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

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

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

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

14. Accountability

15. Transparency

18. https://secure.in.gov/sos/online_corps/name_search.aspx

20. Compliance - Federal

21. Compliance - Employment

22. Compliance - UBIT

24. http://www.irs.gov/charities/article/0,,id=96136,00.html

25. Go to IRS website and search “Publication 78”

28. Financial Controls

29. Monitor appropriate use of nonprofit funds

31. Handling Money

32. Recording Money

35. Accountability - Personal Benefit

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

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

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)

59. Other Danger Zones

60. Danger Zone - Lobbying

61. Danger Zone – Charity Gaming

62. What is “Charity Gaming?”

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

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

73. Executive Compensation

74. “Private Inurement”

75. Excessive compensation

76. Unreasonable Rental Agreements

77. Unreasonable lending agreements

79. Fines to Nonprofit

80. Fines to Board of Directors

81. Fines to Staff

82. PERSONAL LIABILITY FOR ALL!

84. What if you LOSE nonprofit status?

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

92. Accountability

93. Transparency

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