The document provides an overview of legal and accounting considerations for starting a nonprofit organization. It discusses preliminary steps like determining tax-exempt status, recruiting a board of directors, and creating a budget. It also covers the process of formally establishing the nonprofit through corporate formation, applying for tax-exempt status using Form 1023, and meeting ongoing tax and audit requirements. The presenters include an attorney who specializes in nonprofit tax issues and a CPA with experience providing accounting services to nonprofits.
Financial Accountability for Board Members. Sponsored by the Lafayette Community Foundation and the Indiana Nonprofit Resource Network, this program provides basic information and tools to help nonprofit board members understand and comply with their fiduciary responsibilities
This presentation was given to MBA Alumni of the Berkeley-Haas School of Business on April 30, 2011. The presenters were Dr. Nora Silver, Director and Adjunct Professor of the Center for Nonprofit and Public Leadership, and Paul Jansen, Director Emeritus of the Social Sector Practice of McKinsey and Co. For more information: http://nonprofit.haas.berkeley.edu
Have you thought about starting a nonprofit or foundation and are not sure where to begin? Or, perhaps you're "stuck" trying to complete the confusing and complicated IRS paperwork.
If you answered "yes" to either of these questions, you'll want to view our presentation on the 7 Secrets to Starting a Nonprofit or Foundation.
This presentation will show you, step by step, what to do when applying for tax exempt status and what to expect once you have submitted your application. We'll also share the secrets we have learned about how to avoid excessive delays, (including the three things you must never do) and specifically what the IRS is looking for when evaluating nonprofit applications.
Lisa C. Burford of LCB Consulting, LLC delivered a presentation on engaging nonprofit boards of directors on June 22, 2016 at the United Way of the National Capital Area's "Bored with Board Development?" Workshop.
SkyLaw was pleased to host a 'Wine & Learn' event this week with Social Venture Partners Toronto ("SVP") on the topic: "Demystifying Charities, Not-For-Profits and Social Enterprises". We enjoyed an insightful and educational Q&A session with our clients and guests. Please view our handout for some of the interesting questions that we discussed.
Financial Accountability for Board Members. Sponsored by the Lafayette Community Foundation and the Indiana Nonprofit Resource Network, this program provides basic information and tools to help nonprofit board members understand and comply with their fiduciary responsibilities
This presentation was given to MBA Alumni of the Berkeley-Haas School of Business on April 30, 2011. The presenters were Dr. Nora Silver, Director and Adjunct Professor of the Center for Nonprofit and Public Leadership, and Paul Jansen, Director Emeritus of the Social Sector Practice of McKinsey and Co. For more information: http://nonprofit.haas.berkeley.edu
Have you thought about starting a nonprofit or foundation and are not sure where to begin? Or, perhaps you're "stuck" trying to complete the confusing and complicated IRS paperwork.
If you answered "yes" to either of these questions, you'll want to view our presentation on the 7 Secrets to Starting a Nonprofit or Foundation.
This presentation will show you, step by step, what to do when applying for tax exempt status and what to expect once you have submitted your application. We'll also share the secrets we have learned about how to avoid excessive delays, (including the three things you must never do) and specifically what the IRS is looking for when evaluating nonprofit applications.
Lisa C. Burford of LCB Consulting, LLC delivered a presentation on engaging nonprofit boards of directors on June 22, 2016 at the United Way of the National Capital Area's "Bored with Board Development?" Workshop.
SkyLaw was pleased to host a 'Wine & Learn' event this week with Social Venture Partners Toronto ("SVP") on the topic: "Demystifying Charities, Not-For-Profits and Social Enterprises". We enjoyed an insightful and educational Q&A session with our clients and guests. Please view our handout for some of the interesting questions that we discussed.
Non Profit Formation - how to create a non-profit presented by Wayne Lippman CPA
Rules of the Game for Tax Exempt Non-Profits
Getting Into the Game: How to Obtain Tax Exempt Status
Playing Well with Others: Collaborating with Other Non-Profits and For-Profits
Presented by Wayne Lippman CPA.
Think Outside the Boss provides community members an introduction into the nuts and bolts of starting and running a cooperatively owned business. We provide an overview of legal issues in an accessible way to help you understand the relationships between cooperatives, employment, and community wealth-building.
