NFP Exam 3 UPDATED ACTUAL Exam
Questions and CORRECT Answers
Characteristics of NFP Organizations - CORRECT ANSWER - (1) receives significant
amounts of resources from resource providers who do not expect repayment or economic
benefits as a proportionate return
(2) operates for purposes other than to provide goods or services at a profit, and
(3) does not possess ownership interests like those of business enterprises.
Not-for-profit entities are first designated as governmental or nongovernmental to determine
whether they should follow GASB or FASB standards.
The focus is on stewardship and accountability - how is funding spent?
NFP Entities Include - CORRECT ANSWER - 1) Voluntary health and welfare
organizations (VHWOs)
2) Other not-for-profit organizations (such as churches and museums)
3) Health care entities, and
4) Colleges and universities
Tax exempt status - CORRECT ANSWER - you have to file with the state you are
operating in and the federal government
Although an organization may be granted tax-exempt status by a state, it must still apply to the
IRS for tax exempt status, unless it is a religious organization, including churches, synagogues,
temples, mosques, integrated auxiliaries of religious organizations, or any organization with
normal gross receipts in a taxable year of less than $5,000.
The stated purpose of the NFP and the services it will perform determine the Internal Revenue
Code(IRC) section under which the NFP requests exemption.
, Tax exempt status: organizational test - CORRECT ANSWER - The organizational test for
tax-exempt status is that the articles of incorporation must limit the organization's purposes to
those described in the classifications in IRC Sec. 501, cannot benefit private interests, and may
not attempt to influence legislation as a substantial part of its activities.
VHWOs - CORRECT ANSWER - VHWOs encompass a diverse group of NFPs that are
supported by and provide voluntary services to the public.They may expend their resources to
solve basic social problems in the areas of health or welfare either globally, nationally, at the
community level, or on an individual basis.Examples include the March of Dimes, theAmerican
Cancer Society, Girl Scouts, BoyScouts, and Meals on Wheels.
Other NFP organizations - CORRECT ANSWER - The "other" category includes a variety
of organizations, such as libraries, museums, social organizations, political organizations,
cemetery associations, civic organizations, and religious organizations
Private Foundations and Public Charities - CORRECT ANSWER - Private Foundations:
.all 501(c)(3) organizations unless excluded
.support from small number of donors and investment income
.Form 990-PF
.Subject to excise tax
Public Charities:
.Form 990
.Not subject to excise tax
.must meet exclusion requirements
- public support test
-nature of mission
Annual Reporting (Form 990) - CORRECT ANSWER - Except for religious organizations
and government NFPs, tax-exempt organizations must file Form 990 annually. The form must be
made publicly available for three years, and the current form is 12 pages long, with up to 16
schedules.
Questions and CORRECT Answers
Characteristics of NFP Organizations - CORRECT ANSWER - (1) receives significant
amounts of resources from resource providers who do not expect repayment or economic
benefits as a proportionate return
(2) operates for purposes other than to provide goods or services at a profit, and
(3) does not possess ownership interests like those of business enterprises.
Not-for-profit entities are first designated as governmental or nongovernmental to determine
whether they should follow GASB or FASB standards.
The focus is on stewardship and accountability - how is funding spent?
NFP Entities Include - CORRECT ANSWER - 1) Voluntary health and welfare
organizations (VHWOs)
2) Other not-for-profit organizations (such as churches and museums)
3) Health care entities, and
4) Colleges and universities
Tax exempt status - CORRECT ANSWER - you have to file with the state you are
operating in and the federal government
Although an organization may be granted tax-exempt status by a state, it must still apply to the
IRS for tax exempt status, unless it is a religious organization, including churches, synagogues,
temples, mosques, integrated auxiliaries of religious organizations, or any organization with
normal gross receipts in a taxable year of less than $5,000.
The stated purpose of the NFP and the services it will perform determine the Internal Revenue
Code(IRC) section under which the NFP requests exemption.
, Tax exempt status: organizational test - CORRECT ANSWER - The organizational test for
tax-exempt status is that the articles of incorporation must limit the organization's purposes to
those described in the classifications in IRC Sec. 501, cannot benefit private interests, and may
not attempt to influence legislation as a substantial part of its activities.
VHWOs - CORRECT ANSWER - VHWOs encompass a diverse group of NFPs that are
supported by and provide voluntary services to the public.They may expend their resources to
solve basic social problems in the areas of health or welfare either globally, nationally, at the
community level, or on an individual basis.Examples include the March of Dimes, theAmerican
Cancer Society, Girl Scouts, BoyScouts, and Meals on Wheels.
Other NFP organizations - CORRECT ANSWER - The "other" category includes a variety
of organizations, such as libraries, museums, social organizations, political organizations,
cemetery associations, civic organizations, and religious organizations
Private Foundations and Public Charities - CORRECT ANSWER - Private Foundations:
.all 501(c)(3) organizations unless excluded
.support from small number of donors and investment income
.Form 990-PF
.Subject to excise tax
Public Charities:
.Form 990
.Not subject to excise tax
.must meet exclusion requirements
- public support test
-nature of mission
Annual Reporting (Form 990) - CORRECT ANSWER - Except for religious organizations
and government NFPs, tax-exempt organizations must file Form 990 annually. The form must be
made publicly available for three years, and the current form is 12 pages long, with up to 16
schedules.
