illinois 1040x Method one. Illinois 1040x   The school can publish a notice of its racially nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community. Illinois 1040x Such publication must be repeated at least once annually during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. Illinois 1040x When more than one community is served by a school, the school can publish the notice in those newspapers that are reasonably likely to be read by all racial segments in the communities that the school serves. Illinois 1040x If this method is used, the notice must meet the following printing requirements. Illinois 1040x It must appear in a section of the newspaper likely to be read by prospective students and their families. Illinois 1040x It must occupy at least 3 column inches. Illinois 1040x It must have its title printed in at least 12 point bold face type. Illinois 1040x It must have the remaining text printed in at least 8 point type. Illinois 1040x The following is an acceptable example of the notice:   NOTICE OF NONDISCRIMINATORY POLICY AS TO STUDENTS     The M School admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. Illinois 1040x It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs. Illinois 1040x   Method two. Illinois 1040x   The school can use the broadcast media to publicize its racially nondiscriminatory policy if this use makes the policy known to all segments of the general community the school serves. Illinois 1040x If the school uses this method, it must provide documentation showing that the means by which this policy was communicated to all segments of the general community was reasonably expected to be effective. Illinois 1040x In this case, appropriate documentation would include copies of the tapes or scripts used and records showing that there was an adequate number of announcements. Illinois 1040x The documentation also would include proof that these announcements were made during hours when they were likely to be communicated to all segments of the general community, that they were long enough to convey the message clearly, and that they were broadcast on radio or television stations likely to be listened to by substantial numbers of members of all racial segments of the general community. Illinois 1040x Announcements must be made during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. Illinois 1040x Exceptions. Illinois 1040x   The publicity requirements will not apply in the following situations. Illinois 1040x First, if for the preceding 3 years the enrollment of a parochial or other church-related school consists of students at least 75% of whom are members of the sponsoring religious denomination or unit, the school can make known its racially nondiscriminatory policy in whatever newspapers or circulars the religious denomination or unit uses in the communities from which the students are drawn. Illinois 1040x These newspapers and circulars can be distributed by a particular religious denomination or unit or by an association that represents a number of religious organizations of the same denomination. Illinois 1040x If, however, the school advertises in newspapers of general circulation in the community or communities from which its students are drawn and the second exception (discussed next) does not apply to the school, then it must comply with either of the publicity requirements explained earlier. Illinois 1040x Second, if a school customarily draws a substantial percentage of its students nationwide, worldwide, from a large geographic section or sections of the United States, or from local communities, and if the school follows a racially nondiscriminatory policy as to its students, the school may satisfy the publicity requirement by complying with the instructions explained earlier under Policy statement . Illinois 1040x   The school can demonstrate that it follows a racially nondiscriminatory policy either by showing that it currently enrolls students of racial minority groups in meaningful numbers or, except for local community schools, when minority students are not enrolled in meaningful numbers, that its promotional activities and recruiting efforts in each geographic area were reasonably designed to inform students of all racial segments in the general communities within the area of the availability of the school. Illinois 1040x The question as to whether a school demonstrates such a policy satisfactorily will be determined on the basis of the facts and circumstances of each case. Illinois 1040x   The IRS recognizes that the failure by a school drawing its students from local communities to enroll racial minority group students may not necessarily indicate the absence of a racially nondiscriminatory policy when there are relatively few or no such students in these communities. Illinois 1040x Actual enrollment is, however, a meaningful indication of a racially nondiscriminatory policy in a community in which a public school or schools became subject to a desegregation order of a federal court or are otherwise expressly obligated to implement a desegregation plan under the terms of any written contract or other commitment to which any