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4-H Tax Management Options

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4-H Tax Management Options

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    1. 4-H Tax Management Options 4-H National Headquarters October 1, 2010

    2. Overview Background Review of Terminology Review of Management Options 4-H National Headquarters / NIFA / USDA

    3. Background LGU Extension Directors and Administrators, and their designees, are responsible for the design and delivery of their 4-H programs.  This includes:  duly authorizing 4-H clubs and 4-H affiliates, and ensuring program integrity and fidelity, which includes fiscal and fiduciary responsibility. 4-H National Headquarters / NIFA / USDA Refer to continuum – use of name and emblem, charting clubs, having MOUs with affiliates Note wide variation in how 4-H programs are managed from state to state LGUs need to have local oversight of 4-H clubs and affiliates Refer to continuum – use of name and emblem, charting clubs, having MOUs with affiliates Note wide variation in how 4-H programs are managed from state to state LGUs need to have local oversight of 4-H clubs and affiliates

    4. Conditions for Tax Exempt Status Organizations Must have an Employer Identification Number (“EIN”) to Apply for IRS Recognition of Federal Tax Exemption http://www.irs.gov/charities/article/ 0,,id=136200,00.html Organizations Must Meet IRS Organizational and Operational Tests to Qualify for Tax Exemption http://www.irs.gov/pub/irs-pdf/p557.pdf 4-H National Headquarters / NIFA / USDA

    5. Employer Identification Number (EIN) Nine Digit Federal Tax Identification Number Identifies the Organization Understanding Your EIN (Pub. 1635) http://www.irs.gov/pub/irs-pdf/p1635.pdf Applying for an EIN http://www.irs.gov/businesses/small/ article/0,,id=102767,00.html 4-H National Headquarters / NIFA / USDA Having an EIN does not mean that the organization is tax exempt Having an EIN does not mean that the organization itself has to file annual tax or information returns with the IRS or pay taxes; another organization may be responsible for filing tax documents on their behalf – use spreadsheet to make these links Do not use social security numbers for club or affiliate bank accountsHaving an EIN does not mean that the organization is tax exempt Having an EIN does not mean that the organization itself has to file annual tax or information returns with the IRS or pay taxes; another organization may be responsible for filing tax documents on their behalf – use spreadsheet to make these links Do not use social security numbers for club or affiliate bank accounts

    6. EIN Decision Point New Clubs / Affiliates Consult with tax advisor re: use of EIN; options include: Use EIN of Umbrella Organization Apply for own EIN and become a subordinate of a group exemption Current Clubs / Affiliates Use spreadsheet to report options chosen for maintaining federal income tax exemption 4-H National Headquarters / NIFA / USDA

    7. Defining an Umbrella Organization Tax-exempt organization under which a club or affiliate operates and derives tax exempt status Must Have its Own EIN Must Have its Own Tax Exempt Status Must Have General Supervision and Control of all clubs and affiliates under its umbrella If a club or affiliate that is not separately organized as a legal entity operates under and derives its tax exempt status from an umbrella organization, it will be regarded by the IRS as a component part of that umbrella and will have no separate IRS filing requirements 4-H National Headquarters / NIFA / USDA IRS filing requirements are generally associated with EINs, whether a club or affiliate has its own EIN or uses the EIN of the Umbrella Organization.IRS filing requirements are generally associated with EINs, whether a club or affiliate has its own EIN or uses the EIN of the Umbrella Organization.

    8. Supervision & Control Supervision and control relates to the Umbrella or Central Organization: collecting the financial data needed from the subordinates in order to fulfill any tax filing requirements, and ensuring that the subordinates are organized and operated for tax exempt purposes. 4-H National Headquarters / NIFA / USDA

    9. IRS Group Exemption AKA: Group Ruling Central Organization Obtains a Group Exemption Number (“GEN”): http://www.irs.gov/pub/irs-pdf/p4573.pdf GEN Covers Subordinate Organizations that are affiliated with and under the general supervision and control of the Central Organization If a club or affiliate is separately organized as a legal entity , it can become a subordinate organization in a group exemption and derive its tax-exempt status from the central organization Central Organization can provide letters to donors and other third parties acknowledging its Subordinates 4-H National Headquarters / NIFA / USDA The Central Organization may file a Form 990 that covers its Subordinate Organizations. If it does not do so, the Subordinate Organizations will be responsible for filing their own annual Form 990-series returns with the IRS.The Central Organization may file a Form 990 that covers its Subordinate Organizations. If it does not do so, the Subordinate Organizations will be responsible for filing their own annual Form 990-series returns with the IRS.

    10. 4-H National Headquarters / NIFA / USDA This document was included in the July 22nd documents This document was included in the July 22nd documents

    11. 4-H National Headquarters / NIFA / USDA

    12. We suggest MOUs: Include grant authorization for use of 4-H N&E, and spell out some parameters for use. Clarify roles/responsibilities of the affiliate (may want to consider a specific list of approved activities). Clarify expectations for accountability and function (such as reporting, etc.), including requirements for the affiliate to qualify as a “subsidiary” of 4-H and be tax-exempt. Clarify relationship between affiliate and County Extension office and State 4-H Program Office. Clarify any policies, regulations, practices, etc. which the affiliate would be subject to follow. Spell out conditions for terminating or renewing the MOU. 4-H National Headquarters / NIFA / USDA This is general guidance to consider when creating MOUs. It is  best to consult with the LGU legal advisors for specific terms in MOUs. Included in documents sent on Aug. 13th This is general guidance to consider when creating MOUs. It is  best to consult with the LGU legal advisors for specific terms in MOUs. Included in documents sent on Aug. 13th

    13. Option B1 Considerations 4-H National Headquarters / NIFA / USDA Talk to legal counsel and tax advisors Must have supervision and control of clubs in order to collect financial data LGUs are exempt from 990-series filing requirements as state units. They MAY have employment/tax return filing requirements and 990-T filing requirementsTalk to legal counsel and tax advisors Must have supervision and control of clubs in order to collect financial data LGUs are exempt from 990-series filing requirements as state units. They MAY have employment/tax return filing requirements and 990-T filing requirements

    14. Option B2 Considerations 4-H National Headquarters / NIFA / USDA Umbrella must have supervision and control to collect financial data Umbrella must have supervision and control to collect financial data

    15. Option C1 Considerations 4-H National Headquarters / NIFA / USDA Affiliates are authorized by LGU as part of their 4-H YD Program Affiliates have a MOU with the LGUAffiliates are authorized by LGU as part of their 4-H YD Program Affiliates have a MOU with the LGU

    16. Option C2 Considerations 4-H National Headquarters / NIFA / USDA

    17. Option C3 Considerations 4-H National Headquarters / NIFA / USDA

    18. Option C4 Considerations 4-H National Headquarters / NIFA / USDA

    19. Option C5 Considerations 4-H National Headquarters / NIFA / USDA Central organization may be LGU or umbrellaCentral organization may be LGU or umbrella

    20. Option D Considerations Hybrid Some Combination of: B2 C2 C4 C5 4-H National Headquarters / NIFA / USDA

    21. Questions 4-H_tax_info@nifa.usda.gov 4-H National Headquarters / NIFA / USDA

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