ExpressTaxExempt Blog

Politics and Charitable Nonprofits

Amidst our nation’s current political climate, the National Council of Nonprofits reports that nonpartisanship, an essential principle of charitable nonprofits, has fallen under scrutiny with our country’s leaders in Washington, D.C.

The organization is asking for all those concerned with the prosperity and efficiency of the nonprofit community to express support for increased protection by signing the Community Letter in Support of Nonpartisanship.

Nonpartisanship defines as being free from any party affiliation or designation. And though the IRS allows political participation from exempt organizations, there are strict regulations regarding lobbying and its expenditures. According to the National Council of Nonprofits, Congress is introducing bills that could repeal or substantially weaken current protections making charitable organizations more susceptible to endorse or oppose candidates running for an elected office.

The detrimental issue the Council points out is that being more impressionable towards political activities will redirect funding from an organization’s charitable mission to supporting election campaigns. Such legislation could also expose nonprofits and foundations to demands from candidates for political endorsements and contributions which will take funds from charitable work and eventually afflict the public trust of exempt organizations.

Ultimately, the Council states that the proposed changes are entirely unnecessary. They assure that there are already many legal ways for a nonprofit’s staff, board members, and volunteers to express their individual views on public policy issues. If you or any other nonprofit, charity, private foundation, or religious groups are interested in showing support or signing the Support of Nonpartisanship letter, you can visit GiveVoice.org or the Protecting Nonprofit Nonpartisanship website.

For any other questions or concerns about how lobbying and political activities can affect your organization, contact a local tax professional or reach out to the IRS Tax-Exempt Hotline at 877.829.5500.

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E-file 990-N Form in Minutes with New e-Postcard Application

ExpressTaxExempt proudly introduces a new service designed specifically for small nonprofit groups. Exempt organizations with gross receipts less than $50,000 can now e-file 990-N forms with the IRS just by using employer identification numbers (EINs).

With our new e-Postcard application, we’ve taken away the need to enter any filing details or drawn-out account information, so transmitting e-Postcards is faster than ever before! The entire process is quick, easy, and secure - using ExpressTaxExempt is now simple as 1-2-3!

Step 1: Search Your Organization’s EIN
Enter the employer identification number to view the filing history for your nonprofit - this shows each year you filed a 990-N (e-Postcard) and the years which you haven’t filed. Even if you don’t need to e-file, you can always use this first step to search any nonprofit and see when it last filed.

Step 2: Select a Tax Year to File
Choose the available tax years to file your e-Postcard and then enter your email address and a password - this automatically creates your free account with ExpressTaxExempt. If you already have an account, then just enter your password to proceed with the filing. Having an account is necessary for you to correct any rejected forms and receive email notifications about your filing status.

Important: The IRS supports e-filing for three consecutive years only - you won’t be able to file for years further back electronically.

Step 3: Review Form and Transmit to the IRS
Check that the information generated on your e-Postcard is current and correct. It should list the following:

  • Tax Year Period
  • Organization Name and Address
  • Primary Officer Name and Address

All of this information comes directly from the IRS and your organization’s previously filed 990-N forms. All you have to do is confirm gross receipts are less than $50,000 and then submit your e-Postcard. If you need to change any organization or primary officer details, you can “Edit” before transmitting.

And that’s all there is to it! You can print a copy of your 990-N (e-Postcard) immediately after sending it to the IRS, and we’ll email you an approval letter once the e-file is accepted. You can check your filing status any time by entering your return number and email address. ExpressTaxExempt makes it super easy to e-file before the May 15 deadline.

If you have any questions about e-filing your 2016 990-N form with our new e-Postcard application, please contact our U.S. - based customer support team at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST. We’re also available via email with support@expresstaxexempt.com.

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Revenue, Expenses, & Grants from Program Services

The IRS requires large and mid-size exempt organizations to describe three of their most major program services when reporting Form 990 or 990-EZ tax returns.

These services typically measure or rank by the total expenses spent by the organization. If a tax-exempt group has less than three program services, they can just describe the activities of each available service.

Descriptions of program services can include many variables such as how many clients the organization served, days of care provided, publications issued, or the number of sessions held. Along with stating the objective of the service, the IRS also needs to know all revenue, expense, and grant amounts associated with each program.

Section 501(c)(3) and 501(c)(4) organizations are responsible for reporting any income coming directly from activities of each program service. Fees for services or sales from goods related to each activity are all considered revenue. These amounts should include the program service revenue listed on Part VIII, Column A, Line 2 of the 990 form; it can also contain other amounts from Part VIII, Line 1 through 3 such as related or exempt function revenue.

