Imagination Institute

PART X, LINE 2:

“National philanthropic trust and affiliates (organizations") are generally exempt from federal income taxes under the provisions of section 501(c)(3) of the code. In addition, the organizations qualify for charitable contribution deductions and have been classified as organizations that are not private foundations. Income which is not related to exempt purposes, less applicable deductions, is subject to federal and state corporate income taxes. The organizations follow the accounting guidance on accounting for uncertainty in income taxes (financial accounting standards board (fasb) accounting standards codification (asc) topic 740-10), which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded on the consolidated financial statements. Under this guidance, the organizations may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by a tax authority. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. Management evaluated the organizations' tax positions and concluded that the organizations have taken no material uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Consequently, no accrual for interest and penalties was deemed necessary for the years ended june 30, 2016 and 2015. The organizations file income tax returns in the u.s. Federal jurisdiction. With few exceptions, the organizations are no longer subject to income tax examinations by the u.s. Federal, state or local tax authorities for fiscal years before june 30, 2013. The organizations are also subject to income taxes on net income that is derived from a trade or business, regularly carried on, and not in furtherance of the purposes for which it was granted exemption. The organizations' obligation for unrelated business income tax for the years ended june 30, 2016 and 2015 is $803,000 and $457,000, respectively, is paid from the respective donor-advised fund accounts that generated the taxable income, and recorded within program services on the organizations' consolidated statements of activities.”