federal agency was a party. Illinois 1040x   The IRS encourages schools to satisfy the publicity requirement by using either of the methods described earlier, even though a school considers itself to be within one of the Exceptions. Illinois 1040x The IRS believes that these publicity requirements are the most effective methods to make known a school's racially nondiscriminatory policy. Illinois 1040x In this regard, it is each school's responsibility to determine whether either of the exceptions applies. Illinois 1040x Such responsibility will prepare the school, if it is audited by the IRS, to demonstrate that the failure to publish its racially nondiscriminatory policy in accordance with either one of the publicity requirements was justified by one of the exceptions. Illinois 1040x Also, a school must be prepared to demonstrate that it has publicly disavowed or repudiated any statements purported to have been made on its behalf (after November 6, 1975) that are contrary to its publicity of a racially nondiscriminatory policy as to students, to the extent that the school or its principal official was aware of these statements. Illinois 1040x Facilities and programs. Illinois 1040x   A school must be able to show that all of its programs and facilities are operated in a racially nondiscriminatory manner. Illinois 1040x Scholarship and loan programs. Illinois 1040x   As a general rule, all scholarship or other comparable benefits obtainable at the school must be offered on a racially nondiscriminatory basis. Illinois 1040x This must be known throughout the general community being served by the school and should be referred to in its publicity. Illinois 1040x Financial assistance programs, as well as scholarships and loans made under financial assistance programs, that favor members of one or more racial minority groups and that do not significantly detract from or are designed to promote a school's racially nondiscriminatory policy will not adversely affect the school's exempt status. Illinois 1040x Certification. Illinois 1040x   An individual authorized to take official action on behalf of a school that claims to be racially nondiscriminatory as to students must certify annually, under penalties of perjury, on Schedule E (Form 990 or 990-EZ) or Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax, whichever applies, that to the best of his or her knowledge and belief the school has satisfied all requirements that apply, as previously explained. Illinois 1040x   Failure to comply with the guidelines ordinarily will result in the proposed revocation of the exempt status of a school. Illinois 1040x Recordkeeping requirements. Illinois 1040x With certain exceptions, given later, each exempt private school must maintain the following records for a minimum period of 3 years, beginning with the year after the year of compilation or acquisition. Illinois 1040x Records indicating the racial composition of the student body, faculty, and administrative staff for each academic year. Illinois 1040x Records sufficient to document that scholarship and other financial assistance is awarded on a racially nondiscriminatory basis. Illinois 1040x Copies of all materials used by or on behalf of the school to solicit contributions. Illinois 1040x Copies of all brochures, catalogs, and advertising dealing with student admissions, programs, and scholarships. Illinois 1040x (Schools advertising nationally or in a large geographic segment or segments of the United States need only maintain a record sufficient to indicate when and in what publications their advertisements were placed. Illinois 1040x ) The racial composition of the student body, faculty, and administrative staff can be determined in the same manner as that described at the beginning of this section. Illinois 1040x However, a school cannot discontinue maintaining a system of records that reflect the racial composition of its students, faculty, and administrative staff used on November 6, 1975, unless it substitutes a different system that compiles substantially the same information, without advance approval of the IRS. Illinois 1040x The IRS does not require that a school release any personally identifiable records or personal information except in accordance with the requirements of the Family Educational Rights and Privacy Act of 1974. Illinois 1040x Similarly, the IRS does not require a school to keep records prohibited under state or federal law. Illinois 1040x Exceptions. Illinois 1040x   The school does not have to independently maintain these records for IRS use if both of the following are true. Illinois 1040x Substantially the same information has been included in a report or reports filed with an agency or agencies of federal, state, or local governments, and this information is current within 1 year. Illinois 1040x The school maintains copies of these reports from which this information is readily obtainable. Illinois 1040x If these reports do not include all of the information required, as discussed earlier, records providing such remaining information must be maintained by the school for IRS use. Illinois 1040x Failure to maintain records. Illinois 