Think Outside the Boss was created by the Sustainable Economies Law Center (SELC) and the Green Collar Communities Clinic (GC3), a project of the East Bay Community Law Center (EBCLC).
Within it, we answer such questions as:
What is a worker-owned business?
What's the advantage of forming a cooperative business?
How do you run a business democratically?
How do you spread ownership and control across a group of people?
What's the tax and accounting issues in a cooperative?
How do you raise money from your members, your community, and even the bank?
What are the employment and labor laws about how to treat your workers?
Think Outside the Boss provides community members an introduction into the nuts and bolts of starting and running a cooperatively owned business. We go over legal issues in an accessible way to help you understand the relationships between cooperatives, employment, and community wealth-building.
Think Outside the Boss is presented by the Sustainable Economies Law Center (SELC) and the Green Collar Communities Clinic (GC3), a project of the East Bay Community Law Center (EBCLC).
Attorneys, law students, and experienced cooperative professionals give short presentations on legal issues, governance structures, financing, and more!
Good Governance Practices for 501(c)(3) Organizations PYA, P.C.
PYA Tax Manager Elizabeth Wright presented “Good Governance Practices for 501(c)(3) Organizations” at the Accounting and Financial Women’s Alliance (AFWA) Luncheon in Knoxville, TN. The presentation provides an overview of good governance practices to assist any size 501(c)(3) organization in complying with IRS governance guidelines.
If you are one of the many business owners thinking, “I’ve incorporated, now what?” Remember that as a business owner, you have a powerful tool in your Corporation or LLC if you follow the rules.
You will learn:
-The top 10 mistakes business owners make that can cost you everything.
-The myth's behind LLC's.
-Secure your financial future for long-term prosperity.
-Gain the insiders edge when it comes to maximizing your tax deductions.
-Dramatically reduce your risk by establishing a secure corporate fortress
Business Group Resources (BGR) has helped businesses across a range of industries realize millions of dollars in savings from available business incentive programs. Cutting costs and increasing profits are critical to every business, especially during difficult economic times. However, even when times are good, your company cannot afford to overlook opportunities to improve the bottom line with incentives, grants, and other economic development programs offered through federal, state, and local programs.
Business Group Resources (BGR) is focused on assisting companies in obtaining maximum value from incentives and profit recovery programs. Our integrated suite of consulting services is designed to facilitate a wide range of lucrative programs for your company.
Please review the following attachments. Complete, sign and return to be to begin the estimated 8-10 week process. When ready, let us carve out time to review the program and set the expectation of the process.
IRS Regulations-Charities & Nonprofits Conflict of InterestMichael Wyland
Few nonprofit and charity leaders are familiar with the IRS regulations known as "intermediate sanctions." These rules govern conflicts of interest and compensation in nonprofit and charitable organizations, including churches.
Similar to Legal and accounting considerations when starting a nonprofit organization (20)
This presentation by Joe Kovacs at Gelman, Rosenberg & Freedman CPAs, covers success stories of utilizing LinkedIn for business purposes. Topics covered include: networking, time management, LinkedIn groups, PR, trust and the value of LinkedIn connections.
This informative presentation sheds light on the new Uniform Administrative Requirements, Cost Principles and Audit. It covers new and updated regulations;
1.
Introduction
2.
Subpart A -Acronyms and Definitions (200.0 series)
3.
Subpart B -General Provisions (200.100 series)
4.
Subpart C -Pre-Federal Award Requirements and Contents of Federal Awards (200.200 series)
5.
Subpart D -Post Federal Award Requirements (200.300 series)
6.
Subpart E -Cost Principles (200.400 series)
7.
Subpart F -Audit Requirements (200.500 series)
8.
Appendix I-XI
This Gelman, Rosenberg & Freedman CPAs presentation covers "Accounting Systems for Government Contractos":
1. Examples of Common Accounting Systems
2. Key Accounting System Components
3. Chart of Accounts
4. Importance of Written Policies and Procedures
5. Internal Control Environment
This presentation covers the current challenges facing nonprofits as they relate to "ratings." Questions such as what is "results reporting," what is "financial health and governance"? are also covered.
