american chemical society 1 acs division and local section treasurers’ workshop providing the...
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American Chemical Society 1
ACS Division and Local Section Treasurers’ Workshop
Providing the Tools to Help You With Your Financial Management
Treasurers’ WorkshopPhiladelphia, PAAugust 20, 2012
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Objectives
• Define your role as Treasurer
• Preparing for Compliance With the IRS
• Budgeting
• Incorporate or Not
• Your Questions
• Resources
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You are THE Treasurer
• The Financial Officer
• FORMS – Annual Report submission
– Bylaw requirement
– Facilitates the allotment disbursement
– Assists DAC and LSAC with assessing the health and vitality of divisions and sections
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Responsibilities
• Retain accurate and proper records
– Bank records, invoices, receipts
• Maintain a book of accounts (ledger) showing the details of all revenues and expenses
• Manage Bank accounts
• Maintain records of all investments
• Keep the executive committee informed of all financial matters
• File appropriate IRS forms and provide ACS with a copy
• Review the section’s or division’s Bylaws to determine if there are other duties required by the section or division
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SHARE YOUR EXPERIENCE
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ACS Division and Local Section Treasurers’ Workshop
Preparing for Compliance with IRS Requirements
Treasurers’ WorkshopPhiladelphia, PAAugust 20, 2012
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Objectives
• Provide information regarding the ACS and affiliated organizations’ tax-exempt status
• Clear any misconceptions regarding the tax-exempt status of affiliated organizations and their relationship with ACS
• Identify the benefits of tax-exempt status
• Identify the actions that jeopardize tax-exempt status
• Review the mandatory federal tax filings
• Identify other requirements (public inspection, public support test , acknowledging donors)
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ACS Basic Organization Information
• Type of exempt organization: Charitable non-profit scientific and educational organization
• Exempt under IRC Section 501(c)(3)
• Exempt from federal income tax
• Non-private foundation under IRC Section 509(a)(2) Public Charity
• IRS determination letter (originally issued on January 18,1938)
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Tax-Exempt Status of ACS Affiliated Organizations
• ACS affiliated organizations include:
– Local Sections, Divisions, Subdivisions, and Regions
• Type of exempt organization: Charitable non-profit scientific and educational organizations
• Exempt under IRC Section 501(c)(3) through ACS Group Exemption Letter (if election is made by organization)
– IRS Group Exemption Determination Letter (most recent issued February 4, 2003)
• Exempt from federal income tax
• Non-private foundation under IRC Section 509(a)(2) Public Charity
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What is the ACS Group Exemption?
• IRS granted exemption to ACS affiliated organizations through the ACS Group Exemption Letter
– ACS is the central organization
– ACS must take measures annually to keep group exemption letter in force
– Group exemption number: 0945
– Re-election to be included under ACS group exemption must be made every year via ACS annual report
– New local sections, divisions, regions, subdivisions can obtain tax-exempt status by electing to be included within the ACS group exemption letter
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What is the ACS Group Exemption? (cont.)
• Affiliated Organizations (Local Sections, Divisions, Subdivisions, Regions)
– ACS does not have operational and financial control
– Affiliated organizations are separate legal entities
• Each has their own federal employer identification number (FEIN); (also called taxpayer identification (TIN), or federal id number
• DO NOT USE ACS FEDERAL ID NUMBER
• If you do not know your EIN, contact ACS Tax Office
– Each one must prepare their own individual/separate financial reporting and tax filings to maintain tax-exempt status
– Each one must maintain non-private foundation status by meeting public support test
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Quiz (True or False)
• Because ACS is tax-exempt, all its affiliated organizations maintain their tax-exemption through the ACS group exemption umbrella.
• (FALSE)
• ACS affiliated organizations have to file tax returns to the IRS even though we are tax-exempt.
• (TRUE)
• ACS affiliated organizations do not have to file any tax returns to the IRS since their gross receipts are less than $50,000.
• (FALSE)
• ACS does not file tax returns on behalf of ACS affiliated organizations.
• (TRUE)
• ACS files a group return that includes the affiliated organizations’ finances.
