stay exempt! - north carolina ptancpta.org/wp-content/uploads/2013/06/2013-stay-exempt.pdf ·...
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Stay Exempt! A Guide for Charitable Organizations with Changing Leadership
Presenter, Exempt Organizations
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Stay Exempt! | Exempt Organizations, TEGE
You are not alone
• Approximately 1.5 million tax-exempt organizations
• In 2012; 1,081,891 - 501(c)(3) organizations filed with the IRS
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Stay Exempt! | Exempt Organizations, TEGE
Topics for Today
How to stay exempt
• The cardinal rule – a exempt purpose is essential
• Filing requirements
• Fundraising
• Recordkeeping
• IRS Resources 3
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Stay Exempt! | Exempt Organizations, TEGE
What is an “exempt purpose?”
• Religious • Charitable • Scientific • Testing for public safety • Literary • Educational • Fostering national or
international amateur sports competition
• Prevention of cruelty to children or animals
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All 501(c)(3) organizations are organized and operated exclusively for one or more of these purposes:
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Stay Exempt! | Exempt Organizations, TEGE
Passing the Operational Test
• If your organization…
• operates exclusively for an exempt purpose, and
• conducts activities furthering its exempt purpose (non-exempt activities are insubstantial)
• You pass the operational test
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Stay Exempt! | Exempt Organizations, TEGE
Be Careful About the “Big Five”
• Private benefit
• Lobbying / legislative activity • Political activity
• Failure to file
• Too much unrelated business income
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Stay Exempt! | Exempt Organizations, TEGE
Private Benefit
A charity’s activities must serve a public interest
Activities must not • Further private interests
• Permit excess benefit to any individual or organization
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Stay Exempt! | Exempt Organizations, TEGE
Inurement & Private Benefit
Private benefit to insiders (i.e., board members, officers, key employees) is inurement – ABSOLUTELY PROHIBITED
Private benefit must be more than incidental; not limited to insiders
All inurement is private benefit, but not all private benefit is inurement
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Stay Exempt! | Exempt Organizations, TEGE
Lobbying / Legislative Activity
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Lobbying – attempting to influence legislation
Measurement methods • “Substantial Part” test • “Expenditure” test
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Stay Exempt! | Exempt Organizations, TEGE
Political Activity
Direct and indirect candidate support
• Contributions
• Public statements for/against a particular candidate
• Participation in campaigns
ABSOLUTELY PROHIBITED
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Stay Exempt! | Exempt Organizations, TEGE
Filing Requirement
Pension Protection Act of 2006 • Failure to file required return (Form
990, 990-EZ, 990-PF or 990-N) for three consecutive years results in loss of exemption • Organization must re-apply and pay
appropriate user fees
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12 FORM 990 | EXEMPT ORGANIZATIONS
Form 990-series Filing Requirements Who is Required to File?
• Exceptions Which Form?
Private Foundations file Form 990-PF
Tax Year 2012 Form All organization may file 990 Gross receipts below $200K; and Total assets below $500K 990-EZ
Gross receipts at or below $50K 990-N
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13 FORM 990 | EXEMPT ORGANIZATIONS
Information Needed:
• Legal name and address • Employer identification number (EIN) • Web address • Principal officer name/address • Confirmation of gross receipts
990-N (e-Postcard)
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Stay Exempt! | Exempt Organizations, TEGE
Unrelated Business Income (UBI)
• Regularly carried on
• Trade or business activity
• Not substantially related to organization’s exempt purpose
Substantial UBI activities causes operational test failure More – see Publication 598, Tax on Unrelated Business Income of Exempt Organizations 14
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Unrelated Business Income (UBI)
Common Activities • Selling advertising
• Gaming
• Selling merchandise or publications
• Providing services
Exceptions • Activities conducted by
volunteers • Convenience of
organizations members, students, employees
• Selling donated articles • Distribution of low cost
articles • Sponsorship • Traditional bingo games
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Stay Exempt! | Exempt Organizations, TEGE
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UBI Exclusions
• Interest and dividends • Royalty income • Rental income from real property • Gains and losses from the sale of
property
16 Stay Exempt! | Exempt Organizations, TEGE
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Stay Exempt! | Exempt Organizations, TEGE
Fundraising
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Start with these questions: • Is the activity related to the
organization’s exempt purpose? • Does the activity fall within one of
the exceptions to UBI?
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Stay Exempt! | Exempt Organizations, TEGE
Is Gaming “Charitable?”
Gaming is a recreational activity & a business • Gaming itself does not further exempt
purposes • The sole purpose of a charity cannot be to
conduct gaming
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More – see Publication 3079, Tax-Exempt Organizations and Gaming
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Stay Exempt! | Exempt Organizations, TEGE
Why Should I Keep Records?
• Monitor progress • Prepare financial statements • Identify income sources • Track expenses • Track volunteers’ work • Verify items on IRS and state returns • Assist organization’s future leaders
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Stay Exempt! | Exempt Organizations, TEGE
Recordkeeping Basics • Use a system that clearly shows income and
expenses • Keep determination letter forever • Keep Employer Identification number (EIN)
notification forever
• Keep IRS returns until the statute of limitations has expired
• Keep state or local forms and returns as long required by agency
20 More – see Publication 583, Starting a Business and Keeping Records
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Stay Exempt! | Exempt Organizations, TEGE
Employer Identification Number (EIN)
• Have only one (X0-X0XXXXX) • Use for all accounts – bank and IRS Lost or misplaced EIN • IRS computer generated notice • Bank account number • Call 800-829-4933 (7:00-7:00, Mon.-Fri.)
• Authorized person, or • Mailed to address of record
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22 FORM 990 | EXEMPT ORGANIZATIONS
Resources to Assist
HELP!
Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities
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23 EXEMPT ORGANIZATIONS
To reach our Charities and Nonprofits page, go to IRS.gov and click “Information for…” then select Charities & Nonprofits.
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24 EXEMPT ORGANIZATIONS
Find the latest developments affecting EOs by selecting EO Current Topics & News.
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25 EXEMPT ORGANIZATIONS
The A-Z Site Index is one of our most helpful pages.
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26 EXEMPT ORGANIZATIONS
Check out EO’s new on-line exempt org search tool. It’s updated monthly!
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27 EXEMPT ORGANIZATIONS
Educational activities are
specially designed for
the EO community.
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28 EXEMPT ORGANIZATIONS
You can also find the EO Audit page at IRS.gov by searching “Charity and Nonprofit Audits”
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EO-Update: Free e-Newsletter
29 FORM 990 | EXEMPT ORGANIZATIONS
Register for the EO UPDATE!
It’s FREE and it keeps you up to date with what’s happening in EO.
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30 EXEMPT ORGANIZATIONS
StayExempt.irs.gov
This is one of the best ways to learn what’s important to
exempt organizations
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31 EXEMPT ORGANIZATIONS
IRS Video Portal www.irsvideos.gov
Available to fit your busy schedule, online 24/7
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32 FORM 990 | EXEMPT ORGANIZATIONS
For More Information
Charities and Nonprofits page For forms, publications, general information: www.irs.gov/charities
Web-Based Training Program For 501(c)(3) organizations: StayExempt.irs.gov
General Questions Account issues only: 1-877-829-5500 (toll free)