Learn about recording expenses and income, hodge-podge and basic QuickBooks reporting. Additionally you will get an insight into eighteen common QuickBooks errrors.
Learn more about Social Security Benefits from the experts. Additional review:
Retirement benefit qualifications
Steps to recover maximum benefits
Strategies for single people, married couples, survivors and divorced individuals
Medicare issues
Background, Due Diligence and Pre-employment Background Investigations
Locate Witnesses/Defendants
Professional Witness Interviews
Asset Tracing to Recover Court-Ordered Judgments
Cause and Origin Fire Investigations and Testimony
Recorded Conversations (where allowed by law)
Surveillance and Photography Services
GPS Tracking (with consent)
Handwriting Expert Services
This presentation helps you understand:
1. What is a successful audit?
2. Auditor responsibilities vs. auditee
3. Board of Directors vs. Investment comittee
4. Managing investments
5. What do auditors look for
6. Common management letter comments
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Legal and accounting considerations when starting a nonprofit organization
1. Benjamin Takis
Tax-Exempt Solutions, PLLC
btakis@taxexemptsolutions.com
www.taxexemptsolutions.com
Ian Shuman
Gelman, Rosenberg & Freedman
ishuman@grfcpa.com
www.grfcpa.com
LEGAL AND ACCOUNTING
CONSIDERATIONS WHEN
STARTING A NONPROFIT
ORGANIZATION
Foundation Center
March 18, 2014
2. Today’s Agenda
• Part 1: Preliminary Stage
– Basic Concepts
– Steps to Take Before Forming an Organization
– Accounting Basics
• Part 2: Forming the Organization
– Corporate Formation
– Form 1023
– Tax and Audit Requirements
3. Professional Bio
3
Benjamin Takis, Attorney
Founding Attorney, Tax-Exempt Solutions, PLLC
•8 years of experience representing public charities, private foundations,
lobbying groups, trade associations, labor unions, retirement plans, health care
trusts, and other tax-exempt entities of all types and sizes.
•Specializes in tax, corporate governance, and employment issues for non-
profits.
•Faculty member at the Center for Nonprofit Advancement, and regular
speaker at the Foundation Center, Greater Washington Society of CPAs, and
elsewhere throughout the DC area.
4. Professional Bio
4
Ian Shuman, CPA
Partner, Gelman, Rosenberg & Freedman CPAs
•Director of Client Services
•20 years of experience in auditing, consulting and accounting
•Specializes in nonprofit outsourced accounting services
– Flexible CFO & controllership engagements, guide clients through external audit, help
with board reporting, training of client accounting personnel and set up of accounting
systems
•Nonprofit Involvement:
– Treasurer of the Bach Sinfonia, former Treasurer of Sitar Arts Center
5. Part One: Preliminary Stage
1.Basic Concepts
2.Steps to Take Before Forming an
Organization
3.Accounting Basics
6. What is a Non-Profit?
A non-profit is an entity (typically a corporation) that does
not distribute net earnings to its owners or shareholders.
Non-profit status is determined under state law.
Tax status is distinct from non-profit status: non-profit may
or may not qualify as tax-exempt under 501(c)(3) (or any
other federal code section), and it is possible to have a
taxable non-profit.
7. What is a 501(c)(3)?
501(c)(3) is one of many different tax-exemption classifications
under federal law.
Other examples:
• 501(a): qualified retirement plans
• 501(c)(4): social welfare organizations
• 501(c)(5): unions
• 501(c)(6): trade associations
States generally rely on federal 501(c)(3) status when granting
tax-exempt status under state law, but not always
8. Benefits of 501(c)(3) Status
• Earnings generally tax-exempt under federal and state
law
• Donations are tax deductible
• Eligible for grants from foundations
9. Burdens of 501(c)(3) Status
• Very complicated to administer: generally requires
articles, bylaws, board of directors, corporate
policies, plan for distribution of assets at dissolution
• Must take steps to show that any payment to yourself
is “reasonable”
• Finances open to public inspection (ex: Entire Form
990 except names and addresses of donors is public;
required to give copy if asked; many nonprofits put
audits and other documents online)
10. Burdens of 501(c)(3) Status
• Accounting is more complicated
– Tracking costs by funder/project is common
– Labor, fringe and overhead allocations are common
– Use of timesheets to track labor by projects is common
• Compliance requirements much more rigorous
– Federal audit requirements start at $500,000 for a 501(c)(3) versus
$10,000,000 under SBA 8(a) rules for government contractors
– IRS estimates for time required to complete the 990-EZ with common
schedules is 25 hours. For a Schedule C (single member LLC) its 2
hours. The 990 is full of non-financial info.
