presented by dg chet dal santo 2013 assemblies. irs classification tax deductible status ...
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Presented by DG Chet Dal Santo
2013 Assemblies
IRS Classification Tax Deductible
Status Fundraising Disclosures
Required Unrelated Business
Income Tax General Excise Tax
Filing Requirement Charities
Registration Accounting Net Assets Functional
Expenses Financial
Statements Recommendations
2013 Assemblies
The IRS has 29 types of 501(c) designations which grant exemption from taxes
So what designation does our Rotary Clubs fall
under?
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May 13, 1958, the IRS declared Rotary International and its clubs and districts exempt from federal income taxes under IRC Section 501(c)(4).
IRC 501(c)(4)
Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively
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General Concept:
Organizations that promote social welfare should primarily promote the common
good and general welfare of the people of the community as a whole.
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Although very similar to a 501(c)(3), there are differences 501(c)(3) organizations are prohibited from
“carrying on propaganda, or otherwise attempting to influence legislation” as a “substantial part” of its activities.
Social welfare organizations, cannot attract charitable donations that are deductible for income, gift, and estate tax purposes.
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Donations to your club are not deductible as charitable donations by the donor.
Membership dues may be deductible for some Rotarians as a business expense.
Rotary meetings may be deductible for Rotarians as a Meal & Entertainment Expense.
Deductibility is determined by Rotarians status; business vs. individual
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All fundraising income is subject to State of Hawaii General Excise Taxes
Sponsorships may be deductible for Rotarians as a business expenses. Business expenses are generally preferred
over charitable contributions for businesses
Ticket Sales do not have a charitable donation allocation.
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IRC Section 6113 requires certain tax-exempt organizations that are ineligible to receive tax deductible charitable contributions to disclose, in “an express statement (in a conspicuous and easily recognizable format), “ the nondeductibility of contributions during fundraising solicitations.
Organizations whose annual gross receipts do not normally exceed $100,000 are excepted from this disclosure requirement
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Disclosure must be: Medium in Print At least same size type as the primary message Included on the message side of any card or
tear off section that the contributor returns with the contribution
First sentence in a paragraph or a paragraph itself
See IRS Notice 88-120: included in your handouts for more information
August 16, 2011
“Contributions or gifts to [name of organization] are not deductible as charitable contributions for Federal income tax purposes”
“Contributions or gifts to [name of organization] are not tax deductible”
“Contributions or gifts to [name of organization] are not tax deductible as charitable contributions
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Aka – UBIT or UBTI IRS Publication 598 – Tax on Unrelated
Business Income of Exempt Organizations Unrelated business income is the income
from a trade or business regularly carried on by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity.
Certain trade or businesses are not treated as an unrelated trade or business.
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Membership list sales – taxable
Advertising – taxable
Sponsorship – not taxable
Selling Donated Merchandise – not taxable
Volunteer Workforce – not taxable
UBIT is a Gray area – seek professional assistance to assist in determination
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State of Hawaii
Membership and donations are generally exempt
Must pay on fundraising and unrelated business income
Effective July 1, 2010 – State placed a trust fund liability unto unpaid taxes.