1040x   Failure to maintain or to produce the required records and information, upon proper request, will create a presumption that the organization has failed to comply with these guidelines. Illinois 1040x Organizations Providing Insurance An organization described in sections 501(c)(3) or 501(c)(4) may be exempt from tax only if no substantial part of its activities consists of providing commercial-type insurance. Illinois 1040x However, this rule does not apply to state-sponsored organizations described in sections 501(c)(26) or 501(c)(27), which are discussed in chapter 4, or to charitable risk pools, discussed next. Illinois 1040x Charitable Risk Pools A charitable risk pool is treated as organized and operated exclusively for charitable purposes if it: Is organized and operated only to pool insurable risks of its members (not including risks related to medical malpractice) and to provide information to its members about loss control and risk management, Consists only of members that are section 501(c)(3) organizations exempt from tax under section 501(a), Is organized under state law authorizing this type of risk pooling, Is exempt from state income tax (or will be after qualifying as a section 501(c)(3) organization), Has obtained at least $1,000,000 in startup capital from nonmember charitable organizations, Is controlled by a board of directors elected by its members, and Is organized under documents requiring that: Each member be a section 501(c)(3) organization exempt from tax under section 501(a), Each member that receives a final determination that it no longer qualifies under section 501(c)(3) notify the pool immediately, and Each insurance policy issued by the pool provide that it will not cover events occurring after a final determination described in (b). Illinois 1040x Other Section 501(c)(3) Organizations In addition to the information required for all organizations, as described earlier, you should include any other information described in this section. Illinois 1040x Charitable Organizations If your organization is applying for recognition of exemption as a charitable organization, it must show that it is organized and operated for purposes that are beneficial to the public interest. Illinois 1040x Some examples of this type of organization are those organized for: Relief of the poor, the distressed, or the underprivileged, Advancement of religion, Advancement of education or science, Erection or maintenance of public buildings, monuments, or works, Lessening the burdens of government, Lessening of neighborhood tensions, Elimination of prejudice and discrimination, Defense of human and civil rights secured by law, and Combating community deterioration and juvenile delinquency. Illinois 1040x The rest of this section contains a description of the information to be provided by certain specific organizations. Illinois 1040x This information is in addition to the required inclusions described in chapter 1, and other statements requested on Form 1023. Illinois 1040x Each of the following organizations must submit the information described. Illinois 1040x Charitable organization supporting education. Illinois 1040x   Submit information showing how your organization supports education — for example, contributes to an existing educational institution, endows a professorial chair, contributes toward paying teachers' salaries, or contributes to an educational institution to enable it to carry on research. Illinois 1040x Scholarships. Illinois 1040x   If the organization awards or plans to award scholarships, complete Schedule H of Form 1023. Illinois 1040x Also, submit the following: Criteria used for selecting recipients, including the rules of eligibility. Illinois 1040x How and by whom the recipients are or will be selected. Illinois 1040x If awards are or will be made directly to individuals, whether information is required assuring that the student remains in school. Illinois 1040x If awards are or will be made to recipients of a particular class, for example, children of employees of a particular employer— Whether any preference is or will be accorded an applicant by reason of the parent's position, length of employment, or salary, Whether as a condition of the award the recipient must upon graduation accept employment with the company, and Whether the award will be continued even if the parent's employment ends. Illinois 1040x A copy of the scholarship application form and any brochures or literature describing the scholarship program. Illinois 1040x Hospital. Illinois 1040x   If you are organized to operate a charitable hospital, complete and attach Section I of Schedule C, Form 1023. Illinois 1040x   If your hospital was transferred to you from proprietary ownership, complete and attach Schedule G of Form 1023. Illinois 1040x You must attach a list showing: The names of the active and courtesy staff members of the proprietary hospital, as well as the names of your medical staff members after the transfer to nonprofit ownership, and The names of any doctors who continued to lease office space in the hospital after its transfer to nonprofit ownership and the amount of