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Philanthropy Under Trump

Posted By Andrew J. Gray, CPA, Tuesday, February 7, 2017
Updated: Monday, February 6, 2017

 

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Limits on Political Campaigning for 501(c)(3) Nonprofits

Posted By Josh Hirsch, Monday, February 6, 2017

In order to maintain tax-exempt status, 501(c)(3) nonprofit organizations cannot engage in political campaigning. Nonprofits with 501(c)(3) tax exempt status should be ever vigilant about this prohibition -- a violation could result in severe consequences.

The federal tax law is very strict on the issue of political campaigning: A 501(c)(3) organization is absolutely forbidden to directly or indirectly participate in any political campaign on behalf of (or in opposition to) any candidate for elective public office. Violation of this prohibition could lead the IRS to completely revoke your organization's tax-exempt status or impose excise taxes on your organization.

In other words, the IRS is serious about this issue, and your board of directors and officers should be equally serious in making sure that your organization complies with federal law in this area.

What Does "Participating in a Political Campaign" Mean?

Organizations with 501(c)(3) status cannot participate in political campaigns.

What is a political campaign? In general, the IRS rule refers to campaigns between people who are running for offices in public elections. These can include: candidates running for president of the U.S.; candidates running for governor; candidates running for mayor; and also candidates for lower elected offices such as school board officials, city supervisors, and county trustees.

What is "participating?" Your organization cannot participate in a campaign, directly or indirectly, on behalf of or in opposition to a candidate. If your organization takes a stand in any campaign, supporting or opposing one or another candidate, this violates the prohibition.

The IRS Rule

The IRS uses what is called a "facts and circumstances" test to help it determine whether an organization has violated the prohibition on political campaigning. This means that the IRS will evaluate any potential misconduct within the context of the organization's other activities and the current political climate. So, an activity might be considered political campaigning two weeks before an election, but not two years before an election.

Some activities that the IRS has found to violate the prohibition on political campaigning include:

  • inviting a political candidate to make a campaign speech at an event hosted by the organization
  • using the organization's funds to publish materials that support (or oppose) a candidate
  • donating money from the organization to a political candidate
  • any statements by the organization's executive director, in his or her official capacity, that support a candidate
  • criticizing or supporting a candidate on the organization's website
  • inviting one candidate to speak at a well-publicized and well-attended event, and inviting the other candidate to speak at a lesser function
  • inviting all candidates to speak at an event, but arranging the speaking event or choosing the questions in such a way that it is obvious that the organization favors one candidate over the others
  • conducting a "get out the vote" telephone drive in a partisan manner by selecting caller responses for further follow-up based on candidate preference, and
  • using the organization's website to link to only one candidate's profile.

What Political Activities Can a 501(c)(3) Nonprofit Engage In?

A 501(c)(3) organization can engage in the following activities without violating the IRS rule:

Non-partisan activities. Your organization may engage in non-partisan activities such as non-partisan voter registration drives, non-partisan candidate debates, and non-partisan voter education, as long as these activities fulfill your exempt purposes.

Legislative or issue advocacy. Your organization can engage in legislative advocacy and issue-related advocacy, as long as it follows certain rules and steers clear of political campaigning. (If your organization is contemplating such activities, it's a good idea to get advice from a qualified attorney.) To learn more, see Nolo's article, How Much Lobbying Can a Nonprofit Do?

And don't forget that any individuals associated with a 501(c)(3) organization are entitled to voice their opinions and participate in a political campaign, as long as they are not speaking for the organization.

How Does the IRS Find Out About Violations?

Not surprisingly, in the heated atmosphere that usually accompanies a political campaign, people supporting an opposing candidate are often the ones to report any suspicious activities to the IRS. Your organization should remember that people are watching and they will report your group if you appear to intervene in a political campaign in a partisan manner.

Penalties For Violations

If the IRS believes that your organization may have violated the prohibition, it may send a letter or visit your organization for an on-site examination. Although the IRS has the power to revoke your tax-exempt status, it typically uses this punishment only in the most egregious cases. More likely, the IRS will ask your organization to correct the violation and implement procedures to make sure the violation will not occur again. If the organization's funds were used to engage in the prohibited activity, the IRS may also impose excise taxes.

