ACC 219 Chapter 13

The amount of unrelated business income is excluded from taxation is the first ______. Multiple choice question. $500 $5,000 $1,000 $250

$1,000

The NFP must provide the contributor with written disclosure of the contribution amount for a single charitable contribution equal to or greater than what amount? Multiple choice question. $50 $75 $250 $150

$75

An individual can generally receive a tax deduction for contributions to which type of not-for-profit organization? Multiple Choice 501(c)(1) organization. 501(c)(3) organization. 527 organization. Any not-for-profit organization granted tax exemption by the IRS.

501(c)(3) organization.

Public charities apply to the IRS for which of the following? Multiple select question. 502(b) tax-exempt status using Form 1040-NFP 500(d) tax-exempt status using Form 990 501(c)(3) tax-exempt status using Form 1023 501(a) tax-exempt status using Form 1024

501(c)(3) tax-exempt status using Form 1023 501(a) tax-exempt status using Form 1024

The primary tool the federal government uses to collect information about the NFP and its activities is Form ______. Multiple choice question. 990 501(c)(3) 527

990

Which of the following would not be required under not-for-profit incorporation laws? Multiple Choice Appointment of a board of directors. Establishment of by-laws. A clearly stated purpose for the organization. Application for 501(c)(3) status.

Application for 501(c)(3) status.

Which of the following is the incorporating document of a not-for-profit organization that describes the purpose or mission of the organization? Multiple Choice By-laws. IRS Form 1023 request for tax-exempt status. Articles of incorporation. Charter.

Articles of incorporation.

True or false: All NFPs are accountable to the state government that grants them their legal existence; the federal government, which grants them tax-exempt status; their own governing board; individual donors and grantors; consumers of their services; and the public at large.

False

Under the IRC, public charities are allowed to conduct direct lobbying activity. What, if any, limit is placed on such lobbying? Multiple Choice There is no limit provided no propaganda is distributed by the charity. There is no limit provided no individual or group contributes more than $500 to lobbying activity in any one year. There is no limit provided the lobbying activity directly affects the NFP's charitable purpose. If a public charity makes a 501(h) election, there is a limit of up to $1,000,000 a year based on the size of the NFP's exempt program costs.

If a public charity makes a 501(h) election, there is a limit of up to $1,000,000 a year based on the size of the NFP's exempt program costs.

Public disclosure rules require that a tax-exempt not-for-profit organization: Multiple Choice Make available a copy of its Form 990 to the public for a period of up to three years. Post a copy of its articles of incorporation and by-laws on its website. Provide a copy of the minutes to all board meetings to any person who requests the minutes within 90 days of the board meeting. Make available a copy of its Form 990-T, but not its Form 990, to the public for a period of up to two years.

Make available a copy of its Form 990 to the public for a period of up to three years.

Artists Unlimited was formed to support the local art community. Which of the following activities would be considered unrelated business income? Multiple Choice Income from the sale of tee shirts that feature art reproductions by local artists, produced and sold by volunteers. Interest and dividend income from investments that were donated by a major retail company. Sponsorship of an event by an art supply company, whose name was prominently displayed at the event. Monthly rental fees for office space used by two small legal firms. The rental fees are used to make mortgage and interest payments on Artists Unlimited's building.

Monthly rental fees for office space used by two small legal firms. The rental fees are used to make mortgage and interest payments on Artists Unlimited's building.

The organization Shelter the Needy is completing its Form 990 and it is trying to determine if it has unrelated business income on which it must pay taxes. Which of the following would be subject to unrelated business income taxes? Multiple Choice The Shelter sold art work it had received as a donation. Volunteers raised several thousand dollars in a marathon sponsored for the benefit of the Shelter. The Shelter earned revenues from the self-service laundry facilities it provides for the benefit of tenants of its low-income temporary housing facilities. None of the items listed would be subject to unrelated business income taxes.

None of the items listed would be subject to unrelated business income taxes.

A good measure that can be used to help assess whether a not-for-profit organization is spending too much on overhead, such as general and administrative expenses, is: Multiple Choice Percentage of unrestricted net assets to operating expenses. Current ratio. Total revenues divided by total expenses. Percentage of program expenses to total expenses.

