Kentucky Extension Homemakers Association

Transcription

1 Kentucky Extension Homemakers Association April 12, 2010 KEHA Leaders and FCS Agents, In 2007, the Internal Revenue Service (IRS) changed filing requirements for non profit organizations. For the past several months, KEHA has been investigating how these changes affect our affiliated groups. We have learned that the tax exempt status held by the Kentucky Extension Homemaker Association, Inc. under Section 501(c)(3) of the Internal Revenue Code only covers the state organization as a single entity and does not provide group coverage for clubs, counties and areas. In recent months, we have consulted with principals from the firm Dulworth Breeding & Karns, an accounting firm in Lexington, to develop information for distribution statewide as to the steps necessary for clubs and counties to remain in compliance with IRS regulations. The enclosed materials provide those details. We expect most clubs and counties with a treasury (checking account, savings account, etc.) will need to take some action. Actions will include filing the appropriate 990 return for your most recently completed fiscal year as described in the enclosed documents and at the end of this letter. Failure to file could result in loss of exempt status. Only those who have previously applied for and received a tax exempt designation from the Internal Revenue Service and annually file 990 returns will not need to take action. To determine the steps your club or county may need to take, you ll first need to calculate your average annual gross receipts for the past three fiscal years. The IRS defines gross receipts as the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses. (From To calculate your three year average, simply total all funds received during the most recent three fiscal years and divide by three. (If your fiscal year ends June 30, total all funds received from July 1, 2006 through June 30, 2009 and divide by three to determine your average gross receipts for the most recently completed three years.) For clubs or county organizations with less than $5,000 in average gross receipts for the past three fiscal years, please refer to Document A. KEHA does not discriminate by gender, race, color, age, disability, religion or national origin.

2 For clubs or county organizations with more than $5,000 and less than $25,000 in average gross receipts for the past three fiscal years, please refer to Document B. For clubs or county organizations with more than $25,000 in average gross receipts for the past three fiscal years, please refer to Document C. Once your county organization and clubs have calculated gross receipts and reviewed the appropriate documents as directed above, please complete the enclosed response form. The form should be returned to Alice Brown by June 1, The form provides you with an opportunity to request assistance through KEHA and Dulworth Breeding and Karns. Once we receive responses from all counties and know who would like assistance, we will work with the accounting firm to determine a fee schedule to share statewide. KEHA is attempting to centralize legal and accounting services for those who may request them, but in no event are you precluded from seeking advice from others. The KEHA State Meeting will provide you with an opportunity to learn more about this process. Lindy Karns, partner with Dulworth Breeding and Karns, will be part of the treasurer s training session Tuesday, May 11 at 1 p.m. In addition, Ms. Karns will conduct a question and answer session from 3 4:15 p.m. on the same day. Completing these steps and taking action is very important! The final step regardless of your level of gross receipts instructs that you file the applicable IRS return (990 N or 990) for your most recently completed tax year (fiscal year ending in 2009 most likely June 30, 2009). This is of the utmost importance as the IRS has indicated organizations who fail to file for a three year period beginning when requirements changed in 2007 will lose their exempt status and may be subject to paying taxes, penalties and interest. Sincerely, Linda Kaletch, KEHA President

3 Document A Average less than $5,000 in annual gross receipts for the most recent three tax years: The following steps apply to clubs/counties/areas with a treasury and gross receipts averaging under $5,000 annually. Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses. To calculate your three year average, total your receipts for the most recent three tax years and divide by three. Step 1: Do you have an organizing document (i.e. constitution, bylaws, etc.)? If yes, please review the document to be sure it includes the language required by the Internal Revenue Service to be recognized as a non profit. Refer to the Bylaws Requirements for Non Profit Organizations included in this packet for guidance. If no, you will need to draft bylaws. The Bylaws Requirements for Non Profit Organizations prepared by Barb Brown, KEHA State Parliamentarian, and included in this packet is a good reference for those who do not have an organizing document. It includes sample bylaws specifically targeted to clubs. Step 2: Do you have an employer identification number (EIN)? If yes, move on to step 3. If you do not, apply online at When completing this form, indicate you are requesting the number for banking purposes. You must have an EIN to file required IRS returns as described in step 3 below. Step 3: Nonprofit organizations with less than $5,000 in annual gross receipts who have completed the two steps listed above are recognized as tax exempt under Internal Revenue Code and do not have to apply for exempt status from the Internal Revenue Service. Such organizations are required to file Form 990 N (e postcard) with the Internal Revenue Service each year. The form is due the 15 th day of the 5 th month following the end of your fiscal year (i.e. if your fiscal year ends June 30th, your 990 N is due November 15 th each year; if your fiscal year ends December 31 st, your 990 N is due May 15 th each year). For information about the e postcard, read the enclosed fact sheet. KEHA clubs and counties are encouraged to submit your e postcard for the most recently completed fiscal year even if the filing deadline has passed.

