Thank you Geri Stengel for hosting me for “Planned Giving In Small- and Mid-size Shops“!
“Thank you crowd” for spending time with me. I hope it was helpful to each of you.
Your slides are below.
What is Charity Registration. These are the requirements in every state, and D.C., that you register with state authorities before you solicit donations in the state. You either register, qualify for an exemption, don’t solicit there or roll the dice and take your chances.
What is a solicitation. Oh how I wish there was a simple answer. It depends upon the state when you’re talking about email or a “donate now” button on your website. But in every state these are solicitations: U.S. Mail; hosting events; buying advertising space; or having individual meetings, where a donation is requested, any part of which will be used for a charitable purpose.
What about raffles. It’s a solicitation if any part of the donation will be used for charitable purposes and the donation was requested using the methods above.
How do exemptions work. These, too, vary from state to state. Some states, like Arizona and Florida, have paltry exemptions. California and North Carolina, on the other hand, have a decent list of exemptions. Religious organizations are commonly exempt, and many people erroneously believe such nonprofits get an automatic exemption from state registration. Education and healthcare are also commonly exempted, as are small charities that raise less than a threshold set from state to state. In some states you apply for exemption and must be approved. In others, you can walk away if you conclude you’re exempt.
How do you register. My common refrain: it depends on the state. Generally, you fill out a comprehensive form (or a series of forms), add a bunch of documents like tax determination letter; by-laws; articles of incorporation; financial statement; list of board members; IRS form 990; and fundraiser contracts. And, pay a fee.
What about renewals. In most states, you renew annually. In a few, including Hawaii, New Mexico and Oregon, registration lasts indefinitely. In Georgia, it’s every two years.
If you want comprehensive info on the subject, take a look at my book, Charity Registration: State-by-State Guidelines for Compliance. If you want less than a book but more than a blog post, here’s a journal article I wrote.
If your nonprofit wants help with registrations, contact me. I do them.
If you only want the basics, follow me around. I’ll keep writing about it.
I was interviewed today by Asa Aarons for tonight’s Consumer Watch segment of the evening news on the Time Warner cable network.
We talked about the IRS’s automatic revocation of tax-exempt status list, and what it means for donors and charities.
If you missed it, here you go. I’d love feedback and comments either here or on YouTube!
Thanks for taking a couple of minutes to watch!
We hear this language all the time in charity circles:
… and other words and phrases in the nonprofit lexicon. What do they mean to the federal agency that reviews public charities when they apply for tax-exempt designation and again every year when most file an information return?
The most comprehensive (read “burdensome”) of the returns, form 990, asks lots of questions about whether policies are in place, but doesn’t (and shouldn’t) provide any detail as to what the expectations are around these arcane concepts.
If only we could agree on what the practices mean.
I found this gem on the IRS website, “Governance and Related Topics – 501(c)(3) Organizations,” that makes it pretty clear what the agency is looking for. (It’s from February 2008, but these definitions don’t change much.) The Internal Revenue Code does not require documentation or detailed policies in these areas.
But–big but–IRS believes, “A charity that has . . .a knowledgeable and committed governing body and management team, and sound management practices is more likely to operate effectively and consistent with tax law requirements.”(page 1)
That explains the Service’s opinion of the relationship between good governance and tax code compliance, and their interest in the former. So what do these things mean?
Good Governance. This is the broad category. It means having in place “policies relating to executive compensation, conflicts of interest, investments, fundraising, documenting governance decisions, document retention and destruction, and whistleblower claims.” (page 3)
Executive Compensation. You pay reasonable compensation for services rendered. Pay is determined by people knowledgeable about compensation practices and financially uninterested in the levels set. (page 3)
Conflicts of Interest. The Service “encourages a charity’s board of directors to adopt and regularly evaluate a written conflict of interest policy that requires directors and staff to act solely in the interests of the charity without regard for personal interests . . .” You set up the policy and monitor compliance. (page 4)
There is considerably more detail at the page references I’ve given you. Read the document and consult your legal counsel. Do not construe this post as legal advice. It isn’t.
Over the next few weeks I’ll take on additional governance topics from this informative IRS paper.
There are expert attorneys much more knowledgeable than me in the legal requirements for running your nonprofit. I suggest you pay attention to Carter Ellis and Gene Takagi. Gene and his colleague Emily Chan will be regular legal contributors to Tony Martignetti Nonprofit Radio starting in July. I’m sure we’ll talk a lot about governance.
I’d like to go deeper. What do you do to get tax-exempt status back if you’re listed and still operating?
Start on the IRS website.
You’ll get preferential treatment if your organization “normally has annual gross receipts of not more than $50,000 in its most recently completed taxable year.” That’s from Notice 2011-43 which will guide you through the reinstatement process. If you fit that criteria, you’re a “small organization” for purposes of reinstating tax-exempt status.
If a small organization submits an application for reinstatement (Form 1023 for 501(c)(3) charities; Form 1024 for others) by December 31 of next year, and meets the criteria on page 3 of Notice 2011-43, IRS will reinstate tax-exempt status retroactive to the date of revocation.
As if that weren’t enough. Small organizations get a substantially reduced fee of $100, down from $850 for others. That’s an 88% discount. Where you gonna find that kind of bargain?
Plus, there are three phone numbers at the bottom of the notice for “further information.” I wonder how many calls Ms. Rosenbaum and Messrs. Quesenberry and Giuliano will get this week. (It’s nice to see an italian in the bunch.)
Be sure to write “Notice 2011-43” on top of your application and on your envelope.
Your guidance is in Notice 2011-44 and the news isn’t as good as the small folks’.
You submit Form 1023 or 1024, but the standard for award of retroactive reinstatement is more stringent. It includes “a detailed description of all the facts and circumstances that led to each failure and the continuous failure [to file annually], the discovery of the failures, and the steps taken to avoid or mitigate the failures” along with evidence to substantiate.
I love this, too. Government can be burdensome when it puts a mind to it: “. . . showing reasonable cause for failing to file a required return or notice for the first of the three years by the date it was due would be insufficient; an organization also would have to show reasonable cause for not filing that return or notice at any later time during the three-year period, and for not filing required returns or notices for the second and third years . . .” (Notice 2011-44, page 8). Again, that’s the standard for retroactive reinstatement, not for regaining current tax-exempt status.
As if that weren’t enough: you’ll pay the full $850 application fee.
But, you get the same three nice people to call.
This post is not legal advice. Do not construe it as legal advice. Seek the counsel of an attorney. This is my interpretation of IRS methodology without the benefit of technical explanations, court opinions, revenue procedures and other official guidance.