There are a number of legal and tax provisions that can impact chapter operations. The following information is meant to guide chapters on general legal and tax issues. This is not meant to serve as a substitute for formal legal or tax advice, so chapters are strongly encouraged to consult local law and tax experts to discuss any state or local provisions that may impact the chapter.
The following topic areas are addressed in this section:
- Advantages and disadvantages of chapter incorporation
- Procedures for selecting, obtaining and maintaining federal tax exempt status
- Filing tax returns and compliance with other applicable laws
- Lobbying and political activities
- Corporate sponsorship and exhibitor fees
Chapters of the American College of Surgeons are not covered by the IRS determination that the College itself is exempt from taxation under Section 501(c)(3) of the Code. Each chapter, whether it is a corporation or an unincorporated association, must apply directly to the IRS for a determination of its tax-exempt status. If a chapter has failed to apply to the IRS for tax-exempt status, it must do so as soon as possible. If the IRS determines that the chapter is not exempt, it will be required to pay any unpaid income taxes, plus a penalty of up to 25% of the amount of the unpaid tax and interest.
All ACS chapters are tax exempt organizations under Sections 501 (c)(3) or 501 (c)(6).
- Section 501 (c)(3): organizations organized and operated for charitable, educational or scientific purposes and none of its earnings may inure to any private shareholder or individual.
- Section 501 (c)(6): exemption of business leagues which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.
The primary advantage of 501 (c)(3) status is that contributions (other than dues) are deductible as charitable contributions for income tax and federal estate tax purposes. Voluntary contributions or bequests made to 501 (c)(6) organization are not similarly deductible. Contributions made by businesses may be deductible as business expenses.
To obtain an exemption from federal tax under either Section 501(c)(3) or 501(c)(6), the chapter must file the appropriate tax exemption application with the IRS, together with a copy of its organizational documents (articles of incorporation or association), its bylaws, and its most recent financial statements. The IRS website offers details and how to apply for exempt status.
Because the organizational documents and bylaws describe the purposes for which the chapter was formed and contain other provisions that affect the chapter’s qualification for exempt status, these documents and the application for exemption should be prepared carefully with the advice and assistance of legal counsel.
