Nonprofit Nonprofit Legal and Compliance

Question 1

What IRS designation classifies most charitable nonprofits in the United States?

Accepted Answer

501(c)(3)

Answer

501(c)(4)

Answer

501(c)(6)

Answer

501(c)(7)

Question 2

What is Form 1023 used for in the US nonprofit sector?

Accepted Answer

Applying to the IRS for 501(c)(3) tax-exempt status

Answer

Filing annual financial reports with the IRS

Answer

Registering to solicit donations in a state

Answer

Reporting unrelated business income tax

Question 3

What happens if a US nonprofit fails to file Form 990 for three consecutive years?

Accepted Answer

It automatically loses its tax-exempt status

Answer

It receives a financial penalty only

Answer

It must reapply for state nonprofit registration

Answer

It is required to undergo an IRS audit

Question 4

What is unrelated business income tax (UBIT) for nonprofits?

Accepted Answer

A tax on income from activities that are not substantially related to the organization's exempt purpose

Answer

A tax on investment earnings from the endowment

Answer

A penalty for late filing of Form 990

Answer

A tax on compensation paid to the Executive Director

Question 5

What is charitable solicitation registration?

Accepted Answer

A state-required registration that nonprofits must complete before soliciting donations from residents of that state

Answer

A federal IRS process for approving fundraising campaigns

Answer

A board resolution authorizing fundraising activities

Answer

A contract with a professional fundraising firm

Question 6

What is the public support test for US public charities?

Accepted Answer

A requirement that the organization receive at least one-third of its support from public sources to maintain public charity status

Answer

A test of whether the nonprofit's programs serve a broad public interest

Answer

An IRS review of whether the organization has a diverse board

Answer

A government assessment of program effectiveness