Page 93 - Washington Nonprofit Handbook 2018 Edition

y Lines 8 and 9

As indicated with respect to line 7 above, a “yes” answer may raise concerns

for the IRS. Address these concerns by demonstrating that the organization
understands and will follow the requirements necessary to obtain the rebuttable
presumption of reasonableness under the intermediate sanctions regulations.

Part VI. Your Members and Other Individuals and Organizations That
Receive Benefits From You

y Line 1a

Answer “yes” if the organization provides goods or services to individuals
(e.g., educational programs for youth or food to homeless people). If the
organization provides goods or services to individuals, demonstrate that these

goods or services are provided in a manner that serves a charitable class, rather
than a small, identifiable group of individuals. Also, if the organization sells goods
or services, as opposed to giving them away, show that the sales are structured in a
manner that is different from the way a for-profit entity would operate. For
example, do not say that the organization’s charges are based on cost. Instead,
survey what other nonprofits offering similar goods or services charge and base
fees on that research. Then consider setting fees at a level that most people likely
to need your services can afford; set your fees as low as possible, with the
difference to be made up by donations; or establish a sliding scale for fees based
on income and family size.

y Line 1b

As with line 1a above, the key is to show how the provision of goods or
services to organizations furthers your 501(c)(3) purposes. This may be easy if
goods or services are provided to other tax-exempt organizations or government
entities (e.g., by conducting park cleanups or providing free computers to small
community-based nonprofits). However, if goods or services are sold, distinguish
these activities from the manner in which a for-profit entity would operate. (See
comments regarding line 1a of Part VI above.)

y Line 2

If the answer to this question is “yes,” indicate that the class of individuals to
whom the organization provides services is a large and indefinite group (e.g.
homeless people, youth), rather than a small, identifiable group (e.g. the

WASHINGTON NONPROFIT HANDBOOK -82- 2018