What Non-Profits Cannot Do
No private benefit, no political activity, no influencing local legislation.
The following information is copy/pasted from the IRS website:
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes….
…While education and registration is permitted in some cases, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.
In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.
Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items (such as legislative confirmation of appointive office), or by the public in referendum, ballot initiative, constitutional amendment, or similar procedure. It does not include actions by executive, judicial, or administrative bodies.
An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation.
You can report an individual or a business you suspect of tax fraud online.
Tax fraud includes:
False exemptions or deductions
Kickbacks
A false or altered document
Failure to pay tax
Unreported income
Organized crime
Failure to withhold
Failure to follow the tax laws
Submit a whistleblower claim
Individuals must use IRS Form 211, Application for Award for Original Information PDF, and ensure that it contains the following:
A description of the alleged tax noncompliance, including a written narrative explaining the issue(s).
Information to support the narrative, such as copies of books and records, ledger sheets, receipts, bank records, contracts, emails, and the location of assets.
A description of documents or supporting evidence not in the whistleblower's possession or control, and their location.
An explanation of how and when the whistleblower became aware of the information that forms the basis of the claim.
A complete description of the whistleblower's present or former relationship (if any) to the subject of the claim (for example, family member, acquaintance, client, employee, accountant, lawyer, bookkeeper, customer).
The whistleblower's original signature on the declaration under penalty of perjury (a representative cannot sign Form 211 for the whistleblower) and the date of signature.
Individuals must then mail the Form 211 with supporting documentation to:
Internal Revenue Service
Whistleblower Office – ICE
1973 N Rulon White Blvd.
M/S 4110
Ogden, UT 84404
Who is eligible to file a claim for award?
Any individual, other than an individual described below, is eligible to file a claim for award and to receive an award under section 7623.
The Whistleblower Office will reject any claim for award filed by an ineligible whistleblower and will provide written notice of the rejection to the whistleblower. The following individuals are not eligible to file a claim for award or receive an award under section 7623:
An individual who is an employee of the Department of Treasury or was an employee of the Department of Treasury when the individual obtained the information on which the claim is based;
An individual who obtained the information through the individual's official duties as an employee of the federal government, or who is acting within the scope of those official duties as an employee of the federal government;
An individual who is or was required by federal law or regulation to disclose the information or who is or was precluded by federal law or regulation from disclosing the information;
An individual who obtained or had access to the information based on a contract with the federal government; or
An individual who filed a claim for award based on information obtained from an ineligible whistleblower for the purpose of avoiding the rejection of the claim that would have resulted if the claim was filed by the ineligible whistleblower.
What are the rules for getting an award?
Internal Revenue Code (IRC) section 7623 provides for awards, in some cases mandatory, when the Internal Revenue Service (IRS) takes action based on a whistleblower's information. Claims for award that provide specific and credible information regarding tax underpayments or violations of internal revenue laws and that lead to proceeds collected may qualify for an award.
The Bipartisan Budget Act of 2018 defined proceeds as penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, as well as any proceeds arising from laws for which the IRS is authorized to administer, enforce, or investigate. This includes criminal fines, civil forfeitures, and violations of reporting requirements.
In general, the IRS will pay an award of at least 15 percent, but not more than 30 percent of the proceeds collected attributable to the information submitted by the whistleblower. The award percentage decreases for claims based on information from public sources or if the whistleblower planned and initiated the actions that led to the noncompliance. Awards will be processed as either a section 7623(a) or 7623(b) award.
To qualify for the IRC section 7623(b) award program, the information must:
Relate to a tax noncompliance matter in which the tax, penalties, interest, additions to tax, and additional proceeds in dispute exceed $2,000,000; and
Relate to a taxpayer, and for individual taxpayers only, one whose gross income exceeds $200,000 for at least one of the tax years in question.
If a submission does not meet the criteria for IRC section 7623(b) consideration, the IRS will consider it for the discretionary program under IRC section 7623(a) of the Code.