• (FALSE)
• The annual report submissions to ACS constitute IRS filings.
• (FALSE)
• ACS affiliated organizations cannot use the ACS federal id number.
• (TRUE)
• ACS affiliated organizations cannot use the ACS sales tax exemption for their purchases.
• (TRUE)
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Benefits of 501(c)(3) Status
• Income from exempt purpose related activities are exempt from federal income tax
• Exempt from federal unemployment taxes
• Exempt from some state taxes (e.g., income, sales, employment)
• Contributions received are tax deductible to donors
• Tax-exempt financing available
• Reduced postal rates available
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What Jeopardizes § 501(c)(3) Status?
• FAILING TO MEET FILING REQUIREMENTS
• Inurement/private benefit activities prohibited and restricted
• Lobbying activities must be insubstantial
• Political activities are absolutely prohibited
• Failing to operate with an exempt purpose
• Unrelated business activities must not be the primary purpose
– Exempt purpose is found in organization’s organizing documents such as Articles of Incorporation, Articles of Association, Constitution, or Bylaws
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Federal Tax Filing Requirements
• Information returns (Form 990 series):
– Form 990 - Return of Organization Exempt from Income Tax
– Form 990-EZ - Short Form Return of Organization Exempt from Income Tax
– Form 990-N (e-Postcard)
• Income tax return:
– Form 990-T – Exempt Organization Business Income Tax Return (If you have
UBI)
• Other information returns:
– Form 1099 MISC - Miscellaneous Income
– Form 1096 - Annual Summary and Transmittal of U.S. Information Returns
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Form 990 Series Overview
Form 990 is also a tool for an exempt organization to show:
•It is organized and operated as a tax-exempt entity
•It is in compliance with all applicable tax laws
•It has a mission it continues to fulfill
•It responsibly safeguards its assets
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Which Form 990 to File?
Based on Gross Receipts Form to
Tax Year 2011 + Rules File
Gross receipts normally ≤ $50,000** 990-N
(e-Postcard)
Gross receipts > $50,000 AND < $200,000, AND Total assets < $500,000 990-EZ
990 Gross receipts ≥ $200,000, OR Total assets ≥ $500,000
** How to determine if gross receipts are normally ≤ $50,000 : Take the average gross receipts based on a 3-yr period to include tax year + 2 prior tax
periods
The Form 990 series of returns (Form 990, 990-EZ, or 990-N) are mandatory for 501(c)(3) organizations
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Federal Tax Filing Requirements Form 990 - Gross Receipts
What are gross receipts?
1. Contributions
2. Program Service Revenue
3. Membership Dues & Assessments (includes ACS Allotments to Divisions and Local Sections)
4. Interest - Savings/Temporary Investments
5. Dividends & Interest-Securities
6. Gross rents
7. Other Investment Income
8. Sale of Assets, Other than Inventory
9. Special Events
10. Gross Sales of Inventory
11. Other Revenue
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Federal Tax Filing Requirements Form 990-N
What is needed to complete 990-N?
• Employer identification number (EIN)
• Tax Year
• Legal name & address
• Other names the organization uses
• Name and address of a principal officer
• Website address (if one exists)
• Confirmation that the organization’s gross receipts at or below the threshold
Filing Website: http://epostcard.form990.org/
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Federal Tax Filing RequirementsMandatory Schedules Required for Forms 990 and 990-EZ
• For BOTH Form 990 and 990-EZ, must include
– Schedule A, Public Charity Status and Public Support
– Schedule B, Schedule of Contributors (required if the organization received, during the reporting year, $5,000 or more in money or property from any ONE contributor)
• For Forms 990 ONLY, must include
– Schedule O, Supplemental Information to Form 990
• Additional schedules are required based on responses to questions
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FILING DATES:
Due Date for all 990 returns: File by the 15th of the 5th month after the end of the organization’s accounting period. This will be May 15th for a calendar year filer.
EXTENSIONS For Form 990 or 990-EZ
File IRS Form 8868 to get an initial 3-month extension. An additional 3 month extension may be requested if original 3 months was not enough time.
Form 990-N is due on May 15th of each year. NO EXTENSIONS!
