Nonprofit Law/Alumni Council

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Question
I am the treasurer of an all volunteer, unincorporated, nonprofit university alumni council in Washington, DC. We have been in existence since 1992 and were using the University EIN. We changed banks and were informed by our new bank that the University now required that each alumni council obtain its own EIN. I applied for a new EIN for banking purposes only. We have never had more than $5000 in our account and currently have only $902. We have over the past years given stipends of $500 to $1000 to summer interns who work with government agencies. We have no dues so our income comes from various alumni social events. I have checked into forming a LLC and getting 501(c)3 status but the costs appear excessive with a filing fee of $400 for 501(c)3 status alone! Given the fact that we make less than $5000/yr can we now just operate as we have been for the past 20 years without filing returns or any additional paperwork?

Answer
If you want donors to be able to deduct donations and not to have your sales income, if any, taxed as long as you comply with fundraising guidelines for 501(c)(3) organizations, you would need to make sure that your unincorporated nonprofit articles of association states that it is
organized under Internal Revenue Code Section 501(c)(3).

You must have the required clauses in the organizational
document  See, starting in the middle column of page 26
of  Publication 557  under "Organizational Test". Samples
start on page 77. Also you must operate as a 501(c)(3)
organization (see that publication 557 for the general
rules).  I don't think that your organization would have a problem amending its organizational document if it does not presently comply.

Then you would be qualified as a 501(c)(3) organization.  See the IRS Publication 557 "Tax Exempt Status for Your Organization" at:
www.irs.gov/pub/irs-pdf/p557.pdf
in the right column on page 25 under "Organizations Not
Required to File Form 1023" discusses who does not need
to file and among those is "Any organization (other than
a private foundation) normally having annual gross
receipts of not more than $5,000.  These organizations
are exempt automatically if they meet the requirements of
section 501(c)(3)."

If you do not make proper Articles of Association then it still appears that you would not have any federal filings to make even though you would not be treated by the IRS as a 501(c)(3) organization.   Donations will not be deductible, but the fund will not have taxable income if its only income is donations or fees and no profit goes to any insider and it conducts no activities other than disbursements for expenses and social events.

Narcotics Anonymous advises affiliates who have obtained an EIN (Employer Identification Number, also known as the taxpayer identification number) for banking purposes only:
--- Start of Excerpt ---
Any NA group that acquires an EIN should consider that the IRS
could at some point in time contact them and request valid
financial activity information. This is one reason that NA groups
will want to maintain detailed records, including treasurer's
records, bank statements, receipts and any other documentation of
their financial activities. We suggest that NA groups maintain
accurate financial records by using the group record worksheets in
the Group Treasurer's Workbook. The worksheets and other above
mentioned records should be kept for at least five years. Care
should be taken when assigning responsibility for storage of the
records, so that they remain available to the group if needed.
---End of Excerpt---
http://www.na.org/?ID=bulletins-bull32


Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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