[QUOTE=lfm;193317]If the non-profit can use some of those funds to upgrade the servers I think all, present and future, contributors will benefit.[/QUOTE]

We've been pricing a dual Xeon 5520 system from Dell -- with 32GB of memory to keep the database happy. Plus, Scott found a great deal on software. For all the bashing Microsoft gets in these forums, they get kudos for providing software at cost to 501c3 corporations.

Okay, I'm going to semi-hijack this thread and ask:

Has anyone ever actually bothered to READ 501(c)(3)? Actually, here's an ever better idea:

Track down the page it's on(might take you a while, but to start you off it's in Title 26 of the Internal Revenue Code). Now turn to the page that has the heading 501(c)(3). Don't actually read that part, because I have something way more interesting for you to do. Start turning back pages to find the major heading that little piece of legislation is on. You might end up going back to 501(c)(3) and starting over a few times in disbelief, because it's a tax write-off for FOREIGN BUSINESSES AND CORPORATIONS.

That's right folks, by signing up under a 501(c)(3)tax shelter, you're identifying yourself as a FOREIGN entity. Obviously, if you're not an American, this can be pretty cool, but if you ARE an American, and your business is in the US, then you're shooting yourself in the foot by using this.

Unfortunately, my research involved the Income Tax, so I never bothered to discover if there was an alternate route to tax free status for non-profits. But for those of you who are involved in US religious organizations that you have a bit of influence in, or any of the other non-profit stuff going on(some of which I wish didn't exist) you might want to take the time to research this.

Ain't US law grand?

Jasong, you need to provide a citation to support your contention. IAAL, and I have no idea what you are talking about.

I would offer [url]http://www.law.cornell.edu/uscode/26/501(c).html[/url]
[url]http://en.wikipedia.org/wiki/501(c[/url])
The first is the actual code.

501c3
 

Jason

I am looking at section 501c3 and do not see anything saying that these are foreign corporations.

I am involved with 501c3 organizations and they are all incorporated in the United States.

[quote=jasong;195305]Start turning back pages to find the major heading that little piece of legislation is on. [/quote]When you wrote, "Start turning back pages to find the major heading", did you mean just sequentially going back to previous pages without regard to the sectional hierarchy? How did you decide what was "the major heading" for 501(c)(3)?

How far back did the hierarchy you followed match the one I list below?

I started at [URL="http://www.law.cornell.edu/uscode/26/501%28c%29.html"]http://www.law.cornell.edu/uscode/26/501(c).html[/URL]

Going back [B][U]up[/U][/B] the hierarchy from there is:

"PART I--GENERAL RULE" at

[URL]http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A_20_1_30_F_40_I.html[/URL]

then

"Subchapter F--Exempt Organizations" at

[URL]http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A_20_1_30_F.html[/URL]

then

"CHAPTER 1--NORMAL TAXES AND SURTAXES" at

[URL]http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A_20_1.html[/URL]

then

"Subtitle A--Income Taxes" at

[URL]http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A.html[/URL]

then

"TITLE 26--INTERNAL REVENUE CODE" at

[URL]http://www.law.cornell.edu/uscode/26/usc_sup_01_26.html[/URL]

Here are some sanity checks:

[quote=jasong;195305]Has anyone ever actually bothered to READ 501(c)(3)?[/quote]C'mon, did you actually think it's realistically likely that no one's ever read it?

[quote]Start turning back pages to find the major heading that little piece of legislation is on. You might end up going back to 501(c)(3) and starting over a few times in disbelief, because it's a tax write-off for FOREIGN BUSINESSES AND CORPORATIONS.[/quote]Once you thought you had found that (rather unlikely) connection, how seriously did you consider the possibility that [i]you had followed the wrong path[/i] when going backwards? Did you try going forward from that heading, in search of 501(c)(3), in addition to simply repeating the back-track you'd already made? As you did your repetitions of path-following, did you vary the methods by which you followed the hierarchal path?