Percentage of program expenses to total expenses.

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is: Multiple Choice Total revenues divided by assets. Percentage of unrestricted net assets to average monthly operating expenses. Percentage of program expenses to total expenses. Fund-raising expenses as a percentage of public support.

Percentage of unrestricted net assets to average monthly operating expenses.

A not-for-profit organization that is exempt from federal income taxes under IRC section 501(c)(3), exists to make grants to public charities, and receives its support from a small number of individuals or corporations and investment income rather than from the public at large is called a: Multiple Choice Private foundation. Public charity. Nongovernmental organization. Public foundation.

Private foundation.

The question "are revenues sufficient to cover expenses?" is answered by a(n) ______ ratio. Multiple choice question. efficiency fund-raising going concern liquidity

going concern

The Form 990 filed by an NFP must be made available to the public for ______ year(s). Multiple choice question. five one two three

three

The IRS is primarily interested in how the unrelated business income ______. Multiple choice question. was earned is used relates to the organization's tax-exempt purpose

was earned

When a tax-exempt organization dissolves, the managers must ensure that: Multiple Choice All assets are appropriately transferred to another tax-exempt organization. All creditors get paid. All federal, state, and local taxes are paid. All the choices are correct.

All the choices are correct.

Not-for-profit organizations can take which of the following organizational forms? Multiple Choice Nongovernmental. Governmental. Business. Both governmental and nongovernmental are acceptable organizational forms.

Both governmental and nongovernmental are acceptable organizational forms.

The accounting issues involved in a dissolution include ensuring that all ______. Multiple select question. remaining assets are appropriately transferred to the federal or a state or local government remaining assets are appropriately transferred for another exempt purpose federal, state, and local taxes are paid creditors are paid

remaining assets are appropriately transferred for another exempt purpose federal, state, and local taxes are paid creditors are paid

The ultimate penalty imposed on NFPs for violations of laws relating to lobbying is which of the following? Multiple choice question. dissolution fines for engaging in prohibited behavior revocation of exemption from taxes

revocation of exemption from taxes

Approval from the IRS of 501(c)(3) status exempts an organization from which of the following? Multiple Choice All taxes. Federal income taxes. Federal and state income taxes. Income taxes and sales taxes.

Federal income taxes.

If an NFP fails to file an annual report or is found to be engaged in fraud or unlawful conduct a(n) ______ dissolution may occur. Multiple choice question. bankruptcy voluntary involuntary

involuntary

A widely accepted definition of a not-for-profit organization is one whose goals ______. Multiple select question. involve distributing profits to shareholders involve earning a profit for the state government that granted them legal existence involve something other than earning a profit for owners usually involve providing a service

involve something other than earning a profit for owners usually involve providing a service

With regards to excise taxes and limitations faced by donors, which of the following receive preferential treatment because of their broad base of support? Multiple choice question. public charities private foundations

public charities

A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is: Multiple Choice Percentage of program expenses to total expenses. Total revenues divided by total expenses. Current assets divided by current liabilities. Percentage of unrestricted net assets to operating expenses.

Current assets divided by current liabilities.

Which of the following is an advantage of a not-for-profit board establishing an audit committee? Multiple Choice Is able to assist the board in reviewing the compensation paid to the senior executives. It can help the board fulfill its oversight responsibilities by working directly with the public accounting firm. It helps the board develop a succession plan for the CEO. It can assist the board in reviewing the budget for the next fiscal year.

It can help the board fulfill its oversight responsibilities by working directly with the public accounting firm.

Which of the following is a reason why a not-for-profit organization might fail to qualify for tax-exempt status? Multiple Choice It is operated primarily for the benefit of its members. Its officers are paid excessive wages. Its primary purpose is to promote the election of a senate candidate. It has unrelated business income.

Its primary purpose is to promote the election of a senate candidate.

