USE OF TOWN TAX ID NUMBER

USE OF TOWN TAX ID NUMBER
Employer Identification Number (EIN)
07-12-2012

Terry Knowles, Assistant Director
Charitable Trusts Division, Office of the Attorney General,
NH Department of Justice

The IRS classifies entities according to their taxable status: government,
nonprofit, for-profit, trusts, estates, etc. When a tax ID number is issued the IRS
places the entity receiving the EIN into one of its predetermined categories.
The Town of Troy is a governmental entity and therefore any monies reported
under the town’s EIN number are classified by the IRS as assets of a
governmental entity and non-taxable.

The Library is a subdivision of the Town of Troy and should use the town’s EIN
number for that reason. If, however, the library applies for and receives its own
EIN number the taxable nature of the library may be called into question by the
IRS – the library is not a separate 501(c)(3) nonprofit organization, the EIN
issued to the library is not classified by the IRS as a government entity (the
library is not a separate municipal government) and the Service will therefore
assume the library is a taxable entity.

Two libraries in NH that applied for and received their own EINs were sent tax
bills by the IRS for interest earned on private donations in their bank accounts;
another library with its own number recently discovered taxes being withheld
from its trust fund investments because the IRS did not recognize the library as
non-taxable.

It is therefore advisable for the library to use the town’s EIN.