Federal Filing Requirements –When to File?
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Federal Tax Filing RequirementsWhere to file?
• Paper returns are filed in Ogden, UT:Department of the TreasuryInternal Revenue Service CenterOgden, UT 84201-0027
• Electronic filing is required for Form 990 filers with assets of $10 million AND at least 250 returns
• The IRS recommends that all organizations, regardless of size, file electronically.
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Federal Tax Filing Requirements Non-Filers/Late Filers Penalties
Penalties for late filing, incomplete or inaccurate return:
• Against organization: $20 a day for each day the return is late ($10,000 maximum); or 5% of the gross receipts
• Against responsible person(s): $10 a day not to exceed $5,000
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Federal Tax Filing Requirements Non-Filers/Late Filers Penalties
Failure to file for 3 consecutive years:
• Loss of tax-exempt status (automatic revocation)
• Must file annual income tax return (Form 1120) and pay taxes, if owed
• Donations are not tax-deductible
• Not eligible to be included in ACS Group Exemption (will be removed)
• Central organization (ACS) cannot obtain exemption for subordinate organization
• You must re-apply for your organization’s tax-exemption
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HELP !!!
I HAVE BEEN AUTO-REVOKED!!!
How do I get Reinstated?
AUTOMATIC REVOCATION OF TAX EXEMPT STATUS
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• To get reinstatement the organization (NOT ACS) must file FORM 1023 regardless of whether the organization was originally required to apply for exemption.
• Write “Automatically Revoked” at the top of the application.
• Must pay the appropriate user fee (See Revenue Procedure 2011-8 and 2011-36)
• Notice 2011-43 provides transitional relief for certain small organizations (990-N filers) if the application is filed by December 31, 2012.
• An organization may also request retroactive reinstatement as part of the application.
• The organization MUST file Form 1023 even if it was covered under a group exemption.
• Visit the IRS website under Charities for a list of frequently asked questions. www.irs.gov/charities
AUTOMATIC REVOCATION - HOW TO GET REINSTATED
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Beware! You do not want to have your tax-exempt status automatically revoked! If it is revoked, only
YOU can file for reinstatement!
By law, an organization that fails to file Form 990, 990-EZ, or 990-N for three consecutive years will have its tax-exempt status automatically revoked as of
the filing due date for the third return.
File your returns!
AUTOMATIC REVOCATION OF TAX EXEMPT STATUS
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Federal Tax Filing Requirements -Other
• Form 990-T – Exempt Organization Business Income Tax Return
• Form 1099 MISC - Miscellaneous Income
• Form 1096 - Annual Summary and Transmittal of U.S. Information Returns
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Federal Tax Filing Requirements Form 990-T (Exempt Organization Business Income Tax Return)
When are you required to file Form 990-T?
• Unrelated business income $1,000
• UBI is income from:
– A trade or business
– Conducted on a regular basis
– That is not substantially related to the organization’s exempt purpose
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Federal Tax Filing Requirements Form 990-T
Examples of some of the more common forms of unrelated trade or business activities include.
• Advertising
• Gaming
• Sale of merchandise and publications – unrelated to exempt purpose.
Exclusions (not UBI)
• Interest and dividends
• Royalty income
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Federal Tax Filing Requirements (Form 1099-MISC)When are you required to file Form 1099-MISC?
• Paid at least $10 in royalties
• Paid at least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, attorney fees, speaker fees, payments to corporations for legal services.
• Scholarships/Fellowships – not required to be reported
• Travel Reimbursements – not required to be reported if recipient provides adequate accounting of the amount to be reimbursed and includes these four elements: amount, place, time and business purpose.
You need to obtain vendor’s taxpayer identification before making any payments using IRS Form W-9 Request for Taxpayer Identification Number and Certification.
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Other Requirements - Public Support test
What is the public support test?