An individual can receive a charitable contribution tax deduction when making a donation under which of the following circumstances? Multiple select question. Only if the gift is used for charitable purposes. Only if the gift is used for the purposes of public interests. If it is made to a 501(c)(3) NFP (and certain other exempt organizations). If the individual has applied for tax-exempt status.

Only if the gift is used for charitable purposes. If it is made to a 501(c)(3) NFP (and certain other exempt organizations).

All of the following organizations may be not-for-profit except: Multiple Choice Colleges and universities. Hospitals. Privately held partnerships. Human service organizations.

Privately held partnerships.

You are considering contributing to a local charity whose primary function is to provide after-school care for underprivileged children. However, you saw in the paper that the president of the organization just bought a house that is located in a very expensive gated community, and you are concerned that more money is going to the president's salary than to the actual after-school care. Before you donate, you want to feel comfortable that this is not the case. Which of the following is a financial measurement that might help you in determining the amount of resources going to after-school care? Multiple Choice Fund-raising efficiency. Program expense efficiency. Liquidity. Going concern.

Program expense efficiency.

The term that means information skewed toward a particular belief with a tendency to have little or no factual basis is: Multiple Choice Political influence. Legislation. Propaganda. Lobbying.

Propaganda

A not-for-profit organization is granted its legal status by which of the following? Multiple Choice Federal government. State government. The city or county in which it resides. The courts.

State government.

Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec. 501(c)(3)? Multiple Choice Beta Kappa Alpha Sorority. Peaceful Dreams Cemetery Association. Regional Association of Tree Trimmers. Survivors of Breast Cancer Club.

Survivors of Breast Cancer Club.

Which of the following statements are true? Multiple select question. The goal of NFP organizations is generally related to providing a service. NFP success is often measured by how the organization contributes to public well-being. Because NFP organizations do not have a profit motive, managers have few, if any, control and reporting problems.

The goal of NFP organizations is generally related to providing a service. NFP success is often measured by how the organization contributes to public well-being.

An organization was formed solely to support the creation of a high-speed rail system between two major metropolitan areas. The organization will be offering voter education seminars to be sure that the public is educated about the benefits of the rail system before the proposal is presented to the legislature. Under what circumstances would the organization be able to maintain charitable tax-exempt status? Multiple Choice Information in its brochures is strictly based on confirmable facts. The brochures provide information only about the benefits of the system but do not directly attempt to persuade voters to vote for the system. The organization properly elects to make expenditures to influence legislation on Form 5768. The organization would not be eligible for charitable tax-exempt status.

The organization would not be eligible for charitable tax-exempt status.

A good measure of whether a not-for-profit organization is highly leveraged is: Multiple Choice Percentage of unrestricted net assets to average monthly operating expenses. The ratio of debt to net assets. Total revenues divided by total expenses. Percentage of program expenses to total expenses.

The ratio of debt to net assets.

Which of the following is not a true statement about tax-exempt organizations? Multiple Choice They must be organized to serve the charitable needs of the public at large. They must first become a not-for-profit corporation or charitable trust. They are permitted to perform some political lobbying if guidelines are met. Their unrelated business income is taxed at corporate income tax rates.

They must be organized to serve the charitable needs of the public at large.

If an officer of an NFP receives excessive economic benefits, which of the following can result? Multiple select question. an intermediate sanction can be applied the excess benefits will be treated as UBI the NFP's tax-exempt status can be revoked the INFP can be forced to dissolve

an intermediate sanction can be applied the NFP's tax-exempt status can be revoked

Which of the following is required by most states that grant charitable solicitation licenses? Multiple choice question. a license when an NFP compensates someone for fund-raising audited annual financial reports a license or permit for gaming events with maximum prize limits set annual compliance reporting

annual compliance reporting

An organization declares its charitable intentions in the ______. Multiple choice question. bylaws articles of incorporation initial board of director minutes written policies and procedures

articles of incorporation

An IRC section 501(c)(3) organization that receives its support from a small number of individuals or corporations and investment income rather than from the public at large is referred to as a ______. Multiple choice question. private foundation private charity public foundation public charity

private foundation

Nonfinancial performance measures ______. Multiple select question. can indicate whether the organization is effective in meeting its mission and goals are required by the Panel on the Nonprofit Sector, set up by the Independent Sector help donors, creditors, grantors, and others make decisions about providing resources are required in the reconciliation of Form 990 with audited financial statements are critical in addressing questions of effectiveness and efficiency

can indicate whether the organization is effective in meeting its mission and goals help donors, creditors, grantors, and others make decisions about providing resources are critical in addressing questions of effectiveness and efficiency

