Cpoyright 2009 Patricia J. Arthur

EAA AirVenture 2009Chapter Leaders Conference

Tax-Exempt Chapters

Some Notes on Advanced Topics

Patti Arthur, J.D., LL.M (Tax)

The Law Offices of Patricia J. Arthur

Cpoyright 2009 Patricia J. Arthur

Advanced Tax-Exempt Topics

1. Annual Filing Requirements-990 Series

2. Donations to Chapters

3. Unrelated Business Income Tax

4. Recordkeeping and Corporate Governance

5. State Issues and Traps

Cpoyright 2009 Patricia J. Arthur

Annual Filing Requirements-990's

● 990-Very Large TE's only. Gross receipts in excess of $500,000 or assets of $1,250,000 for 2010.

● In 2011 and beyond-Gross receipts in excess of $200,000 or assets of $500,000.

● 990EZ-Gross receipts of $50,000-199,999 and assets less than $499,000. 2011 and beyond.

● 990N-All other chapters no matter how small.● Filing due dates 15th day of 5th month. (May 15th).

Cpoyright 2009 Patricia J. Arthur

990N e-Postcard

● Vast majority of chapters will file this unless they elect to file the 990 or 990EZ.

● Final guidance published last week.● MUST file even if you never applied for formal tax-

exempt status on IRS Form 1023 or 1024.● If you haven't formally applied, call the IRS at 1-

877-829-5500, and tell the agent....

Cpoyright 2009 Patricia J. Arthur

990N e-Postcard

● You are officer of an organization, and wish to file your 990N,

● You are a chapter of a large TE who does not have a GROUP EXEMPTION LETTER (GEL), does not want a GEL and has no intention of filing for one.

● Your FEIN is:_______________● Your Articles of Organization contain 557 language,● Your annual gross receipts are under $5000/yr,● You consider yourself a (c)(3) [or 4 or 7]

Cpoyright 2009 Patricia J. Arthur

990n e-Postcard

● The agent will reset the system and

● You will be able to file electronically in 8 weeks.

Cpoyright 2009 Patricia J. Arthur

Donations to Chapters

● (c)(3) status (formal or assumed), donations are tax deductible by the donor.

● Dues are deductible only to the extent the member receives no benefit in return.

● Must provide donor a confirmation letter for donations over $250.00. Form 1098-C.

Cpoyright 2009 Patricia J. Arthur

Unrelated Business Income Tax

● UBIT or UBTI– Income from a trade or business regularly carried on that

is not substantially related to the organization's tax-exempt purpose.

– Hangar rent from members has become a hot issue with the IRS.

– Must prove the members use the hangar and pay rent to further the tax-exempt purpose.

– Hangar should be open to the public when supervised.

Cpoyright 2009 Patricia J. Arthur

Unrelated Business Income Tax

● If a hangar is financed and the rents pay the mortgage, that is a very specific type of UBTI.

● Again, must prove the hangar is used for tax-exempt purposes.

● Rent is specifically excluded from the definition if the hangar is the facility the organization uses.

Cpoyright 2009 Patricia J. Arthur

Unrelated Business Income Tax

● If you have UBTI, complete for 990-T and file with your return.

Cpoyright 2009 Patricia J. Arthur

Recordkeeping

● Excellent recordkeeping is the single most important thing a Chapter can do to earn and keep TE status.

Cpoyright 2009 Patricia J. Arthur

How long do we keep records?

● Generally, 3 years for return examination.

● Permanently for determination letter, bylaws, etc.

● 4 years for employment tax records.

Cpoyright 2009 Patricia J. Arthur

Corporate Governance

● This is the new IRS focus on TE's and charities.

● www.irs.gov In Charities Tab, search IRS Training Materials-Governance.

● Applying the SOX 404 regulations to TE's.

Cpoyright 2009 Patricia J. Arthur

State Issues

● Make sure you are registered as a non-profit with your respective secretary of state. Possibly a misdemeanor!!!

● This is a SEPARATE registration apart from the Articles of Incorporation.

● Determine if you need a gaming license for raffles. Also can be a misdemeanor.

● Don't forget to apply for a state sales tax exemption!

Cpoyright 2009 Patricia J. Arthur

Resources

● www.irs.gov Charities Tab.● IRS Training Materials on Governance.● Publications 557, 4221-PC, 1771 on contributions.● www.stayexempt.org● State departments of revenue websites.● Secretary of State websites for guidance on

registration and solicitations of donations.● Patti Arthur 719-539-7050