1. Sobel & Co.’s Nonprofit and Social Services Group Webinar “IRS Disclosure Requirements: What Do Organizations Need to Provide to Donors?” February 15, 2012 Brett R. Harris, Esq. Wilentz, Goldman & Spitzer, P.A. www.wilentz.com © Brett R. Harris, Esq. 2012 All Rights Reserved

2. 2 Disclosure of Records  IRS Regulations provide for public access to information regarding exempt organizations  significantly more information publicly available than returns filed by individuals or business entities  transparency as condition to not paying income taxes and receiving tax-deductible contributions  members of the public often rely on Form 990s as principal source of information about a particular organization  members of the media utilize Form 990s for background and as subject matter

3. 3 Public Inspection of Records  certain records and returns must be subject to public inspection and distribution  documents regarding recognition of exemption  annual information returns  returns of unrelated business income, if applicable  reports by Section 527 political organizations

4. 4 Public Inspection of Records  documents regarding recognition of exemption  letter of exemption issued by IRS  application for recognition of tax exemption (Form 1023 under Section 501(c)(3) or Form 1024 under Section 501(a) for other 501(c) entities)  documents submitted in support of application  correspondence to and from IRS concerning application  does not include applications filed before July 15, 1987 unless organization had copy on such date

5. 5 Public Inspection of Records  annual information returns must be available for prior three years  three years measured from the date return is required to be filed or is actually filed, whichever is later  if organization files amended return, amended return must be available for a period of three years from date of filing

6. 6 Public Inspection of Records  annual information returns  exact copy of Form 990, Form 990-EZ or Form 990-PF  any amended returns filed after original  exact copy of Form 990-T (Exempt Organization Business Income Tax Return) if filed by a 501(c)(3)  all schedules, attachments and supporting documents except limited disclosure required of Schedule B to Form 990, Form 990-EZ and Form 990-PF (Schedule of Contributors)

7. 7 Schedule B Disclosure Rules  private foundations must disclose full Schedule B  for those filing Form 990 or 990-EZ other than political organizations, names and addresses of contributors on Schedule B not required to be made available for public inspection, but all other information required (e.g., amount of contributions, description of non-cash contributions and other information unless it clearly identifies the contributor)  contributor names and addresses included in exempt application are subject to disclosure

8. 8 Records of Political Organizations  special rules for Section 527 entities (political parties, campaign committees for federal, state or local office and political action committees)  must make available Form 8871 (Initial Notice) and Form 8872 (Periodic Report of Contributions and Expenditures) which include name, address, occupation and employer of contributors of more than $200 per calendar year  if Section 527 entity files Form 990 or Form 990- EZ, must disclose full Schedule B, Schedule of Contributors (including contributor information)

9. 9 Place for Public Inspection  required documents must be available for public inspection without charge at principal, regional and district offices during regular business hours  if organization has no permanent office or no office hours, must make documents available at a reasonable location of organization’s choice at a reasonable time of day; must be arranged within reasonable time of receipt of request for inspection (two weeks) OR can mail copies to requestor within two weeks of receipt of request instead of inspection

10. 10 Rules for Public Inspection  can have an employee present in room during inspection  must allow individual conducting inspection to take notes  must allow individual to copy documents at no charge if individual has photocopying equipment at place of inspection

11. 11 Copies of Records  must provide copies without charge, other than a reasonable fee for reproduction  if request made in person, copies must be given that day absent unusual circumstances causing unreasonable burden to the organization  if request made in writing, may also charge for postage and must mail copies within thirty days from date of request  organization may require payment in advance  may provide documents exclusively by email if receive consent from individual making the request

12. 12 Penalties  penalty of $20 for each day that inspection is not permitted, up to maximum of $10,000 for each return not made available (no cap if organization fails to make application materials available for public inspection)  willful failure to comply with inspection requirements subject to additional penalty of $5,000

13. 13 Making Applications and Returns Widely Available  a tax-exempt organization is not required to comply with requests for copies if the organization has made the requested documents widely available  must still make documents available for public inspection  documents are widely available if the organization complies with the Internet posting and notice requirements

14. 14 Internet Posting  posting the document(s) on a website that the tax- exempt organization establishes and maintains, or by having the document(s) posted, as part of a database of similar documents of other tax-exempt organizations, on a website established and maintained by another entity  postings can be of some or all documents required to be made available (application for exemption and/or annual information returns)