11. Before Forming an Organization
A number of steps should be taken before filing for
incorporation or applying for tax-exempt status
(1) Consider alternatives to forming a 501(c)(3)
(2) Determine whether you qualify for tax-exempt
status
(3) Recruit a Board of Directors
(4) Create a budget and business plan
(5) Find a fiscal sponsor
12. Alternatives to Forming a New 501(c)(3)
Cautionary Note: Running a successful non-profit organization requires
a compelling and viable mission, a strong network of people to help
fund and administer the organization, and a realistic stream of revenue
to fund both your activities and the hiring of professionals to assist with
the many administrative burdens.
Consider the following alternatives before forming a 501(c)(3)
• Working with an existing organization to run a pilot program based
on your idea.
• Run your project as a taxable entity (e.g. LLC) or sole
proprietorship before forming a non-profit.
13. Qualifying for Tax-Exempt Status
501(c)(3) Exempt Purposes
• Charity
• Education
• Promotion of Health
• Advancement of Religion
• Advancement of Science
• Lessening the Burdens of
Government
• Testing for Public Safety
• Promotion of Social Welfare
• Promotion of the Arts
• Literary
• Environmental Protection
• Fostering Amateur Sports
Competition
• Prevention of Cruelty to
Children or Animals
14. Qualifying for Tax-Exempt Status
The Commerciality Doctrine
• Even if you have what seems like a valid exempt purpose,
the IRS and the courts may deem your organization
unworthy of tax exemption if its activities are too similar
to a commercial business.
• The commerciality doctrine is very arbitrarily and
unevenly applied.
• The non-profit sector is becoming more and more
commercialized, and the law is not keeping up.
15. Qualifying for Tax-Exempt Status
EXAMPLE: Living Faith, Inc. v. Commissioner, 950 F.2d 365 (7th Cir. 1991)
The organization was formed to promote the tenets of the Seventh Day
Adventist Church, one of which is vegetarianism and healthy eating. The
organization’s main activity was the operation of two vegetarian
restaurants/health food stores. The stores operated on normal business hours,
except they were closed on Saturdays (in observation of the Sabbath). Prices
were the same as for-profit competitors. Adventist literature was displayed
throughout the stores, and cooking classes and bible study classes were held
after business hours. Additionally, the organization held a devotional talk and
hymn singing every morning before opening. The organization relied entirely
on income from the stores and had no plans to solicit donations.
16. Qualifying for Tax-Exempt Status
EXAMPLE: Living Faith, Inc. v. Commissioner, 950 F.2d 365 (7th Cir. 1991)
Result: The court ruled that the organization was operated substantially for a
non-exempt purpose and did not qualify for exemption. Key factors: (1) the
organization was run just like a commercial business, e.g. with regular
business hours, promotion through advertising, etc; (2) competed with similar
for-profit businesses; (3) set prices at market rates; and (4) lacked plans to
raise money from any other sources.
How would you modify the organization’s activities to
qualify for exemption?
17. Recruiting a Board of Directors
The ideal Board of Directors has people with the skills, financial
means, and connections to help fund the organization and complement
the strengths and weaknesses of the founder:
• Lawyers
• Accountants
• Entrepreneurs, Business Owners
• Nonprofit Professionals
• Well Connected Individuals (politically and financially)
Most states require a non-profit corporation to have a minimum of 3
directors.
18. Recruiting a Board of Directors
• Think about getting representation from all of the
organization's stakeholders – you want a diverse
range of backgrounds, skills and perspectives
• Consider setting term limits
• Family relationships between directors get disclosed
• Reminder: the role of the Board is to make decisions
and govern. However new organizations often have
more of a “working board”
19. Budget and Business Plan
A business plan must adequately plan for the costs of running the
organization. Some necessary expenses that are often left out of
budgets include:
• Insurance
• Accounting, tax preparation and financial audits
• Attorney fees
• Fundraising consultants
• Strategic planning consultants
• Payroll, payroll processing and related benefits
Remember that budgets should be realistic and achievable!