4 TO BE SET UP TO FILE THE 990 N: An officer of each club/county organization will need to call to be set up to file the 990N/e postcard. You will need the organization s EIN number and fiscal year. Additional questions will ask the officer to verify the group operates as a non profit and to indicate if your average gross receipts are more or less than $5,000. Once this call is made to register the organization, it will be approximately 8 weeks before the 990 N can be filed.

5 Document B Average more than $5,000 and less than $25,000 in annual gross receipts for the most recent three tax years: The following steps apply to clubs/counties/areas with a treasury and gross receipts averaging more than $5,000 and less than $25,000 annually. Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses. To calculate your three year average, total your receipts for the most recent three tax years and divide by three. Step 1: Do you have an organizing document (i.e. constitution, bylaws, etc.)? If yes, please review the document to be sure it includes the language required by the Internal Revenue Service to be recognized as a non profit. Refer to the Bylaws Requirements for Non Profit Organizations included in this packet for guidance. If no, you will need to draft bylaws. The Bylaws Requirements for Non Profit Organizations prepared by Barb Brown, KEHA State Parliamentarian, and included in this packet is a good reference for those who do not have an organizing document. It includes sample bylaws specifically targeted to clubs. Step 2: Do you have an employer identification number (EIN)? If yes, move on to step 2. If you do not, apply online at When completing this form, indicate you are requesting the number for banking purposes. You must have an EIN to file required IRS returns as described in step 3 below. Step 3: Nonprofit organizations with more than $5,000 in annual gross receipts must file for tax exempt status with the Internal Revenue Service by submitting Form 1023, Application for Exemption. You must have secured your EIN and have proper organizing documents/bylaws for the application process. The following links below provide information about the application process. Form 1023: pdf/f1023.pdf Form 1023 Instructions: pdf/i1023.pdf Information about Tax Exempt Status: pdf/p557.pdf KEHA is working with Dulworth Breeding and Karns to provide assistance on a statewide basis. If you would like assistance in submitting your application, please indicate such on the response form. KEHA is attempting to centralize legal and accounting services for those who may request them, but in no event are you precluded from seeking advice from others.

6 Filing for recognition as an exempt organization does require a filing fee. For organizations (counties or clubs), the fee is currently $400 if you average less than $10,000 in gross receipts. If your annual gross receipts are greater than $10,000, the filing fee is $850. Information about these fees is available on the Internal Revenue Service website at Step 4: Nonprofit organizations with more than $5,000 but less than $25,000 in annual gross receipts are required to file Form 990 N (e postcard) with the Internal Revenue Service each year.* The form is due the 15 th day of the 5 th month following the end of your fiscal year (i.e. if your fiscal year ends June 30th, your 990 N is due November 15 th each year; if your fiscal year ends December 31 st, your 990 N is due May 15 th each year). For information about the e postcard, read the enclosed fact sheet. KEHA clubs and counties are encouraged to submit your e postcard for the most recently completed fiscal year even if the filing deadline has passed and you are in the process of seeking tax exempt status. TO BE SET UP TO FILE THE 990 N: An officer of each club/county organization will need to call to be set up to file the 990N/e postcard. You will need the organization s EIN number and fiscal year. Additional questions will ask the officer to verify the group operates as a non profit and to indicate if your average gross receipts are more or less than $5,000. Once this call is made to register the organization, it will be approximately 8 weeks before the 990 N can be filed. *Beginning with the 2010 tax year, organizations with under $50,000 in annual gross receipts will file form 990 N. For a complete listing of the filing thresholds for the 990 forms, please visit