The direct or indirect request for money, credit, property, financial assistance, or other things of value on the representation that these assets will be used for a charitable purpose is referred to as ______. Multiple choice question. organizational test political activity charitable solicitation

charitable solicitation

Required annual filings made by NFPs to the IRS include an annual ______. Multiple select question. exempt organizations information return (on Form 990, 990-EZ, or 990-N) exempt organization audit report application for tax-exempt status using Form 1023 or 1024 unrelated business income tax (UBIT) (on Form 990-T)

exempt organizations information return (on Form 990, 990-EZ, or 990-N) unrelated business income tax (UBIT) (on Form 990-T)

With regards to taxes levied by state and local governments, NFPs are often ______. Multiple choice question. required to pay state but not local taxes exempted from both state and local taxes required to pay local but not state taxes

exempted from both state and local taxes

The incorporating documents of an NFP include the articles of incorporation, which has an ______ focus, and the by-laws, which has an ______ focus. Multiple choice question. internal; external external; internal

external; internal

Excess benefit transactions ______. Multiple select question. include unreasonable compensation include sales of assets at bargain prices apply only to public charities include lease arrangements

include unreasonable compensation include sales of assets at bargain prices include lease arrangements

To be relieved from the property tax, the NFP may have to file for specific tax exemption and document that the property ______. Multiple choice question. was not subject to property tax when it was acquired by the NFP is not located in the area governed by the local government is in use for charitable purposes is not located in the state

is in use for charitable purposes

Characteristics of a quality board for an NFP organization include which of the following? Multiple select question. leadership contributing and attracting funds skepticism charisma diversity direction sensitivity

leadership contributing and attracting funds diversity direction sensitivity

The local Kennel Club is a not-for-profit organization with gross receipts of $43,500 for the current tax year. Under the Internal Revenue Service Code, the Kennel Club would be required to file which of the following forms for the tax year? Multiple Choice Form 990-N. Form 990-EZ. Form 990-PF. Since its gross receipts are less than $50,000 it need not file with the Internal Revenue Service.

Form 990-N.

The Internal Revenue Service may impose intermediate sanctions on all of the following transactions between a not-for-profit organization and its executive officer except: Multiple Choice Excessive compensation. The not-for-profit organization paying more than the fair rental value for property owned by the officer. A bargain on the sale of assets. Fringe benefits comparable to those given to all employees.

Fringe benefits comparable to those given to all employees.

A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is: Multiple Choice Fund-raising expenses as a percentage of public support. The ratio of program expenses to number of clients served. Total revenues divided by total expenses. Percentage of program expenses to total expenses.

Fund-raising expenses as a percentage of public support.

Which of the following defines an appeal to the public to take action on a legislative matter? Multiple Choice Grass-roots lobbying. Propaganda. Lobbying. Political influence.

Grass-roots lobbying.

A nongovernmental tax-exempt organization must complete a Form 990 and send it to the Internal Revenue Service: Multiple Choice Only if they have unrelated business income. If they are not a religious organization, and have gross receipts of $5,000 or more each year. If they have gross receipts of $1,000 or more each year. Only if they are a private foundation, not a public charity.

If they are not a religious organization, and have gross receipts of $5,000 or more each year.

The tool the IRS most likely will use when key officers in a tax-exempt entity receive excess economic benefits from transactions with the not-for-profit organization is: Multiple Choice Fines and forfeits. Revocation of the organization's tax-exempt status. Intermediate sanctions. Public display of offenders on the IRS's website.

Intermediate sanctions.

The Form 990 consists of 12 parts (core form) and several schedules. Which of the following would not be included as one of the parts of the core form of the Form 990? Multiple Choice Statement of program service accomplishments. Management analysis of the financial condition of the organization. Balance sheet. A checklist of required schedules.