rent paid. Illinois 1040x Submit also an appraisal showing the fair rental value of the rented space. Illinois 1040x Clinic. Illinois 1040x   If you are organized to operate a clinic, attach a statement including: A description of the facilities and services, To whom the services are offered, such as the public at large or a specific group, How charges are determined, such as on a profit basis, to recover costs, or at less than cost, By whom administered and controlled, Whether any of the professional staff (that is, those who perform or will perform the clinical services) also serve or will serve in an administrative capacity, and How compensation paid the professional staff is or will be determined. Illinois 1040x Home for the aged. Illinois 1040x   If you are organized to operate a home for the aged, complete and attach Schedule F of Form 1023 and required attachments. Illinois 1040x Community nursing bureau. Illinois 1040x   If you provide a nursing register or community nursing bureau, provide information showing that your organization will be operated as a community project and will receive its primary support from public contributions to maintain a nonprofit register of qualified nursing personnel, including graduate nurses, unregistered nursing school graduates, licensed attendants and practical nurses for the benefit of hospitals, health agencies, doctors, and individuals. Illinois 1040x Organization providing loans. Illinois 1040x   If you make, or will make, loans for charitable and educational purposes, submit the following information. Illinois 1040x An explanation of the circumstances under which such loans are, or will be, made. Illinois 1040x Criteria for selection, including the rules of eligibility. Illinois 1040x How and by whom the recipients are or will be selected. Illinois 1040x Manner of repayment of the loan. Illinois 1040x Security required, if any. Illinois 1040x Interest charged, if any, and when payable. Illinois 1040x Copies in duplicate of the loan application and any brochures or literature describing the loan program. Illinois 1040x Public-interest law firms. Illinois 1040x   If your organization was formed to litigate in the public interest (as opposed to providing legal services to the poor), such as in the area of protection of the environment, you should submit the following information. Illinois 1040x How the litigation can reasonably be said to be representative of a broad public interest rather than a private one. Illinois 1040x Whether the organization will accept fees for its services. Illinois 1040x A description of the cases litigated or to be litigated and how they benefit the public generally. Illinois 1040x Whether the policies and program of the organization are the responsibility of a board or committee representative of the public interest, which is neither controlled by employees or persons who litigate on behalf of the organization nor by any organization that is not itself an organization described in this chapter. Illinois 1040x Whether the organization is operated, through sharing of office space or otherwise, in a way to create identification or confusion with a particular private law firm. Illinois 1040x Whether there is an arrangement to provide, directly or indirectly, a deduction for the cost of litigation that is for the private benefit of the donor. Illinois 1040x Acceptance of attorneys' fees. Illinois 1040x   A nonprofit public-interest law firm can accept attorneys' fees in public-interest cases if the fees are paid directly by its clients and the fees are not more than the actual costs incurred in the case. Illinois 1040x Upon undertaking a representation, the organization cannot withdraw from the case because the litigant is unable to pay the fee. Illinois 1040x   Firms can accept fees awarded or approved by a court or an administrative agency and paid by an opposing party if the firms do not use the likelihood or probability of fee awards as a consideration in the selection of cases. Illinois 1040x All fee awards must be paid to the organization and not to its individual staff attorneys. Illinois 1040x Instead, a public-interest law firm can reasonably compensate its staff attorneys, but only on a straight salary basis. Illinois 1040x Private attorneys, whose services are retained by the firm to assist it in particular cases, can be compensated by the firm, but only on a fixed fee or salary basis. Illinois 1040x   The total amount of all attorneys' fees (court awarded and those received from clients) must not be more than 50% of the total cost of operations of the organization's legal functions, calculated over a 5-year period. Illinois 1040x   If, in order to carry out its program, an organization violates applicable canons of ethics, disrupts the judicial system, or engages in any illegal action, the organization will jeopardize its exemption. Illinois 1040x Religious Organizations To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains two basic guidelines. Illinois 1040x That the particular religious beliefs of the organization are truly and sincerely held. Illinois 1040x That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy. Illinois 