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Form 990 Due 15th day of the 5th month after your fiscal
year end. December 31st yearend, due date is May 15th
Up to 6 month extension
Form 990-T and N-70NP Unrelated business income tax returns for
federal and state; same due date Extension available, but payments are due on
15th day of the 5th month after your fiscal year end
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Form G-45 General Excise Tax Return Monthly, quarterly or semi-annually Due on 20th day after period close
Month – following month Quarterly – April 20th, July 20th, October 20th, January
20th Semi-annually – July 20th and January 20th
Form G-49 Annual Reconciliation Due April 20th
No Extensions available for G-45 or G-49
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State of Hawaii Attorney General Charities registration law requires charitable organizations that solicit contributions to register [see handout]
Filing due dates are linked to Form 990 Tiered annual fees based upon gross
revenues Generally, less than $25,000 in gross
revenues, exempts organization from registration requirements
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Generally Accepted Accounting Principles GAAP
Accural based accounting Income is recorded when earned
Contributions are recorded when there is a detrimental reliance on the income
Expenses are recorded when incurred Prepare a budget Reconciliations should be performed monthly Person doing books should not have check
signing authority Copies of all deposits should be made Invoices should be properly coded and
canceled2013 Assemblies
Unrestricted Net Assets BOD Designated
Temporarily Restricted Net Assets Donor Restricted Time Restricted Transfer to Unrestricted
No separate expense matching
Permanently Restricted Net Assets Endowment
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Program Services International Service project Community Service Projects RYLA, Interact, other
Management and General
Fundraising Event 1 Event 2
Membership2013 Assemblies
Statement of Financial Condition aka – Balance Sheet
Statement of Activities aka – Income Statement or Profit & Loss
Statement of Functional Expenses Program Management & General Fundraising Membership
Statement of Cash Flows
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Sample Rotary ClubStatements of Financial PositionJune 30, 2013
2013Assets
Current Assets:
Cash and Cash Equivalents (Note 4) $
-
Grants Receivable (Note 5)
-
Other Receivable
-
Total Current Assets
-
Property and Equipment: (Note 6)
Property and Equipment
-
Less: Accumulated Depreciation
-
Property and Equipment-Net
-
Other Assets:
Deposits Held in Trust (Note 7)
-
Total Other Assets
-
Total Assets $ -
Liabilities and Net AssetsCurrent Liabilities:
Accrued Payroll and Payroll Taxes $
-
Total Current Liabilities
-
Other Liabilities:
Deposits Held in Trust (Note 7)
-
Accrued Earned Leave (Note 8)
-
Other Liabilities
-
Total Other Liabilities -
Total Liabilities -
Net Assets (Note 3)
Unrestricted
-
Temporarily Restricted
- Permanently Restricted
Total Net Assets -
Total Liabilities and Net Assets $ -
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Net Assets (Note 3)UnrestrictedTemporarily RestrictedPermanently Restricted
Total Net Assets
Sample Rotary ClubStatements of ActivitiesFor the Year Ended June 30, 2013
Temporarily
Permanently
Unrestricted
Restricted
Restricted Total
Revenues, GainsAnd Other SupportRevenues
Block Grants $ -
$ -
$ -
$ -
Other Grants -
-
-
-
Donations -
-
-
-
Fundraising -
-
-
-
County Grants -
-
-
-
Interest -
-
-
-
Miscellaneous -
-
-
-
Total Revenues, Gains
And Other Support -
-
-
-
ExpensesProgram Expenses
-
-
-
-
Management and General
-
-
-
-
Fundraising
-
-
- -
Total Expenses
-
-
-
-
Change In Net Assets -
-
-
-
Net Assets at Beginning of Year
-
-
-
-
Net Assets at End of Year
$ -
$ -
$ -
$ -
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Program ExpensesManagement and General
Fundraising
Sample Rotary ClubStatements of Functional ExpensesFor the Year Ended June 30, 2013
Management
Program and
Services GeneralFundrais
ingMembers
hip TotalPayroll & Payroll Taxes
$ -
$ -
$ -
$ -
$ -
Clothing -
-
-
-
-
Medical -
-
-
-
-
Special Needs -
-
-
-
-
Transportation -
-
-
-
-
Education -
-
-
-
-
Character Building -
-
-
-
-
Professional Fees -
-
-
-
-
Miscellaneous -
-
-
-
-
Insurance -
-
-
-
-
Training -
-
-
-
-
Rent/Dep/Housing -
-
-
-
-
Board & Staff Training
-
-
-
-
-
Newsletter -
-
-
-
-
Advertising -
-
-
-
-
Office Expense -
-
-
-
-
Postage & Supplies
-
-
-
-
-
Depreciation -
-
-
-
-
Utilities -
-
-
-
-
Equipment Rental -
-
-
-
-
Taxes -
-
-
-
-
Dues & Subscriptions
-
-
-
-
-
Community Education
-
-
-
-
-
Travel -
-
-
-
-
Outreach -
-
-
-
-
Volunteer Expense -
-
-
-
-
Total $ -
$ -
$ -
$ -
$ -
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Functional ExpensesNatural Expenses
Identify all income sources and classify them accordingly
Utilize professionals to assist in compliance Utilize accounting software (Like Quick
Books) Ensure persons handling finances is
knowledgeable 2 signatures on all Checks or approved
memo signed by 2 members.
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To check clubs status:
http://www.irs.gov/Charities-&-Non-Profits/Automatic-Revocation-of-Exemption-List
Future Vision account name:The Rotary Club of ___________
TRF District Grants Account
2013 Assemblies