[quote]That's right folks, by signing up under a 501(c)(3)tax shelter, you're identifying yourself as a FOREIGN entity.[/quote]How long did you think about the oddity of that conclusion?

[quote]Ain't US law grand?[/quote]Law-reading does require care to keep the hierarchies straight.

Finally, something I know about as an attorney!

All of the relevant statutory text is found here: [URL="http://www.law.cornell.edu/uscode/26/usc_sec_26_00000501----000-.html"][COLOR=#800080]http://www.law.cornell.edu/uscode/26/usc_sec_26_00000501----000-.html[/COLOR][/URL]

Section 501(a) (titled "Exemption from taxation") states: "An organization described in subsection (c) or (d) or section [URL="http://www.mersenneforum.org/../uscode26/usc_sec_26_00000401----000-.html"][COLOR=#0066cc]401[/COLOR][/URL] [URL="http://www.mersenneforum.org/../uscode26/usc_sec_26_00000401----000-.html#a"][COLOR=#0066cc](a)[/COLOR][/URL] shall be exempt from taxation under this subtitle unless such exemption is denied under section [URL="http://www.mersenneforum.org/../uscode26/usc_sec_26_00000502----000-.html"][COLOR=#0066cc]502[/COLOR][/URL] or [URL="http://www.mersenneforum.org/../uscode26/usc_sec_26_00000503----000-.html"][COLOR=#0066cc]503[/COLOR][/URL]."

Section 501(c) (titled "List of exempt organizations") lists some of the types of tax-exempt organizations referred to in Section 501(a). There are 28 different classes of organizations listed in Sections 501(c)(1)-(28).

The part of the statute at issue here (Section 501(c)(3)) defines one such type of tax-exempt organization to be:

"Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office."

As you can see, there is nothing in Section 501(c)(3) that limits its application to [U]foreign[/U] businesses or corporations. Thus Jasong is incorrect when he claims that "[b]y signing up under a 501(c)(3)tax shelter, you're identifying yourself as a FOREIGN entity."

(If you're wondering, Section 501(d) defines another type of tax-exempt organization referred to in Section 501(a), namely religious and apostolic organizations. And Section 401(a) deals with trusts created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries.)

[QUOTE=jasong;195305]Has anyone ever actually bothered to READ 501(c)(3)?[/QUOTE]

Yes, I have.

[quote=cheesehead;195428]the hierarchal path?[/quote]hierarchical

(What's the point of having an as-I-key spellchecker if I'm going to ignore its prompts?)

The tax code is quite convoluted and complicated and one can't always rely on what might appear to be statutory hierarchies, because there are numerous cross-references, exceptions, and other stumbling blocks sprinkled throughout Title 26.

The bottom line is that although the tax code does permit certain foreign organizations to enjoy tax-exempt status in the United States, the exemption from withholding on income paid to such an organization requires that it qualify under Section 501(c) and that the income not constitute unrelated business taxable income under Section 1443 (titled "Foreign tax-exempt organizations").

Federal regulations require all foreign tax-exempt organizations to provide the U.S. withholding agent a withholding certificate (Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding) along with a favorable IRS determination letter or opinion issued by U.S. counsel that: (1) confirms its tax-exempt status; (2) certifies what portion, if any, of the amounts received constitutes unrelated business income; and (3) specifies whether it is a private foundation described in Section 509.

(The reason for the third requirement above is that under Section 1443, special withholding rules and rates apply where the foreign tax-exempt organization earns unrelated business taxable income. Section 4948(a)provides that to the extent that the foreign tax-exempt organization is characterized as a private foreign foundation, it is subject to a 4% excise tax on its gross investment income.)

All of this is explained in a bit more detail here: [URL="http://www.britannica.com/bps/additionalcontent/18/32010519/US-Withholding-Tax-Imposed-on-Foreign-TaxExempt-Organizations"][COLOR=#810081]http://www.britannica.com/bps/additionalcontent/18/32010519/US-Withholding-Tax-Imposed-on-Foreign-TaxExempt-Organizations[/COLOR][/URL]

Hope this helps clear things up a bit.