Question

To maintain exempt status, an organization must do which of the following:

A. Satisfy only an organizational test.
B. Satisfy only an operational test.
C. Satisfy both an organizational test and an operational test.
D. Satisfy a financial test.
E. Once exempt status is granted, it will continue regardless of whether the organizational test and the operational test are satisfied.

Answer 1

To maintain exempt status, an organization must satisfy both an organizational test and an operational test. This means that the organization must meet certain requirements related to its structure and purpose (organizational test) as well as its activities and how it operates (operational test). Meeting these tests is necessary to maintain the organization's tax-exempt status. It is not sufficient to only satisfy one of these tests or to rely on a financial test. Additionally, exempt status is not guaranteed to continue indefinitely and may be revoked if the organization fails to satisfy these tests or engages in certain prohibited activities.