20. Fiscal Sponsorship
Did you know …
It is currently taking about 2 years (!) for the IRS to confirm
the tax-exempt status of most new organizations.
Fiscal sponsorship enables your organization to raise money
while you are waiting to hear from the IRS.
Expedited treatment of your Form 1023 is possible, but
difficult to obtain
21. 21
Measure the activity showing how we got from
one image to another (Statement of Activities)
Snapshot
Take a photo and capture the image (Statement of Financial
Position)
Take a photo and capture the image (Statement of Financial
Position)
December 31st
January 1st
Accounting Basics
22. 22
• Assets are what you have
• Liabilities are what you owe
• Equity is the difference. It’s
also the sum result of your
whole history
• Moment in time- a different
concept than other reports
Smith Consulting
Balance Sheet
September 30, 2013
Assets
Checking account $ 1,000
Savings account 250
Total cash 1,250
Auto 7,000
Total Assets $ 8,250
Liabilities -
Car Loan 6,000
Retained Earnings 2,250
Total Liabilities and Equity $ 8,250
Balance Sheet
• Nothing here about revenue,
expenses or net income
Balance Sheet: “a moment in time”
23. 23
Smith Consulting, Inc.
Income Statement
For the Year Ended December 31, 2013
Revenue
Fees $ 10,000
Interest income 100
Total Revenue 10,100
Expenses
Salary 7,000
Travel 1,000
Supplies 300
Rent 200
Total Expenses 8,500
Net Income $ 1,600
• Who are the users of this
report?
Maybe bankers, owners,
potential owners or
management
• What do they want to know?
Profitability, ability to
repay a loan, etc.
Income Statement
• Measures activity over time
• How much cash do you have?
Income Statement: for-profit example
24. 24
Carwash for Good
Income Statement
For the Year Ended December 31, 2013
Revenue
Contributions $ 15,000
Interest income 100
Total Revenue 15,100
Expenses
Salary 7,000
Consultants 2,000
Travel 700
Program Materials 300
Rent 500
Total Expenses 10,500
Net Income $ 4,600
• For a nonprofit entity, who are the
users of the reports?
Management, potential donors,
funders, board members
• Does this format still work?
NO, it’s no longer all about net
income
• Conclusion: Nonprofits’ reports
need to address program activities
and stewardship responsibilities
Income Statement (continued)
25. 25
• The different terminology
reflects the change in
emphasis
• Biggest difference is that
expenses are grouped by
functional categories
(purpose) instead of natural
categories (how)
• What was travel expense?
Carwash for Good
Statement of Activities
For the Year Ended December 31, 2013
Total
Revenue
Contributions $ 15,000
Interest income 100
Total Revenue 15,100
Expenses
Treatment 7,450
Advocacy 2,000
Total Program Expenses 9,450
Administration 1,050
Total Expenses 10,500
Change in Net Assets $ 4,600
Statement of Activities
26. 26
• Functional -- Expenses grouped according to
the purpose for which the costs are incurred
(program, administrative, fundraising)
• Natural -- Expenses grouped according to the
kind of economic benefit received (such as
salary, printing, rent, travel, etc.)
Functional and Natural Expenses
27. 27
• Columns are used to
separate restricted and
unrestricted activity
• There’s nowhere to
show the natural
expense categories
except on a separate
page
Carwash for Good
Statement of Activities
For the Year Ended December 31, 2012
Temporarily
Unrestricted Restricted Total
Revenue
Contributions $ 4,500 $ 10,500 $ 15,000
Interest income 100 - 100
Release from restriction 9,000 (9,000) -
Total Revenue 13,600 1,500 15,100
Expenses
Treatment 7,450 - 7,450
Advocacy 2,000 - 2,000
Total Program Expenses 9,450 - 9,450
Administration 1,050 - 1,050
Total Expenses 10,500 - 10,500
Change in Net Assets $ 3,100 $ 1,500 $ 4,600
Restricted Activity
28. 28
• The limitation must come from the donor. A limitation
set by the board is called designated instead.
