Considerations for Not-for-Profit Entities
Sno Barry | CPA
12/01/11
Electronic Filing and Late Filing Penalties
Late filing penalties for Form 990 are $100 per day for organizations with gross receipts exceeding $1 million, and $20 per day for all others. If you are required to electronically file your Form 990, but do not, you may be liable for late filing penalties even if you submit a paper return.
Failure to File
An exempt organization’s failure to file the annual information return required (Form 990, 990-EZ or 990-N) for three consecutive years, will result in the revocation of the organization’s exempt organization status.
Form 990-N
Exempt organizations that are not required to file annual information returns (Form 990) because normal annual gross receipts have been less than $50,000 (increased from $25,000), are required to file Form 990-N electronically each year.
Supporting Organizations
All supporting organizations must file Form 990 or 990-EZ even if their annual gross revenue is below $50,000.
Public Inspection
Tax exempt organizations must make available for public inspection both a copy of their exemption applications and their annual returns (both 990 and 990-T) for the preceding three years.
Vehicle Donations
A donee organization must file a separate Form 1098-C for each contribution received of a qualified vehicle for which the donor claims a value of more than $500.
In order for the donor to claim a charitable contribution deduction, the donee organization must furnish a contemporaneous written acknowledgment of the contribution to the donor containing the same information shown on Form 1098-C, if the vehicle has a claimed value of more than $500. Copy B of Form 1098-C may be used to provide this contemporaneous written acknowledgment.
Form 8282
The filing of Form 8282 for a donee’s sale, exchange or other disposition of charitable deduction property is now required within three years after its receipt.
Requirements for Quid Pro Quo Contributions of more than $75
Organizations receiving contributions of more than $75 in partial exchange for goods or services must provide a written statement to the donor. That statement should indicate that the deductible portion of the contribution is limited to the excess of the amount of the contribution over the value of the goods or services provided to the donor. In addition, the statement should provide the donor with a good faith estimate of the value of the goods or services provided.
Intermediate Sanctions
In place since 1996, the intermediate sanction rules allow the IRS to impose a series of excise taxes on individuals and the institutions that provide them with an excess benefit, generally in the form of compensation and/or fringe benefits. The taxes range from 10% to 200% of the excess benefit and may be assessed against the recipient of the benefit and the person(s) who “allowed” the benefit to occur by virtue of their position (management or directors). Some benefits may be automatically deemed “excessive” if the amount is not properly disclosed.
Controlled Entities
Information returns (Form 990) of parent tax-exempt organizations must include interest, annuities, royalties or rents received from a controlled entity, any loans made to a controlled entity, and any transfers of funds made between the controlling organization and a controlled entity.
State Registration Rules
You should be mindful of the various charitable solicitation registration requirements for all of the states from which your organization solicits and/or receive contributions. Some states do provide exemptions for certain types of nonprofit organizations, but the exemptions may require the completion of a form. Most states publish their charitable solicitation requirements on the internet through their attorney general’s office. Additional information can be found at multistatefiling.org
The Maine Charitable Solicitation Act requires charitable organizations that solicit contributions in Maine, to file an annual registration with the Maine Department of Professional & Financial Regulation. In addition, an Annual Fundraising Activity Report may need to be submitted to the Office of Licensing and Registration.
New Hampshire requires non-profit organizations to register with the Attorney General and file annual financial reports.
State Reporting Requirements
Many states have enacted enterprise fees or taxes for the privilege of doing business in their state. These taxes are not considered income taxes, and so may be applicable to nonprofit organizations. If you have employees working in a state other than your home state, you may have enterprise tax requirements, as well as employee withholding requirements in that state. Alternative investments in the form of a partnership may also create additional state reporting requirements.
Any tax advice contained in this letter is based upon our understanding of relevant facts and the tax law and governmental rulings that were in effect at the time the advice was given. Furthermore, in accordance with IRS rules, we hereby advise that any tax advice contained in the correspondence or attachments is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service.