1040x Therefore, your group (or organization) may not qualify for treatment as an exempt religious organization for tax purposes if its actions, as contrasted with its beliefs, are contrary to well established and clearly defined public policy. Illinois 1040x If there is a clear showing that the beliefs (or doctrines) are sincerely held by those professing them, the IRS will not question the religious nature of those beliefs. Illinois 1040x Churches. Illinois 1040x   Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption. Illinois 1040x In this event, you should submit information showing that your organization is a church, synagogue, association or convention of churches, religious order, or religious organization that is an integral part of a church, and that it is engaged in carrying out the function of a church. Illinois 1040x   In determining whether an admittedly religious organization is also a church, the IRS does not accept every assertion that the organization is a church. Illinois 1040x Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. Illinois 1040x The IRS considers the facts and circumstances of each organization applying for church status. Illinois 1040x Convention or association of churches. Illinois 1040x   Any organization that is otherwise a convention or association of churches will not fail to qualify as a church merely because the membership of the organization includes individuals as well as churches or because the individuals have voting rights in the organization. Illinois 1040x Integrated auxiliaries. Illinois 1040x   An organization is an integrated auxiliary of a church if all the following are true. Illinois 1040x The organization is described both in sections 501(c)(3) and 509(a)(1), 509(a)(2), or 509(a)(3). Illinois 1040x It is affiliated with a church or a convention or association of churches. Illinois 1040x It is internally supported. Illinois 1040x An organization is internally supported unless both of the following are true. Illinois 1040x It offers admissions, goods, services, or facilities for sale, other than on an incidental basis, to the general public (except goods, services, or facilities sold at a nominal charge or for a small part of the cost). Illinois 1040x It normally gets more than 50% of its support from a combination of governmental sources, public solicitation of contributions, and receipts from the sale of admissions, goods, performance of services, or furnishing of facilities in activities that are not unrelated trades or businesses. Illinois 1040x Special rule. Illinois 1040x   Men's and women's organizations, seminaries, mission societies, and youth groups that satisfy (1) and (2) shown earlier are integrated auxiliaries of a church even if they are not internally supported. Illinois 1040x   In order for an organization (including a church and religious organization) to qualify for tax exemption, no part of its net earnings can inure to any individual. Illinois 1040x   Although an individual is entitled to a charitable deduction for contributions to a church, the assignment or similar transfer of compensation for personal services to a church generally does not relieve a taxpayer of federal income tax liability on the compensation, regardless of the motivation behind the transfer. Illinois 1040x Scientific Organizations You must show that your organization's research will be carried on in the public interest. Illinois 1040x Scientific research will be considered to be in the public interest if the results of the research (including any patents, copyrights, processes, or formulas) are made available to the public on a nondiscriminatory basis; if the research is performed for the United States or a state, county, or municipal government; or if the research is carried on for one of the following purposes. Illinois 1040x Aiding in the scientific education of college or university students. Illinois 1040x Obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form th
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Domestic and International Programs

The Domestic and International Index (.pdf) lists all Appeals domestic and international related issues, including contact information, as follows:

  • ACI - Appeals Coordinated Issues
  • ACIcc - Appeals Coordinated Issues, Category of Case
  • CCI - Compliance Coordinated Issues
  • DCI - Decoordinated Issue (Decoordinated in Appeals information available)
  • EM - Appeals Emerging Issues
  • LT - Listed Transactions
  • SME - Subject Matter Expert
  • TOI - Transactions of Interest
  • UIL - Uniform Issue List

The Domestic and International Index is an alphabetical listing of all issues and should be referred to for all current contact information. It is searchable, using Acrobat Search.

ACI or ACIcc - An issue or category of case, is an issue of IRS-wide impact or importance requiring coordination with Appeals to ensure uniformity and consistency nationwide. This is achieved through the coordination of efforts between Appeals Officers (AO) and designated Technical Specialists (TS). The ACI program encompasses legal issues and factual issues and category of case.

