1. Private Benefit or Inurement Private benefit occurs when an individual or organization receives a benefit from a Section 501(c)(3) organization. A tax-exempt organization that provides a substantial amount of private benefit may risk losing its tax-exempt status (this does not include paying reasonable salaries). Inurement occurs when an “insider” (officer, director, or key employee) receives any of an organization’s net income or inappropriately uses its assets for personal gain. Any amount of inurement, no matter how small, can jeopardize an organization’s tax-exempt status. Best practices: Pay only reasonable compensation for services rendered Document all compensation decisions Avoid loans to officers or directors Ensure all transactions with insiders are at arm’s length Adopt and enforce a conflict of interest policy 2. Substantial Lobbying Activity Lobbying is defined as “the attempt to influence legislation.” If a Section 501(c)(3) organization conducts substantial lobbying, it risks losing its tax-exempt status. The IRS uses one of two methods to determine whether lobbying activities are substantial: Substantial part test – Subjective test based on facts and circumstances, considering time and money spent Expenditure test – Objective mathematical test applying a dollar limit based on total expenditures (organizations electing this test must file Form 5768) Best practices: Track all lobbying expenditures carefully Educate staff and volunteers on what constitutes lobbying Consider whether to make the 501(h) election (expenditure test) 3. Political Campaign Activity Political campaign activity is directly or indirectly participating or intervening in any political campaign on behalf of or in opposition to any candidate for elective public office. For a 501(c)(3), violating the political campaign prohibition may result in revocation of tax-exempt status and imposition of certain excise taxes. Prohibited activities include: Endorsing or opposing candidates Making contributions to political campaigns Distributing candidate scorecards or voter guides that favor one candidate over another Hosting candidate forums that favor one candidate Best practices: Maintain strict neutrality in all election-related activities Avoid any statement that could be interpreted as endorsement or opposition Ensure candidate forums include all qualified candidates and ask nonpartisan questions 4. Substantial Unrelated Business Activity UBI (unrelated business income) is income that an exempt organization receives from conducting activities not related to its exempt purpose. Even if an organization uses the income from an unrelated activity to help pay for its exempt activities, that income is still UBI. For 501(c)(3)s, if the conduct of UBI-generating activities is substantial, the organization could jeopardize its tax-exempt status. Best practices: Monitor UBI levels and ensure they remain insubstantial relative to overall activities File Form 990-T if UBI exceeds $1,000 Consider whether to establish a for-profit subsidiary for significant unrelated activities Automatic Revocation Failure to file Form 990 for three consecutive years results in automatic revocation of tax-exempt status. Organizations that lose their status must reapply for exemption and may face tax liabilities during the gap period. At Nova Tax & Accounting Services , we provide Form 990 preparation and nonprofit compliance services to help organizations maintain their 501(c)(3) status. Schedule your free consultation to discuss your organization’s compliance needs.

Loudoun County is home to a diverse range of nonprofit organizations serving the community. Local CPAs and accounting firms that specialize in nonprofit accounting, audit, and tax services are available to help organizations maintain compliance . Local Nonprofit Accounting Support Several accounting firms in Loudoun County provide specialized services to nonprofit clients. For example, Mitchell Burns and Co PC, based in Leesburg, provides tax accounting and audit accounting to nonprofit clients, serving organizations with revenues ranging from $298,980 to $4.8 million . Clients include Loudoun Country Day School, Loudoun Convention and Visitors Association, Loudoun Hunger Relief, The Arc of Loudoun, Every Citizen Has Opportunities (ECHO), and Loudoun Cares, among others . Loudoun County Nonprofit Resources Loudoun County Commissioner of the Revenue – Handles BPOL tax registration, business tangible property tax filings, and property tax exemption applications for nonprofits Loudoun County Department of Economic Development – Provides resources for nonprofit organizations operating in Loudoun County Community Foundation for Loudoun and Northern Fauquier Counties – Supports local nonprofits through grantmaking and capacity building Virginia State Compliance for Loudoun Nonprofits Loudoun County nonprofits must comply with all Virginia state requirements, including: Incorporation with the Virginia SCC 501(c)(3) application with the IRS Sales tax exemption with the Virginia Department of Taxation Charitable solicitation registration with VDACS Annual report filing with the SCC Annual Form 990 filing with the IRS Local Tax Compliance Loudoun County nonprofits should also address local compliance requirements: Register for BPOL tax with the Loudoun County Commissioner of the Revenue Apply for business tangible property tax exemptions if eligible Apply for real property tax exemptions if eligible At Nova Tax & Accounting Services , we serve nonprofit organizations throughout Loudoun County and Northern Virginia. Our assurance and compliance services help organizations maintain compliance with federal, state, and local requirements. Schedule your free consultation to discuss your organization’s needs.

Virginia nonprofits face several local tax obligations that differ significantly from those of for-profit businesses. Understanding these obligations and available exemptions is essential for maintaining compliance. BPOL Tax (Business Professional and Occupational License) The BPOL tax is imposed by Virginia localities on businesses and professionals operating within their jurisdiction. All Ashburn businesses must register for and pay the BPOL tax. Registration: Businesses must register within 30 days of starting operations. The license must be renewed annually by March 1. Fees: First-year businesses pay a flat fee of $30; subsequent years, the fee is $30 if gross receipts are $200,000 or less, with additional amounts for higher receipts. Nonprofit exemptions: Many Virginia localities exempt nonprofit organizations that have received 501(c)(3) status from the IRS from the BPOL tax. However, organizations should verify this with their local Commissioner of the Revenue. Business Tangible Personal Property Tax Virginia localities impose a tax on business tangible personal property, including furniture, equipment, computers, and other assets used in business operations. Registration: Businesses must register for Business Tangible Personal Property Tax with the Loudoun County Commissioner of the Revenue. Filing: An annual return must be filed reporting property subject to this tax. Nonprofit exemptions: Many Virginia localities exempt 501(c)(3) organizations from this tax, but exemptions must be applied for separately. Sales Tax Exemptions Virginia’s state sales tax is 5.3% (4.3% state + 1% local) with rates up to 7% in some regions . 501(c)(3) organizations must apply for sales tax exemption through the Virginia Department of Taxation . This is separate from federal 501(c)(3) status . Exemption covers: Purchases made for the organization’s exempt purpose . Documentation: The organization must present its exemption certificate at the time of purchase . Property Tax Exemptions Virginia offers property tax exemptions for qualifying nonprofits in many localities . These exemptions are available at the local level and may vary by jurisdiction. Registration and Compliance To maintain compliance, Virginia nonprofits should: Register with the local Commissioner of the Revenue for BPOL tax Apply for sales tax exemption through the Virginia Department of Taxation Apply for property tax exemptions with the local Commissioner of the Revenue File annual reports with local tax authorities Maintain proper documentation for all exemption claims Virginia Tax Resources Virginia Department of Taxation – State sales tax exemption applications and guidance Loudoun County Commissioner of the Revenue – Local BPOL and tangible property tax information At Nova Tax & Accounting Services , our expert tax solutions team helps nonprofits navigate Virginia’s complex local tax landscape. Schedule your free consultation to discuss your organization’s local tax compliance needs.