ORGANIZERS FOR STUDENTS "Hey, Mr. Producer!": "Can Nonprofits Make Money?" ANSWER KEY 1) In its simplest form, what is a nonprofit organization? How is it different than a for-profit organization? In its simplest form, a nonprofit organization is a state of mind -- an intention to do public good. A for-profit organization is a business designed to make money for its owners. 2)How must nonprofits use any profits? Any profits must be used to further the charitable purposes of the organization. 3) What types of organizations can be classified as nonprofit, a 501(c)(3)? Religious, charitable, scientific, literary, or educational organizations. 4) What are four issues the IRS will consider in determining whether or not an organization qualifies as a 501(c)(3)? 1) How much employees are being paid in relationship to gross income. 2) The organization's source of income. 3) Whether or not the organization pursues any "forbidden activities," such as donating to political campaigns or influencing legislation. 4) The financial "track record" of the organization. 5) What are some of the benefits of being a nonprofit organization? 1) Nonprofit organizations can be exempted from paying federal income tax. 2) Nonprofits can receive reduced postal rates. 3) Nonprofits are exempted from certain sales and property taxes. 4) Many grants (money!) are available to only nonprofit organizations. 5) Performances of certain kinds of material may be exempt from copyright laws. 6) What are donors to 501(c)(3) organizations allowed to do? Donors to 501(c)(3) organizations are allowed to deduct the donation from their income when filing their federal income tax return (and thus pay lower taxes). 7) What is the "corporate veil"? The "corporate veil" protects officers and employees of the corporation from the actions of the corporation. For example, if someone sues the corporation, the officers are not personally at risk. 8) What is a "mission statement"? A "Mission Statement" is a short paragraph that briefly describes what is unique about the organization. It contains the major characteristics that define the organization's operations. 9) What are two documents that a group will need to prepare to get nonprofit status? 1) Articles of Incorporation 2) By-laws 10) Summarize the "magic sentences" that the IRS will be looking for. The organization will only pursue religious, charitable, scientific, literary, or educational purposes; it will not promote propaganda, attempt to influence legislation, or get involved in political campaigns. 11) What does it mean when a board of directors has to "give it," "get it," or "raise it"? Give it = make a donation Get it = solicit donations from other people Raise it = chair (work on) fund-raising efforts