Bill in Congress May Affect Tax Exempt Organizations 2019

[@MrsM74]

Thank you for making these videos. Can you recommend any content on the facts and circumstances test and also Schedule A Part II line 12 gross receipts. Is this were a state contract would go? What does it mean if line 12 is larger than total support?

[@NonprofitTaxHelp]

You're welcome Simply Dawn. The best information I know of regarding the 10% facts and circumstances test is found in the Treasury Regulations beginning with 1.170A-9(f)(3) see the following link and scroll down to paragraph 9(f)(3): www.law.cornell.edu/cfr/text/26/1.170A-9 At that link you'll also find a number of illustrative examples.

[@NonprofitTaxHelp]

As far as the state contract revenue, it depends. If it is a grant, then it would go on line 1 as a contribution. A relevant characteristic of a grant is that it is a payment by the government to compensate you for performing a service that provides a direct benefit to the public. If the person/entity making the payment pursuant to the contract is also the one receiving the benefit/service, then it is probably gross receipts from performance of exempt functions and would go on line 12. Medicare/medicaid payments would be gross receipts on line 12. This is a highly controversial issue at times.

[@NonprofitTaxHelp]

It's OK if line 12 is larger than total support, to a point. In the regulation I linked to you'll find that mentioned in paragraph 7(iii). You are probably OK unless "almost all" support is on line 12, and an "insignificant" amount of support is on line 1.

[@MrsM74]

@@NonprofitTaxHelp Thank you! If if were to happen that almost all goes on line 12, what would that mean? I'm having trouble finding an answer to that in the instructions.

[@NonprofitTaxHelp]

@@MrsM74 If almost all support goes on line 12, then the organization would not pass the 509(a)(1) public support test found on page 2 of the Schedule A. The next step would be to fill out the 509(a)(2) public support calculation on page 3 of the Schedule A and see if you pass that test. If you pass that test, then check box 10 on page 1 of the Schedule A. There is no need to get the IRS's permission to switch reasons for qualifying as publicly supported.