Important: Revenue should also include any unrelated business income from activities exploiting an exempt function - advertising in a journal would be an example. You shouldn’t combine any charitable contributions and grants as revenue coming from program services.

Expenses & Grants
For each program service listed on Part III, Line 4a through 4c, 501(c)(3) and 501(c)(4) organizations have to enter total expenses that you reported on Part IX, Column B, Line 25. And list the total grants and allocations within those expenses that are marked on Part IX, Column B, Line 3 through 11 of the 990 form.

Other Program Services
If you have more than three significant program services, you can continue to report on the Schedule O. The IRS won’t require a detailed description of these other services like it did the first three. But you are responsible for listing the total revenues and expenses - including grants - exactly how you did with your organization’s larger program services.

With IRS-authorized ExpressTaxExempt, organizations can easily enter information about their program services in minutes. Our 990 form e-file application also generates any additional services onto your Schedule O and allows you to enter revenue, expenses and grant amounts for each entry.

Speak with your local tax professional or advisor if you have any detailed questions about your organization’s program services. For any questions or assistance with reporting your program activities with our e-file service, contact our US-based customer support team at 704.839.2321 or email us with support@expresstaxexempt.com.

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Intangible Religious Benefits from Charitable Contributions

The IRS has rules of recordkeeping and substantiation for donors giving charitable contributions along with disclosure rules for charities receiving those donations. Individuals or groups that donate to exempt organizations can typically write-off those tax-deductible donations on their annual return; however, there are a few other things required.

Deduction Requirements from Contributions
Donors must obtain a bank record or written receipt from the organization for any monetary contributions to claim the amount on their federal income tax returns. A written acknowledgment is also mandatory for any single contribution of $250 - cash or noncash - given to a nonprofit or charity. And charitable organizations should provide written proof to donors who receive over $75 of goods or services in return for the contribution.

Goods and Services
Written acknowledgments for goods and services exchanged for donations must contain a description of what the organization provided and an estimated monetary value of items or services given to the donor. Contributors should also subtract the estimated amount from the total fair market value of the donation to know the deduction value. Goods and services typically include cash, benefits, property, services, or privileges. There are exceptions - one of which is intangible religious benefits.

Intangible Religious Benefits
The IRS does not require a description or value of goods included with a written acknowledgment from faith-based organizations that only provide intangible religious benefits to donors. The statement needs only to say the organization provided such benefits. A tax-exempt organization operating exclusively for religious purposes can only grant this type of benefit; it’s usually something that you can't sell as a consumer transaction.

Examples of intangible religious benefits include admission to religious ceremonies or a de minimis tangible benefit such as wine used for religious services. Benefits that the IRS doesn’t consider intangible or faith-based include education towards a recognized degree, consumer goods, or travel services.
Religious organizations, such as churches, don’t typically need to file annual 990 returns with the IRS. But if they choose to do so, they must submit a complete return which may require a Schedule B for contributions equal to or greater than $1,000 and were used exclusively for religious purposes. You should also list donations used outside of religious purposes that are over $5,000.

If you have any questions regarding substantiation and disclosure requirements or about intangible religious benefits, we recommend seeking a tax professional for assistance. You can inquire about Schedule B and Form 990 information by calling the IRS Tax-Exempt Hotline at 877.829.5500.

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Can Nonprofits Still Get Taxed?

When you hear the words “nonprofit” or “tax-exempt,” you typically think of a public charity or group doing some charitable work. And any money made, either through contributions or services, is exempt from taxes. That’s how you would think nonprofits work, but recently in the state of Washington, this concept went under scrutiny.

In 2015, a small animal rescue organization located in Eatonville, Washington, was contacted by a tax information specialist from the state’s Department of Revenue. The rescue group received notification that the sale of animals isn’t exempt from taxes - meaning that any adoption fees are subject to retail sales tax and Retailing Business and Occupation (B&O) tax. Based on this information, the animal rescue realized they would have to pay nearly $20,000 in back taxes.

According to Washington’s Department of Revenue, nonprofit groups in the state get taxed like any other business; they are also responsible for B&O tax on revenues from business activities, sales tax on goods and services purchased as consumers, and they must charge a sales tax for items and services offered. In this particular situation, the only exemption is for a government or quasi-government group like humane societies providing similar services.

Other private animal shelters and advocates have spoken how animal adoptions are not sales but require fees for pet licensing; they’ve also exclaimed how exceptions for government-sponsored animal shelters are double standards. Back in Eatonville, the founder of the small animal rescue explained that revenue from adoption fees goes directly to providing veterinary and dental services for animals in their care. And the organization is maintained entirely by volunteers.