• The IRS applies public support ratio tests on an annual basis to determine an organization’s public charity versus private foundation status
• ACS and affiliated organizations must meet individual public charity status and non-private foundation status
• The public support test appears on Schedule A (Form 990 or 990-EZ). To maintain 509(a)(2) – public charity status, you need to meet the public support test:
At least 1/3 of organization’s gross receipts are from public support and
exempt function combined, and
Less than 1/3 of its support is from investment income
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Other Requirements - Public Inspection
Information Subject to Inspection:
• Forms 990, 990-EZ, and 990-T, including all schedules and attachments (except names and addresses of contributors)
• Form 1023: Application for Tax Exemption filed after July 15, 1987
• Must furnish copies upon request
• May charge a reasonable fee
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Other Requirements – Acknowledging Charitable Contributions
Quid Pro Quo
• Disclose value of goods or services provided to donor when contribution >$75 .
• Disclose at time of solicitation or receipt of contribution.
Other
• Donor must have contemporaneous acknowledgement for donations ≥ $250
• New – donor must have a bank record or charity documentation for any amount given.
• Refer to IRS Publication 1771 Charitable Contributions – Substantiation and Disclosure Requirements.
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Resources to Assist
To obtain IRS federal forms and publications
IRS Website:
http://www.irs.gov/formspubs/index.html
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American Chemical Society
For further information contact:
ACS Office of Tax Compliance and Reporting
1155 Sixteenth Street, N.W.
Washington, DC 20036
Title Telephone No. Email
Rosalee Lewis Tax Manager (202)872-6306 [email protected]
Maria Tolentino Tax Accountant (202)872-6233 [email protected]
Lisa Wolfinger Tax Accountant (202)872-6052 [email protected]
Leila Hoen Assistant Director (202)872-6027 [email protected]
• Send email inquiries to: [email protected]
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ACS Division and Local Section Treasurers’ Workshop
Budgeting
Treasurers’ WorkshopPhiladelphia, PAAugust 20, 2012
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Budgeting Considerations
• Revenues
• Expenses
• Net Contribution/Deficit and Reserves
• Budget Preparation and Monitoring Actual Results
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Revenues
• Contributions
• Program Revenue
• Membership Dues (Including Allotments)
• Meeting Registration Revenue
• Special Events
• Other Revenue
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Expenses
• National Meeting Programming
• Awards and Contributions
• Conferences and Meetings
• Administrative
• Other Expenses
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Net Contribution/Deficit and Reserves
• Net Contribution/Deficit = Difference between Revenues and Expenses
• Reserves = Planning for the future
– Committee on Local Section Activities (LSAC) recommends minimum reserves equal to 1.5 x Annual Allotment
– ACS Guideline: Reserves = minimum of 50% of next year’s operating expenses
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Budget Preparation and Monitoring Actual Results
• Budget Preparation
– Consult with all Officers to prepare and approve a final budget no later than December for the upcoming year
– Ensure that assumptions are realistic. Review past history, if available
– Fund Division/Local Section objectives/programming
• Monitor Actual Results Against Budget Regularly
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American Chemical Society
To Incorporate or Not to Incorporate
David T. Smorodin
Assistant General Counsel
August 20, 2012
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What is a Corporation?• A separate legal entity
– Has the power to act in any way permitted by law and by its own corporate charter. For example, corporations may:
• enter into contracts;
• buy and sell both real and personal property;
• sue and be sued;
• Incur indebtedness;
• commit crimes!
• If the corporation suffers losses:
– the corporation itself must bear those losses;
– not individual directors and/or officers.
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Why Incorporate?
Primary Benefit:
To protect individual officers, directors, executives and members from liability for many obligations of the corporation.
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DISADVANTAGES OF INCORPORATING• A corporation can be created only by compliance
with General Corporation Law of the state of incorporation.
– This usually requires filing of Articles of Incorporation with the appropriate state entity (usually the Secretary of State) and payment of the requisite state fees.
• A corporation is generally required to have a board of directors, corporate officers, annual meetings, and to maintain separate books and records.
• Failure to observe “corporate formalities” may result in the personal liability of directors and/or officers for corporate debts.
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What else should we discuss?
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RESOURCES
• http://www.irs.gov/formspubs/index.html
• www.acs.org/getinvolved
• www.acs.org/leaderdevelopment
• Other Treasurers
• ACS Staff: [email protected]; [email protected]; [email protected]
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