Nonprofits providing Education related activities
Your non-profit may provide education related activities. Your board and organizers may have in mind that their activities are all tax exempt. Educational activities may be tax exempt, but there are other tests for tax exemption as well. An educational activity must benefit the public interests, and not private interests. The interpretation of “benefiting the public interest” has been the subject of many IRS interpretations and cases. As a board member of
such an organization, you need to be aware of the various interpretations of the law, and operate your organization within your understanding of these cases and regulations.
Here are some examples of what qualified:
- An organization that recruits college students for an internship program of employment in municipal government related to the student’s major.
- A corporation organized by the faculty of a university’s business school to give students experience in managing a securities portfolio.
- An organization providing needy students with free housing and with funds for the purchase of books on a gift or interest-free loan basis.
- An organization that awards scholarships to needy individuals.
- An organization that awards scholarships to students selected only on the basis of scholastic achievement, even though the award recipients aren’t limited to the poor.Similarly, an organization awarding scholarships only to members of a designated fraternity on the basis of scholarship and character.
- An organization formed to promote the art of filmmaking by conducting annual festivals to provide unknown independent filmmakers with opportunities to display their films and by sponsoring symposiums on filmmaking.
- An organization that provides information to the public on the public’s right to access to the media and monitors the media’s performance of their public service obligation.
- An organization that provides educational outreach to promote home ownership among low and moderate-income families, new immigrants, residents of central cities and distressed areas, and persons with special housing needs.
- An organization formed to collect and collate campaign speeches, interviews, and other materials of a candidate for a historically important elective office, for donation to a university or public library.
- An organization, formed to provide free sports instruction to children, is combating juvenile delinquency and thus promotes education.
Contrast the following organizations, which did not qualify:
- An organization that develops and promotes a sport for the general public, and not just for children, isn’t exempt.
- Two corporations that worked with medical and dental schools to assign residents to local teaching hospitals didn’t advance education.
- An organization created and controlled by a farm owner to provide low-income housing where preference was given to applicants for housing on the basis of type of position and length of employment on the farm and all the tenants were, in fact, employees.
- A membership association devoted to developing and exchanging research data among users of a specific type of computer, and that serves as liaison between users and the computer manufacturer.
- An organization formed by parents of pupils attending a private school that provides school bus transportation for its members.
- A purported educational organization whose principal activity was to provide administrative services to individual home schooling parents, who, through their fee-based membership and the activities of the organization, were relieved of what would otherwise have been their individual responsibilities as home schooling parents.
- An organization which provided rental housing at cost to a city which in turn provided housing free to families made homeless by fire. The organization didn’t qualify because it was the city, not the organization, that provided temporary housing to the distressed.
- An organization formed for the purpose of providing travel grants or loans to certain indigent and anti-social persons who had a strong desire or need to leave the commercial area in which the organizers conducted their own restaurant businesses. The organization’s activities were actually intended to rid the commercial district of homeless people and to protect the commercial interests of the organizers.
- A nonprofit corporation that provided housing for needy persons where it acted as a general partner in for-profit limited partnerships that owned developed real estate to be used as low-income housing. The court found that the corporation was lending its exempt status to achieve state property tax reductions for the partnerships. These benefits conferred on disinterested persons served private interests.
- A family association formed to study immigration to and migration within the U.S. by focusing upon its own family history and genealogy through research for the ultimate purpose of publishing a family history.
In some cases, proper nonprofit accounting methods may have changed the result.
Consulting with a good nonprofit accounting firm familiar with IRS regulations prior to beginning an educational endeavor that will help you stay in non-profit compliance.