CNE Nonprofit Tax & Legal Requirements

Question 1

What IRS form must most tax-exempt organizations file annually?

Accepted Answer

Form 990 or a variant

Answer

Most tax-exempt organizations must file Form 990, 990-EZ, or 990-N annually to maintain status and provide accountability.

Question 2

What happens if Form 990 isn't filed for three consecutive years?

Accepted Answer

Automatic revocation of tax-exempt status

Answer

Under the Pension Protection Act of 2006, three consecutive years of non-filing triggers automatic revocation.

Question 3

What is the private benefit doctrine?

Accepted Answer

No part of net earnings may unreasonably benefit private individuals

Answer

This doctrine prohibits operating for private benefit, ensuring resources serve the public interest.

Question 4

What is intermediate sanctions (Section 4958)?

Accepted Answer

Excise taxes on excess benefit transactions between the nonprofit and insiders

Answer

Section 4958 imposes excise taxes on insiders receiving compensation exceeding fair market value from the organization.

Question 5

What is unrelated business income tax (UBIT)?

Accepted Answer

Tax on income from business not substantially related to exempt purpose

Answer

UBIT applies to regularly conducted business activities not substantially related to exempt purpose, taxed at corporate rates.

(CNE) Certified Nonprofit Executive Practice Test