ExpertEasy1 markMultiple Choice
CPA · Question 45 · Area II: Entity Tax Compliance
Which of the following activities could jeopardize a §501(c)(3) organization's tax-exempt status?
Which of the following activities could jeopardize a §501(c)(3) organization's tax-exempt status?
Answer options:
A.
Paying reasonable salaries to employees.
B.
Generating a small amount of UBI.
C.
Endorsing a candidate for political office.
D.
Lobbying on legislation (insubstantial amount).
How to approach this question
Recall the absolute ban on political campaign intervention for 501(c)(3)s.
Full Answer
C.Endorsing a candidate for political office.✓ Correct
IRC §501(c)(3). Participation in political campaigns is an absolute bar to exemption. Lobbying is allowed if insubstantial, but campaigning is zero-tolerance.
Common mistakes
Confusing lobbying (allowed in moderation) with campaigning (banned).
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