tax exemption

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tax exemption, immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various charities, civic leagues, labor unions, trade associations, social clubs, and political organizations. Such policies date back to 1894, when the U.S. Congress passed income tax laws that provided exemptions for certain institutions.

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tax-ex·empt • adj. not liable or obligated to pay taxes: the foundation has applied for tax-exempt status. ∎  bearing interest on which no taxes are imposed: ask about our tax-exempt savings plans.

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tax ex·emp·tion • the process of exempting a person or organization from paying taxes, usu. on a specified amount of income. ∎  a taxpayer's dependent exempted in this way.