Category Archives: Non-Profit

Congress May Intercept ‘Free Pass’ for Tax-Exempt NFL

nfl-logoWhat does a not-for-profit organization have in common with the National Football League (NFL)?

Even though it doesn’t fill up football stadiums with tens of thousands of fervent fans on Sundays in the fall, a not-for-profit organization and the NFL are treated as tax-exempt groups by the IRS. Now, a movement is afoot in Congress to level the playing field. Senator Tom Coburn (Rep.-Oklahoma) recently introduced an amendment to the Marketplace Fairness Act that would prevent professional sports leagues from qualifying for tax-exempt status.

The NFL currently generates about $10 billion in revenue annually, but nevertheless has operated as a not-for-profit organization since 1966 when iconic commissioner Pete Rozelle managed to incorporate the request for the tax exemption with an anti-trust action.

Technically, the NFL, which merged with the American Football League (AFL) that year, qualified as a 501(c)(6) not-for-profit organization. Under that section of the tax code, an exemption is available to “business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”

The NFL has maintained its status as a tax-exempt organization despite the fact that the league is essentially a collection of for-profit entities banding together for common goals. In fact, the NFL itself has asserted a conflicting position when it was in its best interests to do so. In one case decided by the Ninth Circuit Court of Appeals (Los Angeles Memorial Coliseum Commission v. NFL, 726 F.2d 1381, 2/28/84), the NFL argued that it was a separate entity that should be exempt from certain anti-trust laws. The court determined that the NFL, under the direction of Rozelle, had acted in bad faith by blocking an attempted move out of Oakland by the Raiders’ owner, Al Davis.

Similarly, the U.S. Supreme Court ruled against the NFL in another case (American Needle v. NFL, No. 08-661, 5/24/10) involving a claim by the league for anti-trust immunity. In the opinion, Justice John Paul Stevens stated that NFL teams don’t possess either the decision-making quality or the single aggregation of economic power characteristic of independent action.

Therefore, even though individual teams are seemingly operating as for-profit entities, the league still argues that it is not. One way to avoid profitability on the books is to reward top executives with high compensation. Significantly, the NFL paid out a total of approximately $53.8 million to officials in 2012, including $8.5 million to former commissioner Paul Tagliabue, the replacement for Rozelle in1989, and $11.6 million to current commissioner Roger Goodell, who succeeded Tagliabue in 2006.

What do you think?

Boosting Social Media Presence for Non-Profits

PrintTraditional media outlets such as newspapers, radio, and television, have long served the purpose of delivering one-way messages, like not-for-profit advertising. Social media, by contrast, uses Web-based platforms to not only deliver your message, but to allow recipients to participate.

You’ll find a number of technologies under the umbrella of social media, including e-mail, instant messaging, blogs and social networking Web sites. In fact, sites like Facebook, Twitter and LinkedIn have now surpassed traditional search engines when it comes to reaching some segments of the public.

How Social Media Puts Your Group Out Front

Establishing a presence on social networking sites can give your agency a competitive edge in several ways, including:

1. Image Enhancement. Profiles, fan pages and participation in groups all serve to build awareness about your organization’s image. They also provide an opportunity to interact with current supporters as well as begin the relationship-building process with prospects.

2. Open Communication. Social media, including social networking, is based on the principle of two-way communication. Your agency can benefit from both the positive experiences and negative feedback that customers voluntarily share. Not only can you address these customer concerns publicly, but you then have the chance to make any necessary improvements. You have the unique opportunity to make lemonade out of lemons.

3. Target Marketing. Establishing a presence on social networking sites can help you identify, and subsequently target, potential supporters. While the need for advertising through traditional media outlets may not be eliminated, the ability to target marketing communications reduces overall costs and provides a greater return on your marketing investment.

Tapping into social networking analysis tools may also assist with targeted marketing efforts. You may learn, for example, through online discussions that one service your agency provides is more likely to draw volunteers and supporters than other services you have been promoting. For example, if your agency deals with rescue animals, perhaps your community is more responsive to advertising that features dogs rather than cats. You can get real mileage out of that information that will help to develop your marketing message. Just go easy on overt advertising on social networking sites, or your efforts could backfire.

Steps a Charity Needs to Take When Receiving a Donated Vehicle

So you are an employee or Board member of a nonprofit organization and learn that someone wants to donate a vehicle to your organization.  As a tax-exempt organization, you may be asking, “what is the organization required to do after accepting the vehicle donation, and is there any risk of it being taxable to the organization?” The IRS does, in fact, have specific rules spelled out in a user-friendly pamphlet (even with pictures)  for charities who receive donated vehicles.  To summarize the items in the pamphlet:

Q. What can a charity do with a donated vehicle so not to affect its tax-exempt status?

There are four actions a charity can take with a donated vehicle that have no adverse effect on its tax-exempt status:

  1. Sell the donated vehicle and use the proceeds to fund its charitable programs.
  2. Use the vehicle for a significant period of time to conduct activities that further its charitable programs.
  3. Make significant improvements to the vehicle, then sell it and use the proceeds to exclusively further its charitable programs.
  4. Distribute the vehicle at a price significantly below fair value to needy individuals if its charitable purpose is to provide the needy with means of transportation.