15. 15 Requirements for Website  must clearly inform readers that document is available and provide downloading instructions  document must be posted in a format that, when accessed, downloaded, viewed and printed in hard copy, exactly reproduces the image as document was originally filed with the IRS, except for any information permitted to be withheld from public disclosure

16. 16 Requirements for Website  Any individual with access to the Internet must be able to access, download, view and print the document without special computer hardware or software required for the format the document is posted in (other than software that is readily available to members of the public without payment of any fee)  must be no requirement of a fee to the tax-exempt organization or to another entity maintaining the website

17. 17 Reliability and Accuracy of Internet Postings  the entity maintaining the website must have procedures for ensuring the reliability and accuracy of the document that it posts on the page and must take reasonable precautions to prevent alteration, destruction or accidental loss of the document when posted on its page  in the event that a posted document is altered, destroyed or lost, the entity must correct or replace the document

18. 18 Notice Requirement  if a tax-exempt organization has made its application for tax exemption and/or an annual information return widely available, it must notify any individual requesting a copy where the documents are available (including the website address, if applicable)  if the request is made in person, the organization must provide the notice to the individual immediately  if the request is made in writing, the notice must be provided within 7 days of receiving the request

19. 19 Availability of Records from IRS  returns, notices or exemption applications can be inspected at an IRS office free of charge  not in satisfaction of an organization’s obligations for public inspection and distribution  reports by Section 527 Political Organizations are available for inspection and printing from the Internet at www.irs.gov/polorgs  IRS will provide copies of exempt organization’s returns, notices or exemption applications

20. 20 Copies of Records from IRS  these are publicly available copies (i.e., will not include contributor information on Schedule B); organization can obtain publicly available copies or different process to request copies of organization’s own returns  copy fees differ for commercial user vs. educational institution, media and other requesters  copies can be obtained on CD or DVD  up to 60 days to process copy requests

21. 21 Substantiation & Disclosure Requirements for Charitable Contributions  requirements are on the donor with respect to charitable contributions but donee organization must be aware so can provide necessary documentation upon donor’s request  organization must provide disclosure statement for quid pro quo contributions

22. 22 Donor Recordkeeping  recordkeeping rule applies for all cash, check, electronic funds transfers, credit card charges or other monetary contributions of any amount  to deduct such contribution, donor must maintain a bank record or a written communication from donee organization showing donee’s name, date, and amount of the contribution  bank records can be bank or credit union statements, cancelled checks or credit card statements  written records prepared by donor such as check registers or personal notations are no longer sufficient under current IRS regulations

23. 23 Donor Recordkeeping  for contributions made by payroll deduction, recordkeeping requirement can be satisfied with a paystub, W-2 or other document from employer that states amount withheld along with a document prepared by or at direction of charity showing name of donee  for text message contributions, donor’s phone bill meets recordkeeping requirement of a reliable written record if it shows name of donee organization, date and amount of contribution

24. 24 Deductions of $250 or More  to claim deduction for contribution of $250 or more, donor required to obtain and keep a contemporaneous written acknowledgment  to be contemporaneous, must be obtained no later than date donor files the return for the year the contribution is made  donor is responsible for requesting and obtaining the written acknowledgment from the organization  organization is not required to record or report information to IRS on behalf of donor

25. 25 Organization’s Written Acknowledgment  no prescribed format as long as provides sufficient information to substantiate amount of contribution  letters, postcards or computer generated forms acceptable  organization may provide separate statements for each contribution of $250 or more or furnish periodic statements substantiating contributions of $250 or more  separate contributions of less than $250 are not subject to the substantiation requirements, whether or not the sum of contributions made by the taxpayer to the organization during a tax year equals $250 or more

26. 26 Organization’s Written Acknowledgment  must describe the goods or services the organization received but no valuation needed by the organization (i.e., for non-cash contributions)  special rules apply to charitable contributions of motor vehicles, boats or airplanes with a claimed value of more than $500  if donor claims value of donated property over $5,000 and provides the charity with partially completed Form 8283, Non-Cash Charitable Contributions, organization must complete and return Form to donor

