Form 990 Presentation, PPT[3]

IRS Tax Resolution Specialists2315 Market Place, Huntsville, Al 35801O: 256-489-5596 F: 888-261-3365 E: [email protected]

Applying for 501(c)(3) Tax ExemptStatus

Vern Gohanna, MBA, EA, CAAPresident of TaxCorp LLC

Important Documents and Information

Publication 4420: Applying for 501(c)(3) Exempt Status (www.irs.gov and search for Publication 4420)

Your County Judge of Probate (for filing fees to file your Non-Profit Articles of Incorporation in the State where you reside)

Your States Secretary of State website (For filing your Non-Profit Articles of Incorporation)

The Process

1. File Articles of Incorporation in the State your Chapter operates 2. Obtain a Employer Identification Number from the IRS

3. File Form 1023, Application for Recognition of Tax Exempt Status under IRS 501(c)(3)

Benefits of Gaining 501(c)(3) Status

Allows exemption from federal income tax and eligibility to receive tax-deductible charitable contributions.

•Some state and local officials may grant exemption from income, sales or property taxes.

•Some organizations may be exempt from certain employment taxes

•Reduced postage mailing rates for certain mailings

•Individual and corporate donors are more likely to support organizations with 501(c)(3) status because their donations can be tax deductible

Eligibility

There are three key components for an organization to be exempt from federal income tax under section

501(c)(3) of the Internal Revenue Code.

A not-for-profit organization must be organized and operated exclusively for one or more of the following

exempt purposes.

Three Components: Operated for Non-Profit Activity

A substantial portion of an organization’s activities must further its exempt purpose(s), certain activities are prohibited or restricted including, but not

limited to:must absolutely refrain from participating in the political campaigns of

candidates for local, state, or federal office;must restrict its lobbying activities to an insubstantial part of its total

activities;must ensure that its earnings do not inure to the benefit of any private

shareholder or individual;must not operate for the benefit of private interests such as those of its

founder, the founder’s family, its shareholders or persons controlled by such interests

must not operate for the primary purpose of conducting a trade or business that is not related to its exempt purpose, such as a school’s operation of a

factory; andmust not have purposes or activities that are illegal or violate fundamental

public policy.

Three Components: Organized

A 501(c)(3) must be organized as a corporation, trust, or unincorporated association.

An organization’s organizing documents must clearly state that it prohibit activities that do not further its exempt purpose(s) and, permanently dedicate its assets to exempt purposes.

Three Components: Exempt Purpose

Charitable• Advancement of education or science

Educational• Organizations that conduct public discussion groups,

forums, panels, lectures, or similar programs

Religious

501(c)(3) Facts

Lets pause for questions

• In 2011 IRS revoked the 501(c)(3) status of over 275,000 organizations for failing to file required tax returns for 3 consecutive years.

• In 2011 over 189,000 entities filed returns with showing over $3 trillion in total assets: 39,869 organizations reported less than $100,000 in total assets

Facts taken from the 2011 Annual Statistics of Income, IRS.gov

Recordkeeping

Section 501(c)(3) organizations are required to keep books and records detailing all activities, both financial and nonfinancial.

Financial information, particularly information on its sources of support (contributions, grants, sponsorships, and other sources of revenue) is crucial to determining an organization’s private

foundation status

IRS Filing Requirements

Organizations recognized as tax exempt under section 501(c)(3) of the IRC may be required to file an annual information return.

Form 990, Form 990-EZ, 990-N or Form 990-PF along with certain schedules that may be required for your organization.

Public Inspection of Exemption Documents

Section 501(c)(3) organizations must make their Form 1023 Application and the Annual return (Form 990, Form 990-EZ or

Form 990-PF) available to the public for inspection, upon request and without charge.

Each annual return must be made available for a three-year

period starting with the filing date of the return. The IRS is also required to make these documents available for public

inspection and copying.

Charitable Contribution—Substantiation and Disclosure

501(c)(3) organizations must meet certain requirements.

1)A donor must obtain a written acknowledgment from a charity for any single contribution of $250 or more before the donor can claim a charitable contribution on his/her federal income tax return.

1)A charitable organization must provide a written disclosure to a donor who makes a payment in excess of $75 partly as a contribution and partly for goods and services provided by the organization.

How Much Can I deduct?

Rule of thumb is 50% of AGI

• AGI (Adjusted Gross Income): Deductions from your income that are not Subject to tax (i.e. HSA’s, Student Loan interest)

• For example, Your chapters donor has an Adjustable Gross Income of $80,000. They can deduct up to 50% ($40,000) in Charitable Contributions for tax purposes.

Recordkeeping

A donor cannot claim a tax deduction for any contribution of cash, a check or other monetary gift made unless the donor maintains a:•A record of the contribution (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, and;•The date of the contribution, and;•The amount of the contribution.

Closing Questions and Answers

Wish to request a copy of this presentation? Email: [email protected] Subject: 501 (c)(3) Presentation Request

Wish to request more information or have TaxCorp consult with your chapter to gain its 501(c)(3) Exemption Status? Email: [email protected] Subject: 501 (c)(3) Consultation

Or Call us at 256-489-9956 Monday-Friday 8:00am-5:00pm