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Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
Protecting Nonprofit Status 2011
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Protecting Nonprofit Status 2011

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Basic information that small-medium nonprofits need to preserve tax exempt status.

Basic information that small-medium nonprofits need to preserve tax exempt status.

Published in: Business, News & Politics
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  • 1. SafeguardingYour Organization’sNonprofit status
    Avoid
    common mistakes
    Prevent loss of §501(c)(3) status
    Sponsored by :
    Indiana Nonprofit Resource Network
    LaGrange Community Foundation
    Presenter:
    Miriam Robeson,
    Attorney
  • 2. Why Are We Here?
    Information Level – Beginning to Intermediate
  • 3. Why Are We Here – Part 2The Horror Stories and Bad Press
    • “Three Cups of Tea” scandal and lawsuit – fraudulent solicitation of donations based upon inaccurate book
    • 4. Investigation of Fiesta, Sugar, and Orange Bowl games for abuse of nonprofit status and “extravagant compensation”
    • 5. Investigation of Humane Society of the United States for excessive executive compensation
    • 6. Medical Association of Atlanta ED pleads guilty to embezzling more than $300,000
    • 7. Nonprofit Status of 30 credit counseling organizations revoked for failure to achieve a nonprofit purpose and for excessive executive compensation
  • Why We are Here – Part 3The IRS
    • IRS increases nonprofit oversight
    • 8. Employment Taxes
    • 9. Executive Compensation
    • 10. Activist Agenda
    • 11. Compliance (Tax forms)
    • 12. Since 2008, the IRS has added more than 100 employees to the Exempt Organizations Section
    • 13. As of June, 2011, the IRS has “automatically revoked the nonprofit status of more than 275,000 nonprofits
  • Keys to Safeguarding Nonprofit Status
  • Compliance
    • Government and other technical requirements
  • Compliance – State Requirements
  • 17. Compliance – Secretary of State
    • Check out IN SOS Office to verify “in good standing”
    • 18. https://secure.in.gov/sos/online_corps/name_search.aspx
    • 19. OR – in.gov/sos and select “business search” from the navigation menu
  • Compliance – State Requirements
  • 20. Compliance - Federal
  • 21. Compliance - Employment
  • 22. Compliance - UBIT
  • 23. Compliance – Is your nonprofit “on the list?”
    • IRS Publication 78 – Cumulative List of Nonprofit Organizations approved by the IRS
    • 24. http://www.irs.gov/charities/article/0,,id=96136,00.html
    • 25. Go to IRS website and search “Publication 78”
    • 26. Incorporation as a State (Indiana) nonprofit does not equal IRS nonprofit - 501(c)(3) - Status
  • Accountability
  • 27. Accountability - Financial
    • Financial Policies
    • 28. Financial Controls
    • 29. Monitor appropriate use of nonprofit funds
    • 30. Audit - review
  • Accountability - Financial Governance Policies
    • Policies for –
    • 31. Handling Money
    • 32. Recording Money
    • 33. Reporting Money
  • Accountability - Governance
    • Conflict of Interest
    • 34. Ethical Standards
  • Accountability - Conflicts of Interest
    WatchAppearance of Impropriety!
  • 35. Accountability - Personal Benefit
  • 36. Accountability – EthicsExecutive Compensation
    • Exempt Organizations with budgets of $100,000 or more are expected to have paid staff
    • 37. EO’s can pay market rates to staff
    • 38. EO’s can look to “for-profit” compensation when determining “market rates”
    • 39. IRS has no standard formula, but looks at compensation as percent of budget, success of nonprofit mission
    • 40. If IRS finds abuse
    • 41. IRS can fine the Board and Executive
    • 42. IRS can revoke nonprofit status
    • 43. For “higher” compensated ED’s, document salary decision with supporting research and recorded (written) board discussion
