Helpers, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditur

Question

Helpers, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditures of $344,250 for the taxable year and grass roots expenditures of $0. Exempt purpose expenditures for the taxable year are $2,295,000. expenditures on a limited basis. Click here to access Exhibit 15.2 If required, round your answers to nearest dollar. a. What is the ceiling amount of lobbying expenditures under the terms of the election? Helpers elects to be eligible to make lobbying What is the amount of lobbying expenditures Helper is permitted to deduct? b. What is its tax liability as a result of the election?

Explanation / Answer

a The lobbying nontaxable amount is $264,750 [($225000) + ($2,295,000-$1,500,000) × 5%)]. Therefore, the ceiling on lobbying expenditures is $ 397125 ($264,750 × 150%) b Garden did not exceed the ceiling, the tax imposed is only on the amount of the lobbying expenditures in excess of $264,750 ($344,250 – $264,750 = $79,500). c The tax is imposed at a rate of 25%. Thus, the tax liability is $19,875 ($79,500 × 25%)

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