Q. What filings and disclosures are required of a charity receiving a donated vehicle?

Scenario 1Vehicles with a fair value of less than $250 – no filings or disclosures are required by the charity.

Scenario 2Vehicles with a fair value of at least $250 but not more than $500 – the charity must send by the date on which the donor files his or her individual federal income tax return an acknowledgment (using its own written or electronic statement or Form 1098-C – Copy C only) to the donor that includes the name of the charity, a description (but not value) of the vehicle, and one of the following:

  • A statement that no goods or services were provided by the charity in return for the donation, if that was the case
  • A description and good faith and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or
  • A statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case

Scenario 3Vehicles with a fair value of more than $500 up to $5,000 – the charity must send within 30 days of the date it sells the vehicle or, if it does not intend to sell the vehicle, 30 days from the date of the contribution, an acknowledgment (using its own written or electronic statement or Form 1098-C – Copy C only) to the donor that includes the donor’s name and taxpayer ID number, the vehicle identification number, the date of the contribution, and one of the three bullet points noted above in Scenario 2.

All Scenario 3 acknowledgements must also include information on what the charity did or intends to do with the vehicle (see pages 5-8 in the pamphlet for additional required information) AND the charity must also report to the IRS on Form 1098-C – Copy A by February 28 (March 31 if filing electronically) of the year following the year in which the charity provides the acknowledgment to the donor.

Scenario 4 – Vehicles with a fair value of more than $5,000 – the charity must prepare the same information as in Scenario 3, plus an authorized official of the charity must complete  a portion of Section B of Form 8283 provided by the donor and sign it.   If the charity sells or otherwise disposes of the vehicle within three years after the date it received the vehicle, it must file Form 8282, Donee Information Return with the IRS within 125 days after the charity disposes of the vehicle.  The charity must give the donor a copy of the completed Form 8282.

By: Brent Ringenberg

Did You Get a Penalty Notice for Late Filing Form 990?

Many tax-exempt organizations are receiving penalty notices from the IRS for late filing of Forms 990, 990-EZ, 990-PF, and 1120-POL, even though they received an automatic extension and filed during March, as instructed by the IRS in IRS Notice 2010-4.

In December 2011, the IRS announced that its e-filing computer system would be unavailable for filing Forms 990, 990-EZ, 990-PF, and 1120-POL from January 1, 2012, through February 29, 2012.  Because the system was being taken down, the IRS extended the filing deadline for Form 990 until March 30, 2012, for many tax-exempt organizations with a filing due date during the first two months of 2012. The January and February due dates applied to organizations with year ends on August 31 or September 30, respectively, or organizations with May 31 or June 30 year ends, respectively, that had filed for the first three-month extension.  The extension applied to Forms 990, 990-EZ, 990-PF, and 1120-POL whether or not the organizations were required to file electronically.

Some of the organizations that filed during March have received penalty notices (Notice Number: CP141L) from the IRS. Notice CP141L is sent to taxpayers who according to the IRS’s system have filed a late return.

If an organization had a due date of January 17 or February 15, 2012, and filed a Form 990, 990-EZ, 990-PF, or 1120-POL in March and received Notice CP141L, they should call the number listed at the top of the notice: 1-877-829-5500 and request that the IRS abate the penalty in accordance with Notice 2012-4.

By: Tracie Youngless, CPA

Does Your Tax-Exempt Organization’s Form 990 Have a Due Date in January or February 2012?

The Internal Revenue Service (IRS) has recently announced that its e-file system that processes tax-exempt returns will be off-line in January and February 2012.  Forms 990, 990-EZ, 990-PF and 1120-POL (the 990-N is not affected) cannot be electronically filed during these months. Therefore, the IRS is granting an automatic extended due date of March 30, 2012 for returns that have an original or first three- month extension due date on either January 17 or February 15.  January and February due dates apply to organizations with year ends on August 31 or September 30, respectively, or organizations with May 31 or June 30 year ends, respectively, that have filed for a first three-month extension.  No additional forms need to be filed for the March 30 automatic extension; the return just needs to be filed by that date.

If you are still reading, there’s a good chance this additional automatic extension applies to you.  Your organization can still act quickly and e-file before January 1st, otherwise, you can prepare the return in January or February, but you’ll have to wait until March before e-filing it.   The IRS is allowing returns to be paper filed during January and February 2012, if an organization should find it necessary to do so.

What about an organization with a second three-month extension due date in January or February 2012?  The March 30, 2012 automatic extension does NOT technically apply to such an organization.  But, unless an organization can e-file before January 1, it will have to wait until March 2012 to e-file, so the IRS is granting relief from a late filing penalty.  In order to avoid receiving a system-generated penalty notice for late filing, these organizations should attach a Reasonable Cause Statement to the return.  Appendix A of IRS Notice 2010-4 provides an example of such a statement.

