TAX SAVINGS FOR CHARITIES
Nonprofit organizations are facing extraordinarily challenging times as the Covid crisis continues. Tax savings for charities is important as nonprofits that are classified as 501(c)(3) organizations under the Internal Revenue Code (often referred to as “charities”) have the benefit of exemption from various federal and state taxes.
Now is the time to make sure that your organization is taking full advantage of these tax exemptions.
Here are the four most common.
Federal Income Tax.
Charities are exempt from federal income tax. The exemption is not automatic (except for religious organizations and instrumentalities of government).
A charity must apply for recognition as tax exempt by filing IRS form 1023. That form is 28 pages long, although most organizations don’t need to fill out every page. Organizations with small budgets may qualify to file the much smaller form, 1023-EZ. You can learn about the forms here.
State Sales Tax.
In New York State, charities can be exempt from paying sales tax on its purchases. Once again, an application must be submitted. The form to use is New York State Form 119.2. More information is here.
State Corporation Franchise Tax.
In New York, corporations must pay franchise tax. Charities are exempt. The form to submit is New York State Form CT-247 available here.
State Real Property Tax.
Charities that own real property may be exempt from real property taxes. There are far too many rules concerning this exemption to fully discuss here. Information can be found here.
At Jacobowitz & Gubits we work with dozens of charities in the Hudson Valley, as both attorneys and volunteers, including those in education, religion, health and human services, economic development, arts and culture, animal welfare, social clubs, sports, veterans and more.
Contact us if you have any questions about tax exemption or anything else concerning nonprofits.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Gary M. Schuster is partner at the firm and practices business, non-profit, and arts and entertainment law. He can be reached at 866-303-9595 toll free or 845-764-9656 and by email.