(Solved) Essay on Tax Exemption
Added on 2021-05-31
7 Pages1930 Words66 Views
FinanceFilm and TheatreHigher Education
|
|
|
Tax Exemption 1TAX EXEMPTIONBy (Student’s Name)Professor’s NameCollegeCourseDate
Tax Exemption 2ABSTRACTThe following essay is on the tax-free status granted by the federal government and whyand how it is given. A case study on sporting clubs and why they qualify for tax-exempt status ispresented with arguments for and against the tax-free status. Accounting theories have also beenused to explain further the reasons why sporting clubs should retain their status.INTRODUCTIONAn organization or institution that has a tax-free status (tax-free) is one that is exemptedfrom income taxes and federal corporate for most types of revenue. The tax-exempt condition isgiven by the federal government in the form of the Internal Revenue Service (IRS). For anorganization to apply for a federal tax exemption, they need to have been granted non-profitstatus. The non-profit status is issued by the state.There are various types of exemption in the United States Tax Code and total, they are 26exemptions. The best-known form is the charitable exemption that is under 501(c) (3). Manycommunity organizations have this tax-exempt status. Another status is 501(C) (4) which isappropriate for social welfare organizations (Bertrand et al. 2018).Organizations become tax exempt by applying for the status which is a long process.Form 1023 for 501(c)(3) which is the application form for organizations and Form 1024 that isfor others is 30 pages long, and the IRS says that the form can take 8hours to complete. It takesseveral months to be granted status, but after completing the form, the IRS usually sends a letterthat says your status is pending. When the IRS issues the status, they send a letter ofdetermination. This can be used by the organization to show funders and when applying forgrants.Discussion
Tax Exemption 3The NRL and AFL were both granted the tax-free status on the basis that the profitsearned from both will be reinvested back in the community to encourage participation in sportsand to provide local facilities such as stadiums for sports. After the NRL and AFL have paidtheir employee salaries (who pay income tax) the surplus profited is supplied to clubs. This is tohelp them in building property and entertainment establishments. Also, they can fund communityinfrastructure (Fishman 2017).Sporting clubs need to be automatically granted the tax-free status by the IRS due tosome reasons. First, most sporting clubs are non-profit organizations. This is because all theprofits that are earned are re-invested back into the club to sustain it. Thus because they are non-profit their income should not be taxed (Anderson 2017).Second most sporting clubs are formed for the sole purpose of encouraging people to playthe particular sport or game, for example, sporting clubs that are established in schools anduniversities aim at encouraging students to participate in the extracurricular activity. This waythey foster both the mental and physical wellbeing of the students. Hence they should be grantedtax-free status. Lastly, sporting clubs should be allowed a tax-exempt status because most arecharitable organizations that focus on giving back to the community by building infrastructureand entertainment facilities such as stadiums (Nielsen and Storm 2017).Most clubs have managed to earn substantial income after they were granted the tax-freestatus due to some reasons. First, it is because of the tax payer's money. These clubs sell out theirtickets when they are hosting games. The ticket prices are at times very high, and millions ofpeople buy them. Therefore, they get a significant amount of money from the ticket sales.Second, the clubs gain vast amounts of money from gambling. Most of the clubs gain moneyfrom gambling sites where people are given odds to predict which team will win or draw. The
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Accounting Theory and Application - Assignmentlg...
|8
|2160
|31
Accounting Theory: Tax Exemption of Sporting Clubs and its Impact on Public Interestlg...
|9
|2129
|434
Assignment on Accounting Theorylg...
|9
|2241
|23