Does an organization with a January or February 2012 due date have until March 30, 2012 to file a first or second extension if it needs more time?   If your organization needs more time, a first or second three-month extension must be filed by January 17 or February 15; the March 30 date does not apply to the filing of extensions.  And, keep in mind that if a tax liability should happen to be due, this payment is always due on the original due date with no extensions allowed.

For those tax-exempt organizations with Ohio filing requirements, the State of Ohio has not yet officially made known whether the March 30, 2012 federal extended due date will be honored.

By: Brent Ringenberg, CPA

990 filing requirements are changing-do you know what to do?

Changes are coming to the way Ohio charities and non-profits register with the Ohio Attorney General’s Office.  Organizations with a fiscal year end AFTER December 1, 2011 WILL BE REQUIRED to complete filings online.  

How does this differ from what Organizations have done in the past: Prior to this change, Organizations were able to simply mail a copy of their Federal Form 990, Form 990 EZ or complete the one page “Verification of Filing with the Internal Revenue Service” provided by the Attorney General’s Office accompanied with a check for the appropriate sliding scale fee based on the Organization’s total assets.

 The new process requires all Organizations to complete a five page “Charitable Trust Registration Form (CFR-1) and Annual Financial Report”.  The new form asks many questions similar to the Federal Form 990, just a little different presentation and format so it will take some additional time annually to complete.  For the Federal Form 990EZ and 990N filers this will be much more time consuming and detailed than what they are accustomed to preparing and providing. 

The Attorney General’s Office has also prepared an “Charitable Registration User Guide” and “Charitable Registration Tool Tips” which answer questions Organizations may have about the registration process. 

Why is the State requiring the new registration process:The new process will eliminate paper forms and more accurately determine applicable statutes and required fees.  The new system will also provide email confirmations on filings and reminders of upcoming deadlines.  They system is capable of having multiple representatives registered to receive updates and reminders to avoid oversights during periods of management transition.  

The new process will allow potential donors to verify if an organization is registered and in good standing. As organizations file online within the next year, potential donors will also be able to review financial reports and see how much of every dollar donated goes to charitable work. 

Who has to file:In general, Ohio 501(c)(3) organizations and 501(c)(4) health-care organizations must register under the Ohio Charitable Trust Act unless they meet one of eight exemptions. Out-of-state entities may be required to register if they have assets in Ohio or a majority of the governing body is in this state. After filing the initial registration with the office, the organization must file an annual financial report. A sliding scale for fees is based on the organization’s total assets. 

Nonprofits that intend to solicit contributions from Ohioans must register and submit financial reports with the Ohio Attorney General’s Office each year under the Charitable Organizations Act. Ohio 501(c)(3) organizations that have been in operation for two or more years are not required to file under the Charitable Organizations Act if they have properly filed under the Charitable Trust Act each year. The fee is based on contributions received each year. 

There are circumstances when Ohio charities might be required to file under both provisions. 

By: Tracie Youngless, CPA

Helping Those Less Fortunate: Do we Know Where our Money Is Going?

It is that time of year, when despite how little cash we may have in our own pocket, we try to give to others who may be in a less fortunate position than ourselves.  With the seemingly disproportionate amount of 501(c) 3 organizations in the Northwest Ohio region, deciding which charity to give that money to can be a daunting task.

Personally, I tend to revert to the big names that I know have a good record for actually benefitting their stated cause.  There are many organizations that by name or promotion appear to benefit a good cause, but unless I spend a lot of time researching the actual statistics, I don’t know where my money is going.   There was an article in the Wall Street Journal a few weeks ago titled “Putting Charities to the Financial Test”.    The purpose of the article in essence states just what I summarized- you need to do your homework before opening up your wallet.   The article recommends “digging into the charity’s financial statements, visiting the organization, meeting with management, and talking to third-party observers”.  Really? 

I can’t even find time to finish my Christmas shopping let alone do all of the above before I decide to write a check.  What this article did NOT mention was that the Better Business Bureau (BBB) publishes a Wise Giving Guide  to help people just like me make the right choice about where my money goes!   The Better Business Bureau rates hundreds of charities, both local and national. We use the 20 BBB Standards for Charitable Accountability, the toughest evaluation system for charities in America. They look at governance and oversight, effectiveness, finances, fundraising and informational materials in order to assign each charity a letter grade. Grades go from A+ to F, with charities that meet all Standards receiving A+.  All BBB ratings are free, and charities do not ever pay a penny for a BBB rating.  If you meander through the BBB website, you will note that they provide the specifics on these Accountability Standards that Charities have to meet to qualify.  Using the giving guide and following the letter ratings is a much shorter route to follow than as advised by the WSJ article.

The Toledo BBB has done the work for us!  If, like me, you are planning on writing a check to help out those less fortunate than yourself during this holiday season, you are guaranteed to make a good investment if you write the check to one of these local charities that has been given an A+ grade from the Better Business Bureau.   

In addition, in case you want to give to a local charity that is not on this list, you can find it at the Toledo web site,  or call Mollie Morris at the BBB, (419) 531-3116 or 800-743-4222.  Make your giving worthwhile!

By: Jennifer Kinzel, CPA, CMA