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Tax Exempt Issues for UK Cooperative Extension

Tax Exempt Issues for UK Cooperative Extension. What Changed. Federal Laws Changed (2007) All tax exempt organizations required to begin filing annual IRS tax forms 4-H National HQ decided to cease providing group exemption for clubs and affiliates (councils)

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Tax Exempt Issues for UK Cooperative Extension

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  1. Tax Exempt Issues for UK Cooperative Extension

  2. What Changed • Federal Laws Changed (2007) • All tax exempt organizations required to begin filing annual IRS tax forms • 4-H National HQ decided to cease providing group exemption for clubs and affiliates (councils) • Increased need for financial transparency and accountability for all Extension funds

  3. Guiding Principles for Solution • Provide financial accountability and transparency • Be minimally disruptive, yet provide accountability • Establish a tax exempt basis for UK CES • Provide options rather than dictate actions

  4. Possible Exemption Paths • Governmental Exemption • County Extension is tax exempt because Extension Districts are considered a governmental subdivision of the Commonwealth (KRS 164.620) • 501(c)3 status • Needed to accept certain grants or to conduct numerous gaming or raffle fund raisers (see KY regulations on Gaming)

  5. Four Options for Handling Funds(All Organizations) • Option A: Governmental, multi-checkbook • Groups keep checkbooks • Option B: Governmental, single checkbook per program council • Option C: Governmental, District Board holds the checkbook • Option D: Seek 501(c)3 Status

  6. All Options Must Provide: • Financial Accountability • Budget Transparency • Group Oversight • Adherence to UK money handling and financial procedures • Electronic Recordkeeping with the goal of standardizing categories to facilitate aggregation of records

  7. Option A – Governmental Multiple Checkbooks • The county program councils and their related sub-groups will maintain control and have autonomy over their own funds and individual bank account with general oversight by the County Program Council • The appropriate agent will be responsible for adherence to procedures

  8. Option B – GovernmentalSingle Checkbook (per Program Council) • Funds related to a program area in the county will be handled centrally by the appropriate county program council, with separate sub-accounts established in a Quicken, Quickbooks or similar electronic bookkeeping system for each related entity’s (club/group/etc.) funds. • The appropriate agent will be responsible for adherence to procedures

  9. Option C – Governmental- District Board Checkbook • County Program Council funds will be handled centrally by the County Extension District Board with a separate sub-account established for each County Program Council in a Quicken, Quickbooks or similar electronic bookkeeping system.

  10. Option D: 501(c)3 • Apply for own 501(c)3 exempt status • Needs Memorandum of Understanding between the Director of the Cooperative Extension Service and each 501(c)3 entity which will accomplish: • Financial Accountability to District Board • Programmatic Accountability to Program Council and County Extension Council

  11. Note for 4-H only: • If 501(c)3 status is needed for grants, KY 4-H Foundation is willing to handle funds to meet requirements of being a 501(c)3 entity. • Subject to Service Fee (currently 5%) • Multi-county/District entities: • Link to the KY 4-H Foundation OR • Link to a county 4-H program for government exemption and follow their guidelines

  12. 4-H Decision Needed • By March 15 EACH 4-H club/council or entity with an EIN/Checkbook must decide the option chosen. (Option A, B, C, or D) • State 4-H Office will be surveying each county to verify which plan is chosen which will then be reported to National 4-H HQ

  13. Extension Homemakers • Can be included in the Governmental Exemption, but may have to decide before all of the details are known • Can form own 501(c)3 organization.

  14. FAQs • To be developed.

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