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How can my nonprofit organization qualify as exempt from federal income tax?
Posted in Tax and Finance

In this month’s Louisville Business First Legal Forum Column, BGD partner Ross D. Cohen discusses how nonprofit organizations can qualify as tax exempt. He also explains the difference between “nonprofit” and “tax exempt.” Read his advice below and don’t miss our monthly legal forum column in Louisville Business First.

How can my nonprofit organization qualify as exempt from federal income tax? 

The terms “nonprofit” and “tax exempt” are often used interchangeably, however, there are important differences between the two designations. The nonprofit status of an entity is determined under state corporate law; whereas the tax-exempt status of an organization is generally determined under federal tax law. As a general proposition, if an organization is tax exempt, it is likely also a nonprofit. However, if an organization is a nonprofit, it does not necessarily mean it is tax exempt. 
An organization must meet requirements set forth in the Internal Revenue Code of 1986, and certain U.S. Treasury regulations. The specific requirements for an entity to qualify as tax exempt depend on the type of exemption the entity is seeking. The type of exemption to be sought, in turn, depends on a number of factors, including the entity’s anticipated activities, purposes, sources of funds and contributions, asset holdings, and management, among others. 

To learn more about Ross Cohen and his practice, please visit his profile. 

To view the latest Legal Forum Column, please click here. 

  • Partner

    Ross D. Cohen serves as Co-Leader of the Federal Tax Team and concentrates his practice on federal tax transactional and planning issues of partnerships, joint ventures, limited liability companies and S and C corporations.

    With ...



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