7 Document C Average more than $25,000 in annual gross receipts for the most recent three tax years: The following steps apply to clubs/counties/areas with a treasury and gross receipts averaging more than $25,000 annually. Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses. To calculate your three year average, total your receipts for the most recent three tax years and divide by three. Step 1: Do you have an organizing document (i.e. constitution, bylaws, etc.)? If yes, please review the document to be sure it includes the language required by the Internal Revenue Service to be recognized as a non profit. Refer to the Bylaws Requirements for Non Profit Organizations included in this packet for guidance. If no, you will need to draft bylaws. The Bylaws Requirements for Non Profit Organizations prepared by Barb Brown, KEHA State Parliamentarian, and included in this packet is a good reference for those who do not have an organizing document. It includes sample bylaws specifically targeted to clubs. Step 2: Do you have an employer identification number (EIN)? If yes, move on to step 2. If you do not, apply online at When completing this form, indicate you are requesting the number for banking purposes. You must have an EIN to file required IRS returns as described in step 3 below. Step 3: Nonprofit organizations with more than $5,000 in annual gross receipts must file for tax exempt status with the Internal Revenue Service by submitting Form 1023, Application for Exemption. You must have secured your EIN and have proper organizing documents/bylaws for the application process. The following links below provide information about the application process. Form 1023: pdf/f1023.pdf Form 1023 Instructions: pdf/i1023.pdf Information about Tax Exempt Status: pdf/p557.pdf KEHA is working with Dulworth Breeding and Karns to provide assistance on a statewide basis. If you would like assistance in submitting your application, please indicate such on the response form. KEHA is attempting to centralize legal and accounting services for those who may request them, but in no event are you precluded from seeking advice from others.

8 Filing for recognition as an exempt organization does require a filing fee. For organizations (counties or clubs), the fee is currently $400 if you average less than $10,000 in gross receipts. If your annual gross receipts are greater than $10,000, the filing fee is $850. Information about these fees is available on the Internal Revenue Service website at Step 4: Nonprofit organizations with more than $25,000 in annual gross receipts are required to file Form 990 or 990 EZ with the Internal Revenue Service each year through the 2009 tax year. For the 2010 tax year, the filing thresholds will change. For a complete listing by tax year, please visit The required 990 form is due the 15 th day of the 5 th month following the end of your fiscal year (i.e. if your fiscal year ends June 30th, your 990 is due November 15 th each year; if your fiscal year ends December 31 st, your 990 is due May 15 th each year). KEHA clubs and counties are encouraged to submit your e postcard for the most recently completed fiscal year even if the filing deadline has passed and you are in the process of seeking tax exempt status.

9 BYLAW REQUIREMENTS FOR NON PROFIT ORGANIZATIONS Each separate group in an organization such as the Kentucky Extension Homemakers Association (KEHA) must have its own written rules and guidelines for directing it. If the group is not incorporated the document is most often called the bylaws. In the past, the term Constitution has been used, but Robert s Rules of Order suggests Bylaws is the preferred term now. (Ref. Robert s Rules of Order, Newly Revised, 10 th Edition, pg. 12.) A group may also have Standing Rules. These are rules which are related to the details of the administration of the group. These are placed at the back of the Bylaws. The bylaws or other governing document of a nonprofit group must now include wording that covers the following four points: 1. In the Kentucky Extension Homemakers Association, the area, county and club bylaws must state that they are organized exclusively for educational and charitable purposes. 2. There should not be anything in the bylaws permitting any other purpose to be more than just an insignificant part of the group s activities. 3. There should be an article or articles outlining limitations specified for nonprofits under Internal Revenue Code 501(c)3. (See Article IV Limitations in the sample club bylaws attached.) 4. If there is dissolution of the group, the remainder of the assets must be given to another nonprofit group or a purpose such as a scholarship. (See Article XI Dissolution in the sample club bylaws attached.) BYLAWS FOR AREAS AND COUNTIES KEHA area and county organizations should have bylaws already established. As these groups check their bylaws to be sure the four points above are included, it would be a good time to review the whole document to see that it conforms to accepted standards and meets their needs. BYLAWS FOR CLUBS In the past, some KEHA clubs have operated without a governing document. With the IRS now requiring all groups to report each year, every club must have an organizing document such as bylaws. Club bylaws may be simple or more detailed if needed. If a group or club is nonprofit, the four items of information listed above must be included in the document. Attached are some sample bylaws for clubs that will meet the minimum criteria. They are based on Robert s Rules of Order, Newly Revised, 10 th edition. Different wording may be used and there may be other ARTICLES, but the four required points must be included.

