We’re all familiar with the idea of “tax exempt” organizations. The theory here is that some groups serve such valuable roles in society that they should be exempt from income, property, or other taxes. Here in the United States, Internal Revenue Code Section 501 lists 28 categories of exempt organizations, including churches, colleges, charities, social clubs, chambers of commerce, fraternal organizations, cemeteries, and even “mutual ditch or irrigation companies.”
Nobody gets a tax-exemption “for free,” and applying for it can be daunting. IRS Form 1023, “Application for Recognition of Exemption,” runs 28 grueling pages. There’s a shorter “EZ” version — but the checklist to see if you can even use it runs six full pages! And of course state and local governments have their own hoops to jump through. With that in mind, here are two stories that illustrate how that process can work — and not work.
The Cybeline Revival is a pagan sect founded in 1999 and dedicated to the principle that “the divine feminine, the mother goddess Cybele, is present in everything, thereby creating a connection in all living things, as well as giving rise to an obligation to do charitable work and a responsibility to improve the conditions of all people, particularly women.” In 2002, the group bought an old inn located in the town of Catskill, New York, about two hours up the Hudson from Manhattan. They used it as a home for transsexual women and as a headquarters for their faith.
In 2009, the group applied for a property tax exemption for the inn. The town assessor denied the request and a trial court agreed, ruling that the church used the property mainly to house members of the congregation. Last year, however, an appeals court overturned that decision, holding that the church did use the property “primarily for its religious and charitable purposes.”
Not everyone who applies for tax-exempt status succeeds, however. In August, the IRS shot down an application from a group dedicated to protecting the human rights of defenseless victims of involuntary microwave and mind control attacks “perpetrated by intelligence agencies, individuals, defense contractors, mental health agencies, and clandestine crime watch organizations who also work with organized crime syndicates.”
The group applied for tax-exempt status to help educate the public about involuntary mind control, develop weapons to cancel mind control attacks through electronic jamming, and implement counterattacks for particular victims on a case-by-case basis. They also set out to solicit donations to influence proposed legislation written by the group’s founder (who must be a hoot at cocktail parties).
So . . . did our friends at the IRS buy it? Of course not. (C’mon, guys, give ’em a little credit!) In fact, they dedicated 14 pages to not buying it, holding that: 1) the group failed to establish that their activities would be “educational,” 2) its funds would be used to reimburse the founder for expenses incurred prior to formation, and 3) its primary purpose was actually to lobby for anti-mind control legislation. (They diplomatically refrained from saying “you’re nuts” or “really???”)
We, Chicago CPA don’t need to use mind control techniques to know that you want to pay less tax. While we can’t protect you from clandestine crime watch organizations or crime syndicates, we can give you a plan to pay the least amount of tax, without lining your hat with tinfoil. So call our tax preparers at 773-728-1550 for your plan, before someone out there makes you want to pay more!