• Temporarily Restricted- donor specifies a limitation
based on time (when the contribution can be used) or
purpose (what the contribution can be used for).
• Restricted donations are recorded in full at the date of
pledge and are then “released” to unrestricted as the
donor’s limitations are fulfilled (if temporary). You can
think of this as temporary storage.
• Permanently Restricted- donor specifies that only the
donation’s related investment earnings can be spent.
Restricted Contributions
29. 29
• This report is
unique to nonprofit
organizations and
provides a detailed
breakout of the
functional totals by
natural line items
Carwash for Good
Statement of Functional Expenses
For the Year Ended December 31, 2013
Program Services
Treatment Advocacy Admin. Total
Expenses
Salary $ 5,050 $ 1,500 $ 450 $ 7,000
Consultants 1,600 300 100 2,000
Travel 500 200 - 700
Program Materials 300 - - 300
Rent - - 500 500
Total Expenses $ 7,450 $ 2,000 $ 1,050 $ 10,500
These terms are sometimes used
interchangeably: "administrative,”
“management and general,” “general
and administrative,” and "overhead"
Statement of Functional Expenses
30. Part Two: Forming the Organization
1.Corporate Formation
2.Preparing the Form 1023
3.Tax and Audit Requirements
31. Basic Steps to Forming a 501(c)(3)
After you have laid the groundwork, these are the basic
steps:
(1) File Articles of Incorporation with the state
(2) Get an Employer Identification Number
(3) Have your first Board Meeting: adopt Bylaws, Resolutions, and
Policies
(4) Open a bank account
(5) File Form 1023 and applications under state law (27-month
deadline)
(6) File Forms 990 while you wait for tax-exempt status
32. Articles of Incorporation
Elements of the Articles of Incorporation
•Corporate name
•Duration (“perpetual”)
•Statement of Purpose (required for Form 1023)
•Whether or not you have members
•Authority of the Board of Directors, and the process for appointment
•Plan for dissolution of assets (required for Form 1023)
•Names of initial Directors, Incorporators, and Registered Agent
•Authority to amend
33. Employer Identification Number
An employer identification number (“EIN”) is necessary to
apply for tax-exempt status, open a bank account, hire
employees, etc.
•Easy to obtain online from the IRS website:
https://sa.www4.irs.gov/modiein/individual/index.jsp (or google
“EIN online”)
•Can also submit Form SS-4 on paper.
Don’t make a mistake – if the IRS has more than one EIN on
record for your organization, this causes major headaches
34. First Board Meeting
Once Articles of Incorporation have been filed, the Board of Directors
should have their first meeting and take care of initial business:
• Adopt Bylaws
• Appoint Officers (Executive Director, Secretary, Treasurer)
• Adopt Policies (Conflict of Interest, Whistleblower and Document
Retention)
• Establish the authority of selected officers to open a bank account and sign
checks on behalf of the organization
• Establish the authority of selected officers to apply for tax-exempt status
and sign a power of attorney
This meeting should be documented by written resolutions and minutes
35. Inside the Form 1023
Overview of what’s needed
•IRS fee: $400 or $850
•Certified copy of Articles of Incorporation
•Bylaws
•Narrative
•Conflict of Interest Policy
•Copies of contracts and information on how compensation was
determined
•Financial data
•Answers to many, many questions
36. Form 1023: Part I
Line 10: your organization may be exempt from the requirement to file
a Form 990 or Form 990-EZ if it is (1) a church or affiliated with a
church; (2) a state or local government unit or affiliated with a state or
local government unit; or (3) an organization that normally receives
$50,000 or less in annual gross receipts.
•Note: organizations with less than $50,000 in annual gross receipts are
still required to file Form 990-N.
Line 11: date of incorporation is important because you must file within
27 months of incorporation to receive 501(c)(3) status retroactive to the
date of incorporation – may otherwise qualify as 501(c)(4)
37. Form 1023: Part II
Official governing documents are required to obtain tax-exempt status
– your organization must formally exist as (1) a corporation; (2) a
limited liability company; (3) a trust; or (4) an unincorporated
association (with Articles of Association, Constitution, etc.)
Sole proprietorships, partnerships, or loose affiliations are not eligible
for tax-exempt status.
