Public Disclosure Requirements of Tax Exempt Organizations
As part of receiving the benefits of tax exempt status, nonprofit organizations must comply with Public Disclosure requirements. If approached, would you know how to comply with this requirement? Nonprofit organizations must make a copy of their exemption application and their annual returns for the preceding three years [IRC Sec. 6104(d)(1)] available for public inspection upon request.
You need to make a copy of the organization's exempt application available. This is Form 1023 for a 501(c)(3) organization or Form 1024 for all other tax exempt organizations. This includes all schedules and attachments that support the application. The only information that may be omitted would be information marked on the original application as "Not Available for Public Inspection," which may include information that relates to a trade secret, patent, national defense, etc.
You also need to make the three most recently filed annual returns available. This would be either Form 990, Return of Organization Exempt From Income Tax, Form 990EZ Short Form Return of Organization Exempt From Income Tax or Form 990-PF, Return of Private Foundation. All schedules and attachments should be included. Form 990-T Exempt Organization Business Income Tax Return, would also need to be included if the organization was required to file this form. A political organization exempt from taxation under code section 527(a) must make available Form 8872 (the form that discloses contributions and expenditures) but not Form 1120-POL.
Schedule B (Schedule of Contributors) must be shown in its entirety for 990-PF and 527(a) organizations. For all other organizations, the names and addresses of contributors may be omitted. Most tax professionals can print a "Public Disclosure" version of the annual return that would have the names and addresses of contributors blanked out. Unless specifically required by the state, do not include Schedule B when attaching the federal annual information return to the state annual report.
If requested in person, the organization must provide the required copies immediately. The organization is allowed to charge a fee that is reasonable for reproduction of these documents. If requested by mail, the organization must comply with the request within 30 days. Many organizations comply with this disclosure requirement by having their exempt application and the three most recently filed information returns available on their websites. Having the documents available on Guidestar, or similar websites, does not fulfill the requirement as these documents come from the Internal Revenue Service rather than the organization.
There are penalties involved with failure to comply with these requirements. So, it is prudent to have these documents readily available if and when they are requested. A person responsible for failure to comply with any of the disclosure requirements is personally liable for a penalty of $20 per day [IRC Sec. 6652(c)(1)(C) and (D)].
The maximum penalty imposed on all persons for any one return or report shall not exceed $10,000.
Please contact your Hawkins Ash CPAs representative if you have any questions regarding the public disclosure requirements for your organization.
Sandy Jensen, CPA
On August 18, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-14, which will change the way financial statements and disclosures are currently presented. The purpose of the standard is to improve the current net asset classification requirement and the information presented in financial statements and notes about a not-for-profit entity's liquidity, financial performance, and cash flows. The change is effective for annual financial statements issued for fiscal years beginning after December 15, 2017.
The nonprofit professionals at Hawkins Ash CPAs will host four free training events to ensure your nonprofit is ready for the change. Event details include the following.
October 9, 2017
11 a.m. - 1 p.m.
Lunch will be provided.
November 9, 2017
11:30 a.m. - 1:30 p.m.
Hawkins Ash CPAs La Crosse Office
Lunch will be provided.
November 2, 2017
11 a.m. - 1 p.m.
Lunch will be provided.
November 16, 2017
12 p.m. - 2 p.m.
Rochester Area Foundation
Lunch will be provided.
Reserve Your Spot Today.
|Nonprofit Tax Tidbits: Form 990 Schedule B
Schedule B (Schedule of Contributors) is used to provide information on contributions the organization reported on Form 990, 990-EZ, or 990-PF (tax return). Every organization is required to attach Schedule B to its tax return unless the organization certifies that it does not meet the requirements of this schedule. This is done by answering "no" to line 2 on Form 990, Part IV, checking the box on line H of Form 990-EZ, or checking the box on line 2, Part I of Form 990-PF. In order to certify that the organization does not meet the requirements of Schedule B, the organization should review the general and special rules. If the organization is covered by any of the rules, it is required to complete Schedule B.
An organization falls under the general rule if it received contributions totaling $5,000 or more (in money or property) from any one contributor during the organization's tax year unless the organization falls under one of the special rules. In determining the total amount, separate and independent gifts of less than $1,000 can be disregarded. Complete Parts I and II of Schedule B if the general rule applies to your organization.
There are three ways an organization could fall under the special rules.
- If the organization is exempt under 501(c)(3), met the 33.3% support test, checked the box on line 13, 16a, or 16b on Part II of Schedule A, and received total contributions from any one contributor during the year totaling the greater of (1) $5,000 or (2) 2% of the amount listed on Form 990, Part VIII, line 1h or (ii) Form 990-EZ, line 1 (total contributions, gifts, grants and other similar amounts). Complete Parts I and II of Schedule B if this rule applies to your organization.
- If the organization is exempt under section 501(c)(7), (8), or (10) and received from any one contributor total contributions of more than $1,000 exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Complete Parts I, II, and III of Schedule B.