An AO assigned a case with an ACI must consult with the TS prior to the scheduling of the initial conference to obtain current information. For ACIs, except those designated an ACIcc, the AO must get review and concurrence from the TS prior to discussing the settlement with the taxpayer.  Such review and concurrence extends to all aspects of the settlement including closing documents.

CCI - When Compliance coordinates an issue and issues a Coordinated Issue Paper (CIP) Appeals designates the issue as a Compliance Coordinated Issue (CCI).   Appeals generally develops Appeals Settlement Guidelines (ASG) for CCIs.   Effective with the date of the issuance of a CIP, the AO must get the review and concurrence of the Appeals’ TS before discussing the settlement with the taxpayer.  For a list of CCIs visit the Large Business and International (LB&I) Division Coordinated Issue Papers webpage.

EM – An Appeals Emerging Issue is an issue that surfaced in an industry or specialty area in a number of Appeals cases or it is understood cases will be coming to Appeals in the near future with the issue.  The AO assigned a case with an emerging issue is required to contact the designated TS (before holding the initial conference) to gain insight into both the industry or specialty area and the issue. He/she is required to maintain contact with the coordinator. Review and concurrence is not required until such time as an issue may be redesignated a CCI or ACI.

Appeals Settlement Guidelines (ASG)
NOTE: Since specialists may have changed since the finalized ASG was approved, it is recommended that you refer to the Domestic and International Index (.pdf) for contact information.

Page Last Reviewed or Updated: 16-Jan-2014

The Illinois 1040x

Illinois 1040x Index A Adopted child, Adopted child. Illinois 1040x Adoption taxpayer identification number (ATIN), Married child. Illinois 1040x Age test (see Qualifying child) Alaska Permanent Fund dividends, Rule 6—Your Investment Income Must Be $3,300 or Less Alimony, Income That Is Not Earned Income Annuities, Income That Is Not Earned Income Armed forces, Nontaxable military pay. Illinois 1040x , Military personnel stationed outside the United States. Illinois 1040x , Temporary absences. Illinois 1040x , Joint Return Test, Military personnel stationed outside the United States. Illinois 1040x , Nontaxable combat pay. Illinois 1040x Assistance (see Tax help) B Basic Allowance for Housing (BAH), Nontaxable military pay. Illinois 1040x Basic Allowance for Subsistence (BAS), Nontaxable military pay. Illinois 1040x C Child Adopted child, Adopted child. Illinois 1040x Birth or death of, Birth or death of child. Illinois 1040x Foster child, Relationship Test, Foster child. Illinois 1040x , Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer, Kidnapped child, Kidnapped child. Illinois 1040x Married child, Married child. Illinois 1040x Child support, Income That Is Not Earned Income Clergy, Clergy. Illinois 1040x Combat zone pay, Nontaxable combat pay. Illinois 1040x Community property, Community property. Illinois 1040x , Community property. Illinois 1040x D Detailed examples, Chapter 6—Detailed Examples Disability benefits, Disability Benefits Disallowance of the EIC, Chapter 5—Disallowance of the EIC Dividend income, Income That Is Not Earned Income Divorced parents, special rule, Special rule for divorced or separated parents (or parents who live apart). Illinois 1040x Domestic partner, Nevada, Washington, and California domestic partners. Illinois 1040x E Earned income, Rule 7—You Must Have Earned Income, Earned Income Earned income credit (EIC), EIC Table EITC Assistant, Is There Help Online? Extended active duty, Extended active duty. Illinois 1040x , Military personnel stationed outside the United States. Illinois 1040x F Figuring EIC yourself, Chapter 4—Figuring and Claiming the EIC, How To Figure the EIC Yourself Filing status: Head