27. 27 Organization’s Written Acknowledgment  must state whether organization provided any goods or services in consideration for the contribution (a quid pro quo contribution)  must include good faith estimate of the value of any such goods or services unless they are:  of insubstantial value (token exception)  certain membership benefits  either of the above categories, given to employees of a charitable organization, or  intangible religious benefits

28. 28 Token Exception  in the context of a fund-raising campaign, goods and services will be insubstantial if  fair market value of benefits received does not exceed the lesser of 2% of the payment or $97, or  payment is $48.50 or more, items bare the charity’s name or logo and are “low-cost articles” with aggregate cost to charity of $9.70 or less  dollar amounts are for tax year 2011, adjusted annually for inflation  free unordered low-cost articles are considered to be insubstantial

29. 29 Membership Benefits Exception  annual payment of $75 or less  consists of annual recurring rights or privileges such as  free or discounted admission to organization’s facilities or events  discounts on purchases from organization’s gift shop  free or discounted parking  free or discounted admission to member-only events where per-person cost (no including overhead) is within “low-cost articles” limits

30. 30 Intangible Religious Benefits Exception  acknowledgment does not need to describe or value benefits but can simply state that organization provided intangible religious benefits to contributor  typically such benefits are provided by exempt organization operated exclusively for religious purposes and are not usually sold in commercial transactions

31. 31 Quid Pro Quo Contributions  quid pro quo is payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity  organization must provide a written disclosure statement to donors of a quid pro quo contribution in excess of $75  $75 threshold is for entire payment amount, even if charitable contribution portion of the payment is less (i.e., donor gives a charity $100 and receives a concert ticket valued at $40, contribution is $60 but disclosure must be provided)

32. 32 Written Disclosure Statement for Quid Pro Quo Contributions  must furnish disclosure statement in connection with either the solicitation or receipt of quid pro quo contribution  must inform donor that amount of contribution that is deductible for federal income tax purposes is limited to the excess of any money (and value of any property other than money) contributed by donor over the value of goods or services provided by the charity  must provide the donor with a good faith estimate of the value of the goods or services that the donor received unless exception applies

33. 33 Exceptions to Quid Pro Quo Disclosure Statement Rule  no disclosure statement required when  goods or services given to the donor are of insubstantial value (token exception)  goods or services in the nature of certain annual membership benefits in exchange for payment of $75 or less per year  intangible religious benefits  there is no donative element involved in a particular transaction with a charity (e.g., visitor’s purchase from a museum gift shop)

34. 34 Penalties re: Quid Pro Quo Disclosures  penalty for failure to provide is $10 per contribution, up to $5,000 per fundraising event or mailing  penalty may be avoided if charity can show that the failure was due to reasonable cause  charity that knowingly provides false substantiation acknowledgment to a donor may be subject to penalties for aiding and abetting an understatement of tax liability

35. 35 Disclosure of Availability from Federal Government  if organization offers to sell or solicits money for specific information or a routine service to any individual that could be obtained by the individual from a Federal government agency free or for nominal charge must disclosure that fact in a conspicuous and easily recognizable format  intentionally disregarding requirement subject to penalty for each day offer or solicitation is made  penalty is greater of $1,000 or 50% of total cost of offers made on that day

36. 36 IRS Resources for Topics Discussed  Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form  Form 4506, Request for Copy of Tax Return  Publication 1771, Charitable Contributions - Substantiation and Disclosure Requirements  Publication 526, Charitable Contributions  Publication 4302, A Charity’s Guide to Vehicle Donations  Publication 4303, A Donor’s Guide to Vehicle Donations

37. 37 IRS General Resources  Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities  Publication 4221-NC, Compliance Guide for Tax- Exempt Organizations (other than those described in section 501(c)(3))  Publication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations  http://www.irs.gov/charities/

38. 38 Disclaimer  This presentation is for informational purposes only and is not intended to constitute legal advice. Every matter has specific facts and special circumstances requiring its own analysis by legal and tax counsel.

39. 39 Brett R. Harris, Esq. Wilentz, Goldman & Spitzer, P.A. 90 Woodbridge Center Drive Woodbridge, New Jersey 07095-0958 Tel: (732) 855-6122 E-Mail: bharris@wilentz.com LinkedIn: http://www.linkedin.com/pub/brett-r-harris/33/497/a32 Twitter: @BrettHarrisEsq