- If the organization is exempt under section 501(c)(7), (8), or (10) and received contributions exclusively for religious, charitable, etc. purposes, but no such contributions totaled more than $1,000. List the total contributions on the special rule line and do not complete any of the parts for Schedule B unless the General Rule applies to the organizations because it received contributions totaling $5,000 or more that were not exclusively for religious, charitable, etc. purposes.
It is important to note that this schedule should be completed using the same accounting method the organization uses to complete its tax return. Therefore, if the organization uses the accrual method for its tax return, the accrual method should be used for Schedule B.
As discussed in the Public Disclosure Requirements of Tax Exempt Organizations article [above], the tax return of the organization is open to public inspection. For those organizations that file Form 990-PF and for section 527 political organizations the file Form 990 or 990-EZ, Schedule B is also open to public inspection. For all other organizations, the names and addresses of contributors are not required to be disclosed publicly. However, information on the amount of the contribution, description of noncash contributions, and any other information is required to be made available for public inspection. For those organizations that are required to file a copy of its tax return with any state, Schedule B should not be included with the attachment for the state unless the state specifically requires it to be included.
3 Parts of Schedule B
Part I - Contributors
In this part, the organization details out the contributor's name, address, and ZIP code, as well as the amount and type of contribution received. A contributor should only be listed as anonymous if the organization does not know the identity of the contributor. A contributor includes individuals, fiduciaries, partnerships, corporations, associations, trusts and exempt organizations. Contributions include grants, bequests, devises and gifts of money or property, whether or not they are for charitable purposes. If the organization is covered by the general rule, it would list all contributions during the tax year that totaled $5,000 or more. If the organization is covered by one of the special rules, the organization should follow that rule for determining which contributions need to be listed on Part I.
Part II - Noncash property
In this part, the organization details out any noncash contributions received by describing the property received, the fair market value of the property and the date the property was received. If an organization receives a gift of stock and immediately sells the stock, the organization still must report the gift as a gift of property rather than cash. The amount should be reported as the net proceeds plus the broker's fees and expenses.
Part III - Exclusively religious, charitable, etc., contributions to organizations described in section 501(c)(7), (8), or (10) that total more than $1,000 for the year from any one contributor
This section is completed by organizations that are covered under the second special rule. In this section, the organization must detail out the purpose of the gift, how the gift was used, and provide a description of how the gift is held if the organization has not spent the funds. If the organization transferred the gift to another organization, it must show the name and address of the transferee organization and explain the relationship between the two organizations.
In order to properly complete Schedule B, it is important that the organization tracks all donations with donor names, addresses and the amounts given. One common mistake when completing Schedule B is completing it on a different accounting method than what the tax return was completed on. Schedule B can be a good resource for nonprofits to see a summary of their larger donors, making it important to have the Schedule accurately completed.
If you have any questions regarding Schedule B of Form 990, please contact your Hawkins Ash CPAs representative.
Author: Briana Peters, CPA
With reports of ransomware and other cyber attacks making the headlines, we wanted to share some thoughts on how to protect yourself and your organization, clients and staff. Each company out there has different levels of security needs. However, there are some commonalities of which we all need to be aware.
A breach in security without immediate consequence is still risky.
Have you ever received a suspicious email, clicked on a link, and then thought, "Maybe I shouldn't have done that." You then run a virus or malware scan to make sure you are safe, and it comes back clean. If you are thinking "No harm, no foul," you may want to think again. By clicking the link, the attacker knows you are a human and are prone to clicking. They may then target you more often. Increasing your awareness moving forward is the best way to protect yourself.
Data backups are key to security protection.
While no system can protect from every possible threat, properly managed backup systems can make sure you can recover from one. The most common attacks these days are ransomware. In this type of cyber attack, the attacker holds your data hostage until you pay to have it back. With proper backups, you have a copy of the data and won't feel pressured into paying the ransom.
Protection is needed on more than just your PCs.
While the most common issues we hear about have occurred on Windows PCs, those are not the only devices that need protection. Any device that connects to the Internet should be considered vulnerable. Even devices we don't traditionally consider vulnerable are now being targeted. New printers that now contain hard drives and operating systems to give you a better experience can also be targeted.
Check out HP's The Wolf campaign to learn more about this
The best system is only as good as its weakest link.
No matter how many security layers we implement to protect our systems, it is only as good as its weakest link. Make sure every employee in your organization is aware of his or her role in your security system.
Author: Bob Spencer, IT Manager
|Client Feature: Home and Community Options
Home and Community Options (HCO) is a nonprofit
that serves children and adults with developmental disabilities who are in need of residential and support services in order to live happily in Winona, MN, and area communities.
HCO hosts an annual musical that serves as the nonprofit's largest fundraiser and provides opportunities for individuals with developmental disabilities to become involved in the performing arts. Each year, the production raises nearly $100,000. HCO's productions draw sell-out crowds and have the ability to pull in nearly 300 volunteers annually. It is estimated that these community volunteers donate 16,000 hours each year.
This year's production of Chitty Chitty Bang Bang casted 73 individuals, including 23 individuals with developmental disabilities. Many other individuals who HCO serves helped create the set and served as emcees, vending and backstage help during the productions. This year marked HCO's 20th musical. More information about HCO and its annual musical can be found at www.HCO.org.