What Happens When a Not-For-Profit Corporation Has a Positive Net

question 26

Multiple Choice

What happens when a not-for-profit corporation has a positive net income?

• A) It must invest the net income in the business.
• B) It must reduce its fees.
• C) It must donate the net income to a charity.
• D) It must report net income to the governing board.

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Definitions:

Dollar Tax Liability

The amount of tax owed to the government, calculated in dollars, based on income, sales, imports, or other taxable activities.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, placing a larger burden on those who have higher earnings.

Average Tax Rate

The proportion of the total taxable income paid in taxes, calculated by dividing the total tax amount by the total income.

Regressive Tax

A tax system where the tax rate decreases as the amount subject to taxation increases, often placing a heavier burden on lower-income individuals.