Management analysis of the financial condition of the organization.

Wendy and Bob decided to form a charitable organization, I Love Rock N Rollers, to provide funding to assist former rock and roll group members who have become homeless. They are planning to hold a music festival to raise money. The festival will offer food and beverages and the sale of memorabilia related to the event. Before they go any further, Wendy and Bob need to Multiple Choice Prepare articles of incorporation and bylaws, obtain an EIN from the IRS if the organization will have employees, apply for permission to solicit charitable contributions, and apply for 501(c)(3) status from the IRS. Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS, apply for permission to solicit charitable contributions, and apply for 501(c)(3) status from the IRS. Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS if the organization will have employees, apply for permission to solicit charitable contributions, and apply for 501(a) status from the IRS. Prepare articles of incorporation and bylaws, obtain an EIN from the IRS, apply for permission to solicit charitable contributions, and apply for 501(a) status from the IRS.

Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS, apply for permission to solicit charitable contributions, and apply for 501(c)(3) status from the IRS.

A tax-exempt organization that receives its support primarily from a large number of individuals or corporations and a relatively small amount from investment income is called a: Multiple Choice Public charity. Private foundation. Public foundation. Voluntary health and welfare organization.

Public charity.

The income most likely to be considered unrelated business income of a human service organization that provides immunizations to children in the community is: Multiple Choice Rental of extra space in the debt-financed building. Sale of sweatshirts with the organization's logo on it at a price above cost at the annual fundraiser. Interest and dividend income on investments. Gain on the sale of equipment no longer needed by the organization.

Rental of extra space in the debt-financed building.

Which of the follow is not an example of a state and/or local government regulation an NFP organization might be subject to? Multiple Choice Requirement to prepare and file a Form 990 with the IRS. Requirement to have a conflict of interest policy. Requirement to file a notice of plans to merge with another agency. Requirement to apply for exemption from property taxes.

Requirement to prepare and file a Form 990 with the IRS.

Accountants and auditors play a critical role in assuring stakeholders that all NFS have ______. Multiple select question. complied with applicable laws and regulations effectively and efficiently used the assets with which they were entrusted earned a minimum return on the assets with which they were entrusted not sought funds from additional sources

complied with applicable laws and regulations effectively and efficiently used the assets with which they were entrusted

States generally have built into the not-for-profit corporation laws the requirement that organizers do which of the following? Multiple select question. call at least four quarterly board meetings a year designate a resident agent and address appoint a board of directors choose a name that is not misleading or in use by another corporation

designate a resident agent and address appoint a board of directors choose a name that is not misleading or in use by another corporation

Nonfinancial performance measures are critical in addressing questions of ______. Multiple select question. profitability effectiveness efficiency

effectiveness efficiency

NFP board members are responsible for which of the following? Multiple select question. keeping full and accurate records of all receipts and disbursements custody of corporate funds and securities setting policy and providing fiscal guidance and ongoing governance all authorized activities generating financial support on the organization's behalf

setting policy and providing fiscal guidance and ongoing governance all authorized activities generating financial support on the organization's behalf

Once an organization is recognized by the state as an NFP, the responsibility to represent public beneficiaries of charities and contributors lies with which of the following? Multiple choice question. state individual donors and grantors Attorney General federal government

state

The power to give legal life to an NFP (in the form of a not-for-profit corporation or limited liability company or as a charitable trust) resides with which of the following? Multiple choice question. Attorney General state federal government individual donors and grantors

state

Upon conferring the NFP legal status separate from the incorporators, the entity that bears oversight responsibility for the NFP is the ______. Multiple choice question. officers and directors board of directors resident agent state

state

The impact of excessive political activity on NFPs can be significant as a result of which of the following? Multiple select question. the potential for revocation of exemption from taxes negative publicity that may harm future fund-raising efforts the harsh sanctions for violating these laws diversion of resources, mismanagement, or defrauding

the potential for revocation of exemption from taxes negative publicity that may harm future fund-raising efforts the harsh sanctions for violating these laws