While it is quite possible for nonprofit organizations to have taxes imposed, under normal circumstances, it depends on how the revenue gets generated. If a tax-exempt group makes money from activities or services that have nothing to do with their exempt purpose, it gets taxed. Likewise, revenue spent on anything non-related to the exempt purpose gets taxed. And you also have your normal wage taxes for any paid employees or officers.

The Washington state Department of Revenue has since then vetoed their decision to impose retail taxes on adoption fees; however, this resolution has remained inconsistent throughout the state. In 2016, a bill was introduced in the Senate suggesting tax improvements and licensing laws governed by the Department of Revenue. The bill presents a formalized policy prohibiting retail sales tax from animal adoption fees charged by nonprofit animal organizations.

If you have questions or concerns about taxable revenue generated by your nonprofit or charity, please speak with a local tax professional - you may have to file additional returns along with your IRS 990 form to correctly report taxed income.

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How to File a Schedule F for Foreign Activities

Any exempt organization with activities conducted outside the United States need to report information about those international actions on their IRS Form 990.

Activities can include grants and other assistance, program-related investments, fundraising activities, program services, and more.

Reporting this type of information is done using Schedule F and is for various geographic locations like Antarctica, Central America and the Caribbean, East Asia and the Pacific, Europe, and much more.

Here are some helpful guidelines to follow from the IRS when filing a Schedule F:

Part I - General Information on Activities Outside the United States
The first section of Schedule F is for organizations with aggregate revenues or expenses greater than $10,000 from grantmaking, fundraising, business, investment, or program services outside of the United States. The IRS doesn't require any expenditure from services provided in U.S. for recipients inside and outside the U.S.

For Line 1, indicate whether the organization maintains records to substantiate the following:

  • The monetary value of its grants and other assistance
  • The recipients’ eligibility for grants or assistance
  • The selection criteria used to award grants or assistance

Responses to Line 2 will go on Part V of the Schedule F. You should describe the organization’s procedures for monitoring the use of grants and assistance outside of the U.S. - this can include details from periodic reports and accountings, field investigations, or third-party audits.

Line 3 requires you to enter details for each type of activity conducted any time during the filling year for each region. If the organization has many activities per area, list each one separately for the same location name. Report any investments by regions as well; however, they should be separate from other activities listed in the same area. And you can list all investments from a particular region as a single entry.

It is not necessary to report any foreign investments indirectly held through a pass-through entity in the U.S. because the entity is not physically in a foreign location. You also won’t need to list any investments from entities located overseas that trade on a U.S. stock exchange.

Important: Listing funds transferred to a non-interest bearing account outside of the United States for program services is not necessary for Line 3; however, once those funds are used, the IRS requires you to list them on Line 3, Column F.

Complete the chart for Line 3 as follows

  • Column A - List each region in which your organization conducts its foreign activity
  • Column B - List the number of offices in each region
  • Column C - List the number of employees, agents, and independent contractors in each region
  • Column D - List the type of activity conducted in the region (i.e. fundraising, program services, etc.)
  • Column E - Give a description of the particular type of service for any program services listed in Column D
  • Column F - List total expenditures and investments in each region

With Lines 3a through 3c for Column B, report the total number of offices in foreign locations maintained by the organization during the tax year - don’t count any one office more than once. You’ll also enter the total number of employees and the overall sum of expenditures and investments on Lines 3a through 3c for their respective columns.

Part II - Grants and Other Assistance to Organizations or Entities Outside the United States
Exempt organizations with any recipients outside of the U.S. that have received grants or assistance of at least $5,000 need to be reported in this section. On Line 1, you need to list those recipients in the chart provided. Enter each organization or entity on separate lines. If you require more space for additional beneficiaries, you can attach duplicate copies as needed.

In this section, list cash or noncash grants and assistance based on the accounting method from your organization’s financial statements - you’ll need to describe this process later on in Part V. You should also report grants no matter the source of the funds or whether the organization chose the recipient.

Important: Completing Columns A or B in the chart isn’t necessary.

Finish the rest of the chart for Line 1 as follows

  • Column C - Enter the region where the principal foreign office of the recipient organization is or where grant funds are getting used
  • Column D - Describe the purpose of grant funds with specific terms like general support, school, construction, or medical supplies rather than broad words like educational or religious
  • Column E - Enter the total dollar amount of cash grants, in U.S. dollars, for each recipient
  • Column F - Describe how your organization disburses cash for each recipient (i.e. cash payment, check, money transfer, etc.)
  • Column G - Enter the Fair Market Value of noncash properties in U.S. dollars
  • Column H - Enter a description for any noncash goods or assistance listed
  • Column I - Describe the method of valuation for noncash properties

On Line 2, report the total number of recipients from your list on Line 1 that is either recognized as a charity by the foreign country, recognized as tax-exempt by the IRS, or has provided a section 501(c)(3) equivalency letter. With Line 3, enter the total number recipients that are not classified as described in Line 2.

