CNE Nonprofit Tax & Legal Requirements 2

Question 1

A nonprofit receives a $50,000 gift with the donor specifying it must fund a specific program. How should this be classified on financial statements?

Accepted Answer

Temporarily restricted net assets

Answer

Donor-imposed conditions or restrictions that limit use to a specific program create temporarily restricted net assets until the restriction is met.

Question 2

Under IRC Section 4958, 'excess benefit transactions' primarily concern which type of person?

Accepted Answer

Disqualified persons such as officers and directors

Answer

Section 4958 intermediate sanctions apply to excess benefit transactions between a public charity and disqualified persons, including officers, directors, and key employees.

Question 3

Which IRS form must a tax-exempt organization with gross receipts of $50,000 or less file annually?

Accepted Answer

Form 990-N (e-Postcard)

Answer

Organizations with gross receipts normally $50,000 or less must file the Form 990-N electronic notice (e-Postcard) to maintain exempt status.

Question 4

A nonprofit lobbying expenditure is considered 'direct lobbying' when it:

Accepted Answer

Communicates directly with legislators about specific legislation

Answer

Direct lobbying involves communicating with legislators or their staff to influence specific legislation, as defined under IRS rules.

Question 5

What is the primary purpose of the Uniform Prudent Management of Institutional Funds Act (UPMIFA)?

Accepted Answer

To govern how nonprofits invest and spend endowment funds

Answer

UPMIFA provides a legal framework for the prudent investment and expenditure of nonprofit endowment funds, adopted by most U.S. states.

(CNE) Certified Nonprofit Executive Practice Test

(CNE) Certified Nonprofit Executive Practice Test

CNE Nonprofit Tax & Legal Requirements 2