  • Accountability - Ethics
  • 44. Nonprofit Ethical Issues - Examples
    • Improper donor acknowledgements
    • 45. Donations of time are not tax-deductible
    • 46. Improper arrangements with donors
    • 47. Failing to include both spouses in joint gift paperwork
    • 48. Staff/ED/Board/Volunteer accepting gifts from donors
    • 49. Lunch versus bequest in a Will?
    • 50. “Professional Fund Raiser?”
    • 51. Failing to take responsibility (“Not My Fault”)
    Only 10% of the public
    believes that charities are ethical
  • 52. More Examples - Ethics
    • Failure to properly account and restrict use of donor-specified donations (illegal and unethical!)
    • 53. Capital contributions used for operational expenses
    • 54. “Borrowing” from restricted funds
    • 55. Purchases from Board-member business without proper disclosure (the copy shop example)
    • 56. Failure to consult professionals for assistance, when needed (lawyer – accountant)
    • 57. Improper oversight of spending (financial control policies)
    • 58. Indianapolis Humane Society
  • Transparency – Credibility to Public
    Regularly provide information to the Public
  • 59. Other Danger Zones
  • 60. Danger Zone - Lobbying
  • 61. Danger Zone – Charity Gaming
  • 62. What is “Charity Gaming?”
  • 63. Charity Gaming – Rule 1Gambling is Illegal
    • Unlicensed gaming is illegal and subject to fines
    • 64. $1,000 for the first violation
    • 65. $2,500 for the second violation
    • 66. $5,000 for additional violations
    • 67. Same fines apply to improper gaming, failing to file reports, failing to pay tax
    • 68. Criminal charges may also apply – Class B Misdemeanor
  • Charity Gaming Rule 2 – Charity Gaming is Regulated
    • Must be charitable organization
    • 69. Must be in existence (§501(c)(3) status) for > 5 years
    • 70. Must apply for and receive license
    • 71. Must conduct gaming activities properly
    • 72. NOTE – if properly licensed, conducted and reported, there are NO income taxes from charity gaming
  • Danger Zone – Abuse of Nonprofit Status
    • Improper Conduct
    • 73. Executive Compensation
    • 74. “Private Inurement”
    • 75. Excessive compensation
    • 76. Unreasonable Rental Agreements
    • 77. Unreasonable lending agreements
    • 78. Unreasonable sales transaction
  • Consequences of Abuse of Status
    • IRS Consequences – $$
    • 79. Fines to Nonprofit
    • 80. Fines to Board of Directors
    • 81. Fines to Staff
    • 82. PERSONAL LIABILITY FOR ALL!
    • 83. IRS Consequences – Revocation of Nonprofit Status
  • Has Your Status Been Revoked?
    Google: “recent IRS revocations”
    http://www.irs.gov/charities/charitable/article/0,,id=141466,00.html
    Comprehensive List of
    “Automatic Revocations”
    (organized by state)http://www.irs.gov/charities/article/0,,id=240099,00.html
  • 84. What if you LOSE nonprofit status?
  • 85. How can you get back NP Status?
    • Loss of Status cannot be reversed or appealed
    • 86. Must go through re-application for tax exempt status
    • 87. May include request for retroactive reinstatement to avoid taxes for “interim period”
    • 88. Requires payment of user fee ($400 or $850)
    • 89. Small nonprofits might be allowed to pay $100 user fee
    • 90. Must write “Automatically Revoked” on application
    • 91. If exemptions do not apply, must provide complete packet of information for re-application
  • Keys to Safeguarding Nonprofit Status
  • For More Information
    • IRS.gov – Exempt Organizations
    • 95. Publication 557 – Tax Exempt Status Info
    • 96. Publication 78 – Approved nonprofit list
    • 97. Indiana Charity Gaming Commission
    • 98. Indiana Secretary of State
    • 99. Indiana Department of Revenue
    • 100. Guidestar.org
    • 101. Charity Navigator
  • Thank you for your attention!
    Any Questions?

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