Generally, 501(c)(3) nonprofit organizations are classified as public charities or private foundations. For purposes of your tax-exempt application, compliance, and reporting requirements, it is important to know what classification your nonprofit organization falls under.

Public charities are generally organizations that are classified as: (1) community service organizations, churches, hospitals, qualified medical research organizations that are affiliated with hospitals, schools, and universities; (2) that have an active fund raising program, and receive contributions from many sources, the general public, government agencies, corporations, private foundations, or other public charities; and (3) that receives income from the conduct of activities that further the organization’s tax-exempt purposes, or (4) actively functions in a supporting relationship to one or more existing public charity.

Generally, a private foundation is any 501(c)(3) organization that does not fit the definition of a public charity. Under tax law, a 501(c)(3) organization is presumed to be a private foundation unless it requests, and qualifies for, a ruling or determination as a public charity.

A public charity usually receives a great portion of its financial support from the general public or government agencies, and has greater overall interaction with the public. A private foundation is usually controlled by a small group of individuals, and generally receives most of its financial support from a small amount of sources and investment income.

Although both classifications may be recognized as 501(c)(3) tax-exempt, IRS treatment and reporting is very different for a public charity versus a private foundation. For instance, you must declare whether your organization is a public charity or a private foundation on your 501(c)(3) application, and offer support of the same. Public charities must annually file IRS Form 990, 990-EZ or 990N; private foundations must annually file IRS Form 990-PF.

-by Gloria Mason, Legal Assistant

We can prepare and file your 501(c)(3) tax exemption application. Should you want to learn more about this post or our services, please visit www.DandridgeLaw.com or email ContactUs@DandridgeLaw.com for a FREE Initial Consultation.

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Labels: Nonprofit Annual Return, nonprofit compliance, nonprofit private foundation, nonprofit public charity

WASHINGTON — Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program, the Internal Revenue Service announced today.

The IRS today posted on a special page of IRS.gov the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance. The organizations on the list have return due dates between May 17 and Oct. 15, 2010, but the IRS has no record that they filed the required returns for any of the past three years.

“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”

Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard) , and a voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.

Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15. That will bring them back into compliance.

Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee. Details about the VCP are on the IRS website, along with frequently asked questions.

The relief announced today is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.

The IRS will keep today’s list of at-risk organizations on IRS.gov until Oct. 15, 2010. Organizations that have not filed the required information returns by that date will have their tax-exempt status revoked, and the IRS will publish a list of these revoked organizations in early 2011. Donors who contribute to at-risk organizations are protected until the final revocation list is published.

The Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations, effective the beginning of 2007. First, it mandated that all tax-exempt organizations, other than churches and church-related organizations, must file an annual return with the IRS. The Form 990-N was created for small tax-exempt organizations that had not previously had a filing requirement. Second, the law also required that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status. The IRS conducted an extensive outreach effort about this new legal requirement but, even so, many organizations have not filed returns on time.

If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

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Labels: Nonprofit Annual Return, nonprofit compliance, Nonprofit Tax Return

Come join Nicole S. Dandridge as she presents the nationwide teleconference Nonprofits: Handling Contributions and Tax Deductions on Thursday, August 5, 2010. The teleconference is offered by the National Business Institute (NBI), a national leader in continuing education for lawyers, accountants, and business professionals. Learn more and register online at:
http://www.nbi-sems.com/Enbi/Email/53559T.htm

TELECONFERENCE HIGHLIGHTS

Stay Up to Date on Tax Deduction and Reporting Requirements

What do tax-exempt organizations need to know before accepting contributions and charitable gifts? How should unanticipated funds be handled? With the recent IRS focus on nonprofits, it's imperative to ensure tax deductions and reporting are "by the book." This fundamental course examines the legal and tax aspects of exempt organizations receiving money and property, so you can make sure all accounting, IRS and donation designation rules are met. Enroll today!

* Be prepared to effectively advise exempt organizations on accepting gifts of money and property.
* Learn how to use the "facts and circumstances" test to ensure tax treatment as a publicly-supported organization.
* Recognize the substantiation and reporting requirements associated with contributions.

2 ways to attend!

Series - This course is part 2 of a 3-part series on the laws governing tax-exempt organizations. Missed the first session? No problem! Click here for more information or to order the entire series at a significant savings, please call us at 1.800.930.6182. Only $499 for all three parts!

Part 1: Nonprofit Board Governance and Liability Issues
Part 3: Tax Exempt Organizations: Lobbying and Political Campaign Activities

Stand Alone - This course was created to be as valuable individually as it is in the series. You do not need to purchase the entire series to benefit from the information presented. Register for the individual course for $209.

Look below for more information on this program AND how to register for this teleconference!

Learn More & Register Today!

AGENDA

Session Time: 11:00 AM - 12:30 PM Eastern
Presenter: Nicole S. Dandridge

1. Types of Gifts: Advising Clients on Accepting Money and Property
2. "Facts and Circumstances" Test
3. Tax Deductions and Substantiation Requirements
4. Reporting Requirements for Charitable Gifts
5. Recent Changes and Current IRS Focus

TELECONFERENCE INSTRUCTIONS

2 business days prior each registrant is emailed complete teleconference details. Dial-in access information (toll-free phone number and personal ID number), as well as links to access program materials and to request continuing education credit(s) will be provided.

Should you want to learn more about this post or our services, please visit www.DandridgeLaw.com or email ContactUs@DandridgeLaw.com for a FREE Initial Consultation.

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Labels: Nonprofit contributions, Nonprofit tax deductions