Tax-exempt organizations

TCP Chapter 11 · Area II · Blueprint II.E

Charities, schools, trade groups and clubs are exempt from income tax, but only while they keep meeting the rules, and even then some of their business income is taxed. The Blueprint asks you to recall what it takes to qualify under §501(c)(3), what makes an organization lose its exemption and which kinds of income count as unrelated business income. Tessa and Leo advise Harbor Lights Literacy Center, a public charity run by its director Nadia Ferris, and the Riverside Arts Foundation, a private foundation. Figures are for 2026.

In this chapter

Qualifying under §501(c)(3)
Other exempt organizations, public charities and private foundations
Keeping the exemption: annual returns
How an organization loses exempt status
What is unrelated business income?
Computing and reporting UBTI

This chapter has 6 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

Qualifying under §501(c)(3)
losing exempt status
types of unrelated business income

Chapter 10: Trusts · Chapter 12: Forming and liquidating entities