The recommended form of entity is the non-profit corporation
•Attach Articles of Incorporation (certified by state government) and
Bylaws (showing date of adoption by Board)
38. Form 1023: Part III
Required Provisions in organizational documents:
•Statement of purpose: the Articles of Incorporation must state that the
organization is operated for a purpose consistent with section 501(c)(3),
and may not engage in activities that are prohibited for a 501(c)(3)
organization.
•Dissolution: if the organization dissolves, its assets must continue to
be used for 501(c)(3) purposes rather than returned to the founders.
Easiest way to satisfy this requirement is to require that assets be
contributed to another 501(c)(3) organization.
– It is not recommended that you rely on state law for your
dissolution provision
39. Form 1023: Part IV
The Narrative
•Describe your major activities, and give some concrete examples
(3-5 paragraphs is usually enough)
•The Form 1023 narrative is not a grant proposal and shouldn’t
look like one.
•You should know all the IRS hot-button issues associated with
organizations likes yours, and avoid triggering IRS concerns
•Note: if you later engage in activities that are not described in
the narrative or elsewhere in the Form 1023, the validity of your
tax-exemption letter may be called into question.
40. Form 1023: Part V
Compensation of Officers, Directors, Employees and
Independent Contractors
Background Law:
•Private Inurement: organization “insiders” may not be paid more than
“reasonable” compensation
•Intermediate Sanctions: penalty excise taxes imposed on “excess
benefit transactions” with “disqualified persons”
•Private Benefit: a 501(c)(3) organization may not use its assets to the
benefit of a private party, except to the extent that such benefit is
incidental to the organization’s tax-exempt purpose
41. Form 1023: Part V
Line 2: describe family and business relationships among your officers,
directors, highest compensated employees or independent contractors.
• Business relationships include common ownership of a business (i.e.
related parties together hold more than 35% ownership), as well as
employment and contractual relationships.
• The IRS is looking for conflicts of interest that may compromise the
independence of the organization and lead to private inurement and
private benefit violations.
• EXAMPLE: one organization board member is also on the board of
a for-profit business that is a client of a law firm of which another
board member is a partner.
42. Form 1023: Part V
Line 3: list name, qualifications, average hours worked and duties of
each officer, director, highest compensated employee, and highest
compensated independent contractor
•The IRS is looking to ensure that the people running the organization
have actual qualifications and duties, and not just handpicked by the
founder to act as “rubber stamp”
43. Form 1023: Part V
Line 4: you should answer “yes” to all these questions if you want your
Form 1023 approved without complications
•Follow Conflict of Interest Policy (see IRS sample)
•Approve compensation in advance
•Document compensation arrangements in writing
•Record board decision (i.e. minutes of board meeting)
•Obtain comparability data from at least 3 similarly situated
organizations
•Document the data and its source in the meeting minutes
44. Form 1023: Part V
Line 5: Conflict of Interest Policy (see IRS sample) is optional but
highly recommended
Line 6: non-fixed payments such as discretionary bonuses and revenue-
based payments are inherently suspect and should be avoided, if
possible
Lines 7, 8, 9: transactions should be negotiated at arm’s length (i.e.
decided by an independent board) and at fair market value (based on
comparable data).
•Good board procedures are of the utmost importance
45. Form 1023: Part VI
Provision of goods, services, or funds to individuals and
organizations
Again, the IRS is concerned about possible private inurement and
private benefit violations. Any disbursements must directly further the
organization’s exempt purpose, and not unduly benefit insiders.
46. Form 1023: Part VII
History of any predecessor organizations:
•Line 1: If your organization has taken over the activities or assets of
another organization, the IRS will take a closer look to ensure that your
organization is truly independent and worthy of its own 501(c)(3) – See
Schedule G.