of household, Rule 3—Your Filing Status Cannot Be Married Filing Separately Married filing separately, Rule 3—Your Filing Status Cannot Be Married Filing Separately Forms: 1040, Do I Need This Publication?, Adjusted gross income (AGI). Illinois 1040x , No SSN. Illinois 1040x , Form 1040. Illinois 1040x 1040A, Adjusted gross income (AGI). Illinois 1040x , No SSN. Illinois 1040x , Form 1040A. Illinois 1040x 1040EZ, Adjusted gross income (AGI). Illinois 1040x , No SSN. Illinois 1040x , Form 1040EZ. Illinois 1040x 1040X, Rule 2—You Must Have a Valid Social Security Number (SSN), Filing deadline approaching and still no SSN. Illinois 1040x 2555, Rule 5—You Cannot File Form 2555 or Form 2555-EZ 2555–EZ, Rule 5—You Cannot File Form 2555 or Form 2555-EZ 4029, Minister's housing. Illinois 1040x , Approved Form 4361 or Form 4029, Form 4029. Illinois 1040x 4361, Minister's housing. Illinois 1040x , Approved Form 4361 or Form 4029, Form 4361. Illinois 1040x 4797, Do I Need This Publication? 4868, Filing deadline approaching and still no SSN. Illinois 1040x 8814, Do I Need This Publication? 8862, Chapter 5—Disallowance of the EIC, Form 8862 Foster care payments, Income That Is Not Earned Income Foster child, Relationship Test, Foster child. Illinois 1040x , Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer, Fraud, Exception 2. Illinois 1040x , Are You Prohibited From Claiming the EIC for a Period of Years? Free tax services, Free help with your tax return. Illinois 1040x H Head of household, Community property. Illinois 1040x , Spouse did not live with you. Illinois 1040x , Community property. Illinois 1040x , Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC, Applying Rule 9 to divorced or separated parents (or parents who live apart). Illinois 1040x Help (see Tax help) Home Homeless shelter, Rule 14—You Must Have Lived in the United States More Than Half of the Year Military, Rule 14—You Must Have Lived in the United States More Than Half of the Year United States, Rule 14—You Must Have Lived in the United States More Than Half of the Year Homeless, Homeless shelter. Illinois 1040x , Homeless shelter. Illinois 1040x I Income that is not earned income, Income That Is Not Earned Income Individual taxpayer identification number (ITIN), Other taxpayer identification number. Illinois 1040x , Married child. Illinois 1040x Inmate, Earnings while an inmate. Illinois 1040x , Figuring earned income. Illinois 1040x Interest, Income That Is Not Earned Income Investment income, Rule 6—Your Investment Income Must Be $3,300 or Less IRS can figure EIC for you, IRS Will Figure the EIC for You J Joint return test (see Qualifying child) K Kidnapped child, Kidnapped child. Illinois 1040x M Married child, Married child. Illinois 1040x Married filing a joint return, Rule 4—You Must Be a U. Illinois 1040x S. Illinois 1040x Citizen or Resident Alien All Year Married filing separately, Spouse did not live with you. Illinois 1040x Military Combat pay, Nontaxable military pay. Illinois 1040x Nontaxable pay, Nontaxable military pay. Illinois 1040x Outside U. Illinois 1040x S. Illinois 1040x , Military personnel stationed outside the United States. Illinois 1040x Minister, Net earnings from self-employment. Illinois 1040x , Minister's housing. Illinois 1040x , Church employees. Illinois 1040x N Net earnings, self-employment, Net earnings from self-employment. Illinois 1040x Nonresident alien, Rule 4—You Must Be a U. Illinois 1040x S. Illinois 1040x Citizen or Resident Alien All Year, Step 1. Illinois 1040x O Online help EITC Assistant, Is There Help Online? P Parents, divorced or separated, Married child. Illinois 1040x , Examples. Illinois 1040x , Special rule for divorced or separated parents (or parents who live apart). Illinois 1040x Passive activity, Worksheet 1. Illinois 1040x Investment Income If You Are Filing Form 1040 Pensions, Income That Is Not Earned Income Permanently and totally