Financial Issues for Local Sections

Local Section Committee MeetingRick Cain

Director of FinanceJanuary 25, 2012

Local Section Structure• Separate entities under the AIChE umbrella• Share in the 501(c)(3) non-profit status of the

national organization, because:– You share in AIChE’s exempt purpose of educating the

public on topics related to Chemical Engineering– You are non-profit

• Maintain your own financials and account balances

• Have your own Tax ID Number (EIN)• Not included in AIChE’s financial statements, tax

returns or audits

Local Section Benefits

• Most sources of revenue are exempt from paying federal income taxes

• Sponsors and contributors (and LS members) can claim deductions on their tax returns

• Reduced postage rates for certain types of mailings

Local Section Obligations

• Maintain your finances in a responsible manner

• File annual tax returns• Pay taxes on unrelated business taxable

income (UBTI)• Abstain from lobbying – influencing elections

of candidates for public office• Keep IRS updated on LS mailing addresses

Annual Tax Returns

• Must be filed by the 15th day of the 5th month after the end of your fiscal year– May 15 for Jan-Dec fiscal year

• Which form to file?– Form 990-N if gross receipts are < $25,000– Form 990-EZ if gross receipts are < $200,000 and total

assets are < $500,000– Form 990 if either of the 990-EZ criteria are not met– Form 990-T if gross income from UBTI >$1,000

Form 990-N• Referred to as e-Postcard• Minimal information required:

– Legal name (and other names used)– Mailing address– Website (if it has one)– Employer Identification Number (EIN)– Group Exemption Number (GEN) - 2603– Name and address of a principal officer– Annual tax year– Answers to the following questions:

• Are your gross receipts normally $25,000 or less?• Has your organization terminated or gone out of business?

• Should receive confirmation back from the IRS

Unrelated Business Taxable Income (UBTI)

• Most receipts are exempt from taxes:– Dues / contributions / sponsorships– Fees for seminars, symposia, etc.

• Revenues from advertising may not be exempt if:– Ads are included in >3 newsletters per year– Outside entity is paid to help prepare / distribute the

newsletter (vs. volunteer support only)– Gross income >$1,000

• Gross receipts minus cost of goods sold

• UBTI requires filing of Form 990-T

Implications of Non-Compliance

• Many LSs and SCs recently lost their tax-exempt status for not filing returns for 3 consecutive years– Contributors cannot deduct their donations from their

tax returns (including dues)– Must pay income taxes on receipts– Must file tax returns with the IRS

• Need to apply with the IRS to have their tax-exempt status reinstated (including associated fees)

Additional Information

• Form 990-N:– http://epostcard.form990.org/

• Form 990-EZ: – http://www.irs.gov/pub/irs-pdf/i990sa.pdf

• Form 990-T: – http://www.irs.gov/pub/irs-pdf/f990t.pdf

• Change of Address (Form 8822): – http://www.irs.gov/pub/irs-pdf/f8822.pdf

• Group Exemption Number (GEN) - 2603