•To maintain independence from a related organization, be sure to
negotiate all dealings at arm’s length, and have either: (1) a majority of
different, independent board members, or (2) a different executive
director and staff running the day-to-day details of the organization
•Line 2: 27-month rule for retroactive 501(c)(3) status
47. Form 1023: Part VIII
Line 1: must check “no” – 501(c)(3) organizations are prohibited from
opposing or supporting political candidates
Line 2: 501(c)(3) organizations are allowed to influence legislation (i.e.
direct lobbying and grassroots lobbying), so long as these activities are
not “substantial”
•If your organization engages in direct or grassroots lobbying at all, it is
generally recommended to file Form 5768 (the “501(h) election”)
Line 6: you must be able to show that any economic development
activities are charitable and do not just benefit private businesses
48. Form 1023: Part VIII
Line 8: “joint ventures” with non-501(c)(3) organizations are inherently
suspect and should be handled with caution
•There are specific cases and IRS rulings that should be closely
followed – in general, the 501(c)(3) must retain voting control over the
project to ensure that the joint venture furthers charitable purposes
Line 14: contributions made to your organization that are used for the
benefit of a foreign organization will qualify for the charitable
deduction only if specific rules are followed:
•Your organization must retain discretion over the funds (i.e. no
earmarks), and adequate control over the projects abroad
49. Form 1023: Part VIII
Line 15: you have a “close connection” with another organization if:
•You control the organization or it controls you through common officers,
directors, or trustees, or through authority to approve budgets or expenditures.
•You and the organization were created at approximately the same time and by
the same persons.
•You and the organization operate in a coordinated manner with respect to
facilities, programs, employees or other activities.
•Persons who exercise substantial influence over you also exercise substantial
influence over the other organization, and you either (1) conduct activities in
common, or (2) have a financial relationship.
Must take steps to maintain the separateness of the organizations
50. Form 1023: Part IX
Financial Data – Statement of Revenue and Expenses
•If the organization has existed for 4 years or more: provide actual data
for the most recent completed year and the three prior years (4 years
total)
•If the organization has existed for more than 1 year but less than 4
years: provide actual data for all completed years, and projected data as
needed to get to a total of 3 years of financial data
•If the organization has existed for less than 1 year: provide projected
data for the current year and the following 2 years (3 years total)
•Generally speaking, this is the only page that your CPA can do
51. Form 1023: Part X
Public Charity Status- general rules
•A 501(c)(3) nonprofit can be either a public charity (ex: Red Cross) or
a private foundation (ex: Gates Fdn).
•Private Foundations file a different tax return (990-PF), pay tax on
investments, are subject to very strict conflict of interest rules, and have
to distribute a portion of their assets every year. Most importantly:
private foundations are very unlikely to give money to other private
foundations.
•To be a public charity you have to pass the public support test: done
every year on Schedule A of the Form 990. Schools, hospitals, churches
and government entities are exempt from this test.
52. Form 1023: Part X (continued)
Public Charity Status- general rules (cont.)
•The test calculates what portion of revenue over a five-year
cumulative period was “public support.”
•You become a private foundation if you fail two years in a row
but you get a pass in your first five years.
•Use this first five years to develop a broad base of support and
remember that any inactive time after formation counts.
53. Form 1023: Part X (cont.)
Public Charity Status: general rules
•Form 1023 provides 8 possible versions of this test. Most organizations
will choose between option (g) “509(a)(1) and 170(b)(1)(A)(vi)” and
option (h) “509(a)(2).”
•Option (g) generally seeks to ensure that 1/3 of total support is from
contributions and grants, with most sources subject to a 2% limit (support
from government and other public charities is not subject to the 2% limit).
It’s possible to pass with 10% public support under “facts and
circumstances” test.
•Option (h) also generally seeks to ensure that 1/3 of total support comes
from the public, except “exempt function revenue” is counted.
54. Tax Filing Requirements
• Filing thresholds:
– 990: Gross receipts over $200,000 OR totals assets over
$500,000
– 990-EZ: Gross receipts from $50,000 to $200,000 AND
totals assets under $500,000
– 990-N (“postcard”): gross receipts normally under $50,000
• The 990-N is an online-only version that is mostly just name
and address information.
• Exempt status is automatically revoked if an organization fails
to file for three consecutive years.
55. Audit Requirements
A requirement to have an organization audited can come
from any of several sources:
• State charitable registration requirements often set thresholds
for requiring an audit, review or compilation based on total
contributions reported on the 990.
• A single audit under A-133 is required if an organization
spends $500,000 of federal funding in one fiscal year.
• Donors may require an audit (but may also accept a review or
compilation).
• Bylaws, banks or best practices