Taxes and Tax Exemption

Most organizations believe that because they are essentially nonprofit and are comprised of students, they are automatically tax-exempt. This is false. There are 2 types of tax-exemption in which RSOs typically have an interest and which cause confusion: federal income tax and state sales tax. Related to federal income tax is the tax-deductible donation, which is of interest to organizations that desire to raise funds from sponsors. The information provided below, while gathered from the Internal Revenue Service (IRS) and Florida Department of Revenue, cannot be considered official tax advice. RSOs should contact an independent tax advisor for official tax information.

Federal Income Tax
RSOs are not automatically granted UCF’s exemption from paying federal income taxes. Also keep in mind that many organizations (especially if the group has a bank account) have an Employee Identification Number (EIN), sometimes also called a Tax ID. The possession of this number does not imply that the organization is tax-exempt. However, this number would be required if the group does decide to apply for a tax-exempt status from the IRS.

According to the IRS, some organizations may have to pay federal income taxes, depending on their annual gross receipts. Otherwise, the organization will have to file federal taxes using a version of IRS Form 990 (Links listed below)

That being said, most RSOs should be able to apply for one of the many categories of tax-exempt status. Groups still cannot claim to be tax-exempt entities unless they apply for and are granted tax-exempt status from the IRS.

Of the many categories of tax-exempt status, the most sought after status is under Internal Revenue Code Section 501(c)(3) because it is the only status that allows sponsors to write off a donation as an income tax deduction. Again, RSOs are not automatically granted UCF’s status as a tax-deductible entity just because they are registered by OSI, nor are all RSOs eligible to apply for 501(c)(3) status. In order to gain this status, RSOs would need to be granted it by the IRS through a process of application. Therefore, unless the organization applies for and receives 501(c)(3) status from the IRS, donations made to the organization are not considered tax-deductible as charitable gifts, and groups should inform potential contributors of this. That being said, sometimes potential sponsors will accept, in lieu of a tax-exempt status, a letter from OSI stating that the organization is not functioning as a for-profit group. If the potential sponsor will accept this letter, please contact OSI to request one.

Filing for any type of tax-exempt status can be a tedious and expensive process, and typically requires the specialized training of a tax attorney and accountant. The application process can take from 6 months to a year, and the process alone costs a minimum of $125, depending on gross receipts. Organizations that are granted a tax-exempt status, while they would not have to pay taxes if annual gross receipts are less than $25,000, may still have to file tax paperwork annually.

Many local/national affiliations have federal tax-exempt status. Some of them may even have 501(c)(3) exemption. Organizations with this type of affiliation should ask their parent organization if they are covered under the parent’s tax-exempt status.

State Sales Tax
RSOs cannot use UCF’s exemption to purchase goods or food (including on-campus catering) without state sales tax. According to the Florida Department of Revenue, RSOs cannot apply to receive state sales tax-exemption unless they have applied for and been granted federal tax-exempt status under Internal Revenue Code Section 501(c)(3). Resource Links are listed below: