CCST 2007 The INs and OUTs of Filing for Exempt Status Presented by Julie Fry, CPA

Solution to 90/10 Challenges Do you have nightmares about your 90/10 ratio? Are you consistently worried about passing the test? The solution to your problem may be just around the corner!!

Solution to 90/10 Challenges Current proposed legislation before Congress – Allowance of institutional scholarships in total revenue calculation. What does this mean for your organization? – Set up 501(c)3 entity – Provide scholarships to worthy candidates – Add scholarship dollars when calculating total revenue

Solution to 90/10 Challenges Student loans $ 9,500 Student cash 500 Ratio = 95% Total revenue $ 10,000 Failed Student loans $ 7,000 Student cash 500 Ratio = 70% Scholarships 2,500 Passed Total revenue $10,000 How would this actually work?

Non Profit’s A brief history…… – Private foundation vs. public charity – Unrelated business income – 1950’s – Intermediate Sanctions – mid 90’s IRC Section 4958 – Annual filing/reporting requirements Form 990

Filing for Exempt Status The Process – Incorporate Articles of Incorporation Bylaws Filing with State SS-4

Filing for Exempt Status The Process – Form 1023 Mission/vision statement Scholarship program Establish board of directors Financial information/budgets

Filing for Exempt Status The Process – Form 1023 Narrative description of activities Form 2848 Itinerary Advanced ruling period

Filing for Exempt Status The Process – Form 1023 Relationship/common control issues Conflict of interest policy Fundraising Political influence

Filing for Exempt Status How should scholarships be awarded? – Non discriminatory fashion – Awarded upon need and/or merit – Available to an “open-ended” group, rather than “pre-selected” individuals – Well documented procedure

Filing for Exempt Status What are the costs involved in this process? Attorney fees Filing fees – State and Federal * CPA fees *standard fixed fees

Filing for Exempt Status In conclusion, what are the benefits to your school? – Can improve 90/10 ratio – Awards worthy students scholarships – Marketing tool when recruiting new students

Filing for Exempt Status Questions