Did you know that if you want to set up or operate a charity in Colorado that there are legal and tax considerations? The charity must be organized as the proper entity with the State of Colorado and then must apply to the IRS to seek tax-exempt status. The application process requires a variety of hoops to jump through to prove that your organization qualifies for tax exemption. The IRS recently made updates to its application process, allowing more organizations to apply online. This should help provide an overall smoother application process but still requires navigating the complex rules that apply to tax-exempt entities.
Once the charity is up and running, yearly governance items are required such as board meetings, annual solicitation report and adherence to the organization’s conflict of interest policy. Annual tax returns must be filed with the IRS using either Form 990, Form 990EZ, or 990N depending on the organization’s activities.
The State of Colorado now allows individual taxpayers to donate all or a portion of their refund to certain qualified charitable organizations through the Colorado Nonprofit Fund. This can be a great opportunity for qualified charities to gain exposure to potential donors. To qualify, charities must have been registered and in good standing with the Colorado Secretary of State for at least five years. So now it is of even greater importance for non-profit organizations to remain in good standing with the State of Colorado.
If you are involved with an existing charity or if you are interested in setting up a new charity and would like to discuss the legal and tax aspects, please do not hesitate to contact me.
Jeffrey D. Cohen, Esq., C.P.A.