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A Charitable Reminder:
New Reporting Rule and Other Reminders
Many people get involved with tax-exempt organizations either by serving on their boards, volunteering for their programs, or simply by donating. People are often very proud of their involvement because of the mission and purposes of the organizations. These missions and purposes are also what qualify the organizations for beneficial tax treatment, which for some organizations includes the ability to receive tax deductible charitable contributions. To ensure that tax benefits are not bestowed on undeserving organizations, tax exempt organizations are subject to a number of organizational, operational and reporting rules. This article provides information on a new reporting rule as well as other reminders for people serving on boards of tax-exempt organizations.
1. New Reporting Rule.
Most tax-exempt organizations are required to file an annual information tax return with the IRS. In addition to filing the annual return (Form 990, 990-EZ, or 990-PF) with the IRS, tax-exempt organizations are also generally required to make the returns available to the public upon request. Until recently, tax-exempt organizations that normally have gross receipts of $25,000 or less ("Small Organizations") were exempt from the annual return filing requirement.
For tax years beginning in 2007, Small Organizations must now file an abbreviated information return, the Form 990-N. This new form (the "E-Postcard") must be filed electronically. Filing the E-Postcard is free, and like other IRS e-file options, easy.
The due date for filing the E-Postcard is the 15th day of the fifth month after the close of the Small Organization's tax year. Therefore, for a Small Organization whose tax year ended December 31, 2007, an E-Postcard must be filed by May 15, 2008. Failure to file the E-Postcard for three consecutive years will result in an organization losing its tax-exempt status.
Note that churches and organizations included in a group return are exempt from the new filing requirement. For more information about the E-Postcard and how to file click here.
2. Other Reminders.
A. Corporate Registration and Renewal.
In Oregon a tax-exempt organization that is organized as a non-profit corporation needs to be registered with the Oregon Secretary of State, just like a for profit business corporation does. A tax-exempt organization that is a trust does not need to register with the Oregon Secretary of State. The registration with the Oregon Secretary of State needs to be renewed annually. For more information on registering with the Oregon Secretary of State and the annual registration renewal, click here.
Other states have similar registration requirements for non-profit corporations that are formed under the laws of their state or doing business in their state. If the organization with which you are involved is holding meetings or engaging in other activities in another state, you should evaluate whether you are required to register with that state.
B. Non-profit and Fundraising Registrations.
In Oregon, there is an additional registration requirement for certain tax-exempt organizations. The following organizations are required to register with the Oregon Department of Justice Charitable Activities Section ("CAS"):
1) Any Oregon non-profit organization that is organized as a public benefit corporation;
2) Non-profit corporations organized in a different state that solicit, hold assets or do business in Oregon; and
3) Trusts that hold assets in Oregon for charitable beneficiaries.
Paid fundraisers and Oregon mutual benefit non-profit corporations that raise funds for public benefit non-profit corporations are also generally required to register with CAS.
The CAS registrations need to be renewed annually. For more information about starting and maintaining a charity in Oregon and the CAS registration requirements click here.
For information on registration and reporting requirements in other states, click here.
C. Periodic Check-up.
In addition to ensuring that the organization with which you are involved has its registration with the state up-to-date, it is important to periodically evaluate whether the organization is complying with other tax-exempt organization rules. Important items to evaluate include whether the organization is engaging in activities that further the purposes for which it received its tax-exempt status, whether the organization is appropriately acknowledging charitable donations and whether any activities or transactions of the organization could result in any penalties or other sanctions for the organization or board members of the organization involved in the prohibited activity or transaction. For additional information on the on-going compliance issues see the IRS Life Cycle of a Public Charity of the IRS Life Cycle of a Private Foundation.
Conclusion
Serving on the board of a tax-exempt organization can be very rewarding, but it carries with it the responsibility to run the organization appropriately. Timely annual reporting and registration renewal for the organization are an important part of the smooth running of the organization. Keep the organizations you are involved with up to date.
If you have any questions, please contact the author of the foregoing, Melissa Busley or Bob Winger, head of the Dunn Carney Tax Team.
Any tax advice contained herein, or in any attachment, is not a covered opinion under Circular 230 and therefore cannot be used, by itself, for the purpose of avoiding tax penalties that may be imposed. If you would like to receive a covered opinion or advice regarding the nature or possible extent of tax penalties, please let us know.
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