Part III - Grants and Other Assistance to Individuals Outside the United States
Similar to Part II, this section is for exempt organizations who have given at least $5,000 in grants and assistance directly to foreign individuals or foreign groups for the benefit of a particular foreign individual.

You need to complete the chart in Part III the same way you did for Part II, Line 1. Be aware that for Part III, Column A, you’re going to use the same terms that you used for Part II, Line 1, Column D. The IRS also needs an explanation in Part V for any estimated numbers you come up with for Part III, Column C.

Part IV - Foreign Forms
Any exempt organization filing a Schedule F must complete Part IV by answering each question from Line 1 to Line 6. It could be possible to answer each question as “No,” if applicable. But for any question answered “Yes,” the IRS requires you to the file the additional form listed with the question.

Part V - Supplemental Information
The final section within Schedule F is for you to provide detailed explanations for the following parts you answered earlier:

  • Part I, Line 2 - Methods for monitoring the use of your organization’s grants and assistance outside the U.S.
  • Part I, Line 3, Column F - Methods used for accounting expenditures on the organization’s financial statements
  • Part II, Line 1 and Part III - Methods used for accounting cash grants and noncash assistance on the organization’s financial statements
  • Part III, Column C - Methods used to estimate the number of recipients

You can also supply any other explanations or descriptions as needed, but for anything written in Part V, you should write out the corresponding part and line of the schedule. For any tax-intensive questions regarding your organization’s activities outside of the U.S., we recommend speaking with a certified professional or contacting the IRS directly at 877.829.5500.

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Are Donations to Animal Rescue Shelters Tax Deductible?

are donations to animal rescue shelters tax deductible Like with many other nonprofits or charities, if you make a donation, you can typically deduct the value of your contribution from your annual tax bill.

To do so, the nonprofit group you’re giving to must be officially recognized by the IRS as a section 501(c)(3) organization. You can check an organization’s tax-exempt status by searching the IRS Exempt Organization Select Check.

Are Donations to Animal Rescue Shelters Tax Deductible?

When you’re filing, you will also need to itemize the amount of your donation - this may not be worth the extra effort if you only gave a little here and there. But if you gave a significant amount throughout the year, it is best to itemize the deduction on your personal tax return.

Here are 3 things to consider when donating to an animal rescue shelter:

1. Pet Adoption vs. Donation

A common misconception most people make is thinking that payment for adopting from an animal shelter is the same as making a donation. Only donations in which the donor receives no goods or services in return can count towards a deduction.

In this case, you’re giving money in exchange for your pet - that's more of a service charge rather than a charitable contribution. However, if you paid over the cost of adoption or gave a gift outside of the adoption transaction, that counts as a valid charitable contribution.

2. Donation Value

If you’re donating items, you’ll need to estimate the fair market value for each of those items. There’s no one particular method for finding fair market values - you can look through local shops or online stores to figure out prices of similar items in the open market. For special unique gifts, such as a hand-woven, nap basket for kittens, you can get it appraised for the market value.

nonprofit animal shelter worker

3. Written Proof of Donation

When you’re donating to an official 501(c)(3) organization, it’s common practice to receive a physical receipt for your donation. If your total contribution amount is at least $250, the IRS requires you to submit proper documentation along with your tax return. Like other receipts from nonprofits or charities, it should contain the description of the contribution and the amount along with the name and address of the organization.

If you received a gift or benefit from the animal shelter in return for your donation, include a description of the gift on the written receipt. Any reciprocated gifts with a monetary value should be subtracted from the amount of your contribution when reporting. A paper certificate or “Thank You” card typically don’t have cash values, but a coupon or gift card does.

Animal rescue shelters can report received contributions over $5,000 to the IRS by using a Schedule B along with their Form 990 or 990-EZ tax return. Taxpayers that want to claim an itemized deduction for their donations to an animal shelter can complete a Schedule A with their IRS 1040 form.

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Frequently Asked Questions

Find answers related to e-filing IRS Form 990, 990-EZ, 990-PF, 990-N (e-Postcard), Form 1120-POL and Extension Form 8868 with our Frequently Asked Questions.

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