disabled, Permanently and totally disabled. Illinois 1040x Prisoner, Figuring earned income. Illinois 1040x Publications (see Tax help) Q Qualifying child, Can I Claim the EIC?, Do I Have To Have A Child To Qualify For The EIC?, Chapter 2—Rules If You Have a Qualifying Child Age test, Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests, Age Test Home, Residency Test Joint return test, Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Permanently and totally disabled, Permanently and totally disabled. Illinois 1040x Relationship test, Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Residency test, Residency Test United States, Residency Test R Railroad retirement benefits, Income That Is Not Earned Income Registered domestic partner, Nevada, Washington, and California domestic partners. Illinois 1040x Relationship test (see Qualifying child) Reminders, Reminders Residency test (see Qualifying child) S Salaries, wages, and tips, Earned Income, Wages, salaries, and tips. Illinois 1040x , Earned Income Schedules: C, EIC Worksheet A. Illinois 1040x , EIC Worksheet B. Illinois 1040x C-EZ, EIC Worksheet A. Illinois 1040x , EIC Worksheet B. Illinois 1040x EIC, Chapter 2—Rules If You Have a Qualifying Child, Kidnapped child. Illinois 1040x , Figuring earned income. Illinois 1040x , Nontaxable combat pay. Illinois 1040x , How To Figure the EIC Yourself, When to use the optional methods of figuring net earnings. Illinois 1040x , Schedule EIC SE, Figuring earned income. Illinois 1040x , Clergy. Illinois 1040x , Church employees. Illinois 1040x , EIC Worksheet A. Illinois 1040x , EIC Worksheet B. Illinois 1040x , Net earnings from self-employment $400 or more. Illinois 1040x , When to use the optional methods of figuring net earnings. Illinois 1040x , When both spouses have self-employment income. Illinois 1040x School, School defined. Illinois 1040x Self-employed persons, Rule 7—You Must Have Earned Income, Figuring earned income. Illinois 1040x , EIC Worksheet B. Illinois 1040x Self-employment income, Earned Income Self-employment tax, Net earnings from self-employment $400 or more. Illinois 1040x Separated parents, special rule, Married child. Illinois 1040x Social security benefits, Income That Is Not Earned Income Social security number (SSN), Rule 2—You Must Have a Valid Social Security Number (SSN), Valid for work only with INS authorization or DHS authorization. Illinois 1040x , No SSN. Illinois 1040x , Getting an SSN. Illinois 1040x , Married child. Illinois 1040x , Exception for math or clerical errors. Illinois 1040x Statutory employee, Statutory employee. Illinois 1040x , Figuring earned income. Illinois 1040x , EIC Worksheet A. Illinois 1040x , Statutory employees. Illinois 1040x Strike benefits, Strike benefits. Illinois 1040x Student, Student defined. Illinois 1040x T Tax help, How To Get Tax Help Taxpayer identification number Adoption identification number (ATIN), Married child. Illinois 1040x Individual taxpayer identification number (ITIN), Other taxpayer identification number. Illinois 1040x Social security number (SSN), Other taxpayer identification number. Illinois 1040x Tiebreaker rules, Tiebreaker rules. Illinois 1040x Tips, wages, and salaries, Earned Income, Wages, salaries, and tips. Illinois 1040x , Earned Income TTY/TDD information, How To Get Tax Help U Unemployment compensation, Income That Is Not Earned Income United States, United States. Illinois 1040x V Veterans' benefits, Income That Is Not Earned Income W Wages, salaries, and tips, Earned Income, Wages, salaries, and tips. Illinois 1040x , Earned Income Welfare benefits, Income That Is Not Earned Income Workers' compensation benefits, Income That Is Not Earned Income Workfare payments, Workfare payments. Illinois 1040x Worksheet 1, Worksheet 1. Illinois 1040x Investment Income If You Are Filing Form 1040 Worksheet 2, Worksheet 2. 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