Tracy James -Legal Services of Eastern Missouri Next Steps: What to Do AFTER Starting a Nonprofit Tracy James -Legal Services of Eastern Missouri August 11, 2016

Your charity is officially tax- exempt You filed your 1032EZ with the IRS, and the IRS sent you a determination letter….THEN Your charity is officially tax- exempt NOW WHAT?

Your work is not done Make sure directors are in compliance with duties Duty of Care Duty of Loyalty Adopt a conflict of interest policy

Keep good Records & keep them for at least 6 Years Why? Duty of Care Compliance when completing tax forms Important records to preserve: Board meeting minutes Bylaws Articles of Incorporation Financial reports Other official records Documentation of gross income, deductions and tax credits Sales slips, paid bills, invoices, receipts, canceled checks, deposit slips

Comply with federal regulations File Form 990 ANNUALLY Who? Every charity except churches When due: 15th day of the 5th month after the close of the next business year HUH? Depends on your tax year: For example: If your tax year ended on December 31, 2016 the 990 is due May 15, 2017

Caution: While there is no penalty for filing late, if your charity fails to file a 990 return for 3 consecutive years, it automatically loses its tax- exempt status.

Which Form to use to File Form 990? If your gross receipts are less than or equal to $50,000 in the past year, you must file Form 990N (E-postcard)electronically If gross receipts are less than $200,000 and total assets are less than $500,000, you must file Form 990EZ (electronically or in paper form) But any nonprofit can choose to file the full 990 Form regardless of how much the nonprofit received

Prohibitions No private inurement- cannot conduct a business arrangement that unreasonably benefits board members, trustees, officers or key employees. No private benefit. No private benefit transaction – the charity’s work is for the public benefit and must not provide benefits to private individuals or organizations that are more than incidental. Broader requirement than private inurement

Prohibitions continued No lobbying – can’t attempt to influence government officials. Lobbying: communication that refers and reflects view on a specific legislative proposal or legislation that has been introduced whether it be local, state, federal. Substantiality Test Expenditure Test The consequence: Excise tax on excess $$ spent on lobbying. Sometimes, loss of tax-exempt status.

Prohibitions continued No political activity Political activity requires direct intervention If you give a candidate access to space or time with your charity, then equal time required for all candidates However, non-profit leasers making political statements in their personal capacity should clearly state they aren’t making statements on behalf of the nonprofit What is personal capacity? Consequence? Excise taxes on $$ spent on political campaigns. Often, loss of tax-exempt status.

Prohibitions continued Unrelated Business Income Definition If your charity has unrelated business income, then the income is subject to Unrelated Business Income Tax (UBIT) Test: unrelated business income becomes taxable when: 1. It is income from a trade or business, “any activity conducted for the production of income from selling goods or performing services;” 2. The trade or business is NOT substantially-related to the charity’s performance of it’s mission; and 3. Such trade or business is regularly-carried on by the charity.

Prohibitions – Unrelated Business income continued NOTE: Compliance with the 3-part test is determined by comparing a nonprofit’s income-producing activity with similar activities performed by for-profit companies. Consequence? UBI is taxed. Failure to report such income = substantial penalties ($$$). Exceptions: Activity that meets all parts of the UBI test can still be exempt if it qualifies for one of the 3 exceptions: All work done to make money performed by volunteers Activity was done primarily for the convenience of the nonprofit’s members OR It involved selling merchandise that was mostly donated

Required public disclosures Your charity MUST make certain documents available to the public. Time to make documents available: In-person request: documents must be presented THAT day. If written, faxed, emailed request: 30 days to respond. What documents? 1023/1023EX Application Annual returns for a period of 3 years

St. louis and Missouri regulatory compliance St. Louis City: Occupancy Permit –if you rent or own space in the City and use it for organizational activities Application for Commercial Occupancy made in person at Customer Service of the Permits Section, City Hall, Room 425. $80 if space less than/equal to 3,500 sq. feet $160 if space larger than 3,500 sq. feet St. Louis County: Business Licenses required if any activities in county Nonprofit registration form and Occupancy permit from County or municipality Apply for Merchant or Manufacturer License with the County Assessor $5 application fee and No Tax Due Letter

St. Louis County Compliance Continued- fundraising If you intend to fundraise through face-to-face solicitation, you must: 1. Submit a notarized Initial Registration Form $10 + 10 cents for every individual who needs to have a solicitor’s license 2. Submit an Annual Report form within 75 days of the close of EACH fiscal year ending after the nonprofit organization files its initial registration—NOTE: no need to submit if raise less than $1,000 annually 3. Submit a Campaign Form 7 days in advance EVERY time you wish to solicit funds in the community

Maximize the benefits of your 501(c)(3) Status Federal Unemployment Taxes- do not pay federal unemployment taxes once your Form 1023 is approved Missouri Sales Tax Exemption- Not required to pay sales tax on items bought for use for nonprofit File Form 1746 with the Missouri Dep’t of Revenue NOTE: nonprofits must charge sales tax on retail sales. U.S Postal Rates- are reduced for bulk mailings Complete PS Form 3624 Take the form and proof of your federal tax-exempt status to the post office

Maximize the benefits of your 501(c)(3) Status Continued St. Louis City Property Tax Exemption (Board of Equalization)- to get property exempt for tax purposes, must present proof of 501(c)(3) status to City Assessor’s Office, 1200 Market, Room 120. Cars leased for at least 1 year in MO are exempt from property taxes so long as the cars are used EXCLUSIVELY for charity’s mission. St. Louis City Graduated Business License Exemption- city imposed fee based on # of employees To be exempt, take 501(c)(3) status to Office of the License Collector at 1200 Market St., Room 102-104. May have to take an oath and allow premises to be inspected by City. Non-compliance- penalties, interest, closure. Missouri Charitable Solicitations Law Exemption No need to complete a state filing before soliciting funds. Instead, submit to the MO Attorney General, a copy of the IRS determination letter with a note explaining that the charity wishes to solicit funds

Maximize the benefits of your 501(c)(3) Status Continued- St Maximize the benefits of your 501(c)(3) Status Continued- St. Louis County Property Tax Exemption 2 types of property tax exemption available in the County-Personal and Real/Personal Property Personal Property- File Petition for Exemption for Personal Property with the Board of Equalization Personal and Real Property- File Petition for Exemption for Real and Personal Property with the Board of Equalization Complete an Exemption Packet