Getting More Help

The IRS has several helpful publications on 501(c)(3) organizations and political campaigning. The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations provides an overview of the law. In addition, the IRS's Revenue Ruling 2007-41 (found at http://www.irs.gov/pub/irs-tege/rr2007-41.pdf) provides a series of examples that will give you an idea of what constitutes partisan activities. Both documents can be found on the IRS's website at www.irs.gov.

Original post can be found here.

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Starting a Nonprofit 501(c)(3) In Florida

Posted By Joe Rosen, Wednesday, February 1, 2017
Are you thinking about starting a non profit charity, but are not sure where to start or how to go about it? Have you heard of the term "501(c)(3)" but are not exactly sure what that term means or what significance is attached to it? You are probably not alone. This article helps shed light on some of the issues involved in creating and setting up a non profit charitable organization in Florida. We also describe the basic steps one must take to get your charity off the ground. If you are looking to set up a non profit in Florida, the basic steps to be taken are as follows:

Once you have your proposed charitable mission in mind, you must incorporate. To incorporate a non profit, you must prepare and file articles of incorporation with the Florida Division of Corporations. The articles of incorporation is the document which "creates" your non profit in accordance with state law. The articles contains, among other provisions, name of legal entity, address of the corporation, and name and address of the registered agent.

Additionally, the articles must contain certain special provisions required by the IRS to form a charitable non profit entity. These provisions include a purpose and dissolution clause, respectively. Without such clause, your articles will not be in compliance with IRS requirements. For this reason, it is preferable for you to have a professional, like a CPA or attorney, handle your filing requirement.

Once prepared, the completed articles of incorporation must be submitted to the Florida Division of Corporations along with the state filing fee of $70.00. The filing fee must be made payable to the "Florida Department of State." You must send the articles to the Division of Corporations, P.O. Box 6327, Tallahassee, Florida 32314.

After incorporation, you should obtain an Employment Identification Number ("EIN") for your non profit. You can obtain an EIN for your non profit entity in a few ways. The quickest way is to apply online on the IRS website. However, you might not feel comfortable with that. Alternatively, you can complete IRS Form SS-4 and fax the completed form to the IRS. Typically, you will receive your EIN within 4 business days thereafter. You can obtain more information by contacting the IRS at 1-800-829-4933.

To establish an IRS-recognized charity, the next major step is to apply for 501(c)(3) tax exemption status with the IRS. This step involves filling out a relatively detailed application known as Form 1023, Application for Recognition of Exemption. The purpose of completing this form is so that the IRS will recognize your organization as a tax exempt charity. Moreover, once you have obtained such exemption status, donors who contribute to your charity will be able to make donations that are tax deductible, to the extent permitted by law. In order to obtain such tax exemption status, you must complete Form 1023 and submit the completed application to the IRS along with the applicable IRS application fee. To obtain a copy of the application, you can contact the IRS at 1-877-829-5500.

After the form is submitted to the IRS, within about 3 to 5 months thereafter, the IRS will respond by sending to you a Determination Letter which formally recognizes your entity as a 501(c)(3). If your application is incomplete or a problem arises, the IRS will notify you of this, which may result in delay of the successful processing of your application.

Once you have received the Determination Letter from the IRS, you should notify the Florida Department of Revenue of your charity's tax exemption status by sending a copy of your IRS Determination Letter to that Department. The Florida Department of Revenue can be reached at 1-800-352-3671.

Another issue to consider is the solicitation of donations. If you plan to solicit donations from the general public to support your charity's mission, then you must register your charity with the State of Florida. The registration process is administered through the Florida Department of Agriculture and Consumer Services. In order to register to solicit donations in Florida, you must secure a copy of the registration application from the Florida Department of Agriculture and Consumer Services, fill it out, and then submit the completed application to that department along with the applicable registration fee. You can obtain the registration application by contacting the Department of Agriculture and Consumer Services at 1-800-435-7352.

As a non profit charitable organization, you will also be required to file an annual return with the IRS. This annual filing requirement is important because, if you fail to file the pertinent return for 3 consecutive years, your entity could automatically lose its tax exempt status. Such an event could be devastating to your organization. For this reason, you should hire a CPA at the outset so that he or she can ensure the continued compliance of your organization with federal tax code requirements.

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Cheer on Team Nonprofits First at the Great Charity Challenge

Posted By Josh Hirsch, Wednesday, February 1, 2017

 

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Sean Dollard - How will Rising Leaders impact your organization?

Posted By Josh Hirsch, Wednesday, February 1, 2017
Updated: Wednesday, December 28, 2016
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