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Financial Issues for Local Sections

This document outlines the financial responsibilities and obligations of local sections under the AIChE umbrella. It emphasizes their status as separate entities sharing in AIChE's 501(c)(3) non-profit category. Local sections must handle their own finances, file annual tax returns, maintain tax-exempt benefits, and avoid lobbying activities. Specific instructions for filing forms 990-N, 990-EZ, and 990-T for unrelated business taxable income (UBTI) are included, as well as the implications of non-compliance which can affect contributors’ tax deductions and the section's tax-exempt status.

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Financial Issues for Local Sections

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  1. Financial Issues for Local Sections Local Section Committee Meeting Rick Cain Director of Finance January 25, 2012

  2. Local Section Structure • Separate entities under the AIChE umbrella • Share in the 501(c)(3) non-profit status of the national organization, because: • You share in AIChE’s exempt purpose of educating the public on topics related to Chemical Engineering • You are non-profit • Maintain your own financials and account balances • Have your own Tax ID Number (EIN) • Not included in AIChE’s financial statements, tax returns or audits

  3. Local Section Benefits • Most sources of revenue are exempt from paying federal income taxes • Sponsors and contributors (and LS members) can claim deductions on their tax returns • Reduced postage rates for certain types of mailings

  4. Local Section Obligations • Maintain your finances in a responsible manner • File annual tax returns • Pay taxes on unrelated business taxable income (UBTI) • Abstain from lobbying – influencing elections of candidates for public office • Keep IRS updated on LS mailing addresses

  5. Annual Tax Returns • Must be filed by the 15th day of the 5th month after the end of your fiscal year • May 15 for Jan-Dec fiscal year • Which form to file? • Form 990-N if gross receipts are < $25,000 • Form 990-EZ if gross receipts are < $200,000 and total assets are < $500,000 • Form 990 if either of the 990-EZ criteria are not met • Form 990-T if gross income from UBTI >$1,000

  6. Form 990-N • Referred to as e-Postcard • Minimal information required: • Legal name (and other names used) • Mailing address • Website (if it has one) • Employer Identification Number (EIN) • Group Exemption Number (GEN) - 2603 • Name and address of a principal officer • Annual tax year • Answers to the following questions: • Are your gross receipts normally $25,000 or less? • Has your organization terminated or gone out of business? • Should receive confirmation back from the IRS

  7. Unrelated Business Taxable Income (UBTI) • Most receipts are exempt from taxes: • Dues / contributions / sponsorships • Fees for seminars, symposia, etc. • Revenues from advertising may not be exempt if: • Ads are included in >3 newsletters per year • Outside entity is paid to help prepare / distribute the newsletter (vs. volunteer support only) • Gross income >$1,000 • Gross receipts minus cost of goods sold • UBTI requires filing of Form 990-T

  8. Implications of Non-Compliance • Many LSs and SCs recently lost their tax-exempt status for not filing returns for 3 consecutive years • Contributors cannot deduct their donations from their tax returns (including dues) • Must pay income taxes on receipts • Must file tax returns with the IRS • Need to apply with the IRS to have their tax-exempt status reinstated (including associated fees)

  9. Additional Information • Form 990-N: • http://epostcard.form990.org/ • Form 990-EZ: • http://www.irs.gov/pub/irs-pdf/i990sa.pdf • Form 990-T: • http://www.irs.gov/pub/irs-pdf/f990t.pdf • Change of Address (Form 8822): • http://www.irs.gov/pub/irs-pdf/f8822.pdf • Group Exemption Number (GEN) - 2603

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