10 It is a good idea for groups to review their bylaws every few years to make sure they meet the needs of the organization. The following document is a suggested format based on Robert s Rules of Order. In it, some information needed is shown as fill in the blank spaces for you to complete. Any words in parenthesis are for information or explanation. You may add more Articles as needed. Articles are commonly designated with Roman numerals. Sections are designated with Arabic numerals. Be sure your finished document is dated and signed when it is accepted. References are from Robert s Rules of Order, Newly Revised, 10 th Edition. Your state parliamentarian will be glad to answer any questions you may have. ****************************************************** BYLAWS OF THE CLUB KENTUCKY EXTENSION HOMEMAKERS ASSOCIATION COUNTY, KENTUCKY ARTICLE 1 - NAME The name of the organization shall be. ARTICLE II OBJECT The Club is organized exclusively for educational and charitable purposes. The objects shall be: (You may keep your purposes as is or refer to the state KEHA bylaws ARTICLE I for ideas.) ARTICLE III MEMBERS Section 1. Membership is open to all adults without regard to gender, race, color, age, disability, religion or national origin. Section 2. Club dues shall be set by mutual agreement of the club members. Section 3. Members shall also pay dues annually to cover county, area and state dues. These dues are payable in September of each year.

11 ARTICLE IV LIMITATIONS No part of the net earnings of the club shall inure to the benefit of, or be distributable to, any of its members, trustees, officers or other private persons, except that the club shall be authorized to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the exempt purposes. No substantial part of the activities of the club shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the club shall not participate in, or intervene in any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the club shall not carry on any other activities not permitted to be carried on (a) by an organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by an organization, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. ARTICLE V OFFICERS Section 1. Officers and duties. Officers shall consist of a President, Vice President or President Elect, Secretary and Treasurer or Secretary/Treasurer. These officers will comprise the club s Executive Committee. 1. Officers and duties. a. The duties of the President shall be; (1.) To preside over all meetings of the club, the executive committee and any special club meetings; (2.) To attend all the meetings of the County Council; (3.) To appoint all club committees unless otherwise provided for; and (4.) To perform all duties normally applicable to the office as prescribed by the Parliamentary authority adopted by the club. b. The duties of the Vice President or President Elect shall be; (1.) Attend all meetings of the club, the executive committee and any special club meetings; (2.) To attend the County Council meetings, (3.) Perform president s duties during her absence or inability to serve; (4.) Assist the president in any way possible: and

12 (5.) To perform all duties normally applicable to the office as prescribed by the Parliamentary authority adopted by the club. c. The duties of the Secretary shall be; (1.) To attend all meetings of the club, the executive committee and any special club meetings. Record and preserve the minutes; (2.) To handle all correspondence; and (3.) To perform all other duties normally applicable to the office as prescribed by the Parliamentary authority adopted by the club. d. The duties of the Treasurer shall be; (1.) To attend all meetings of the club, the executive committee and any special meetings; (2.) Receive dues from the members and forward dues to the county, area and state by the due date each year; (3.) Pay monies as directed by the President; (4.) Keep accurate record of funds and give reports as required; and (5.) To perform all other duties normally applicable to the office as prescribed by the Parliamentary authority adopted by the club. Section 2. Nomination and election of officers. (Clubs often have their own procedures for nominating and electing officers. Therefore this section should reflect the individual group s practices. The term of office should also go in this section.) ARTICLE VI MEETINGS Section 1. The regular meetings of the club shall be held on with the exception of the months of. One third of the members shall constitute a quorum. The President may change the meeting date or place with the concurrence of the club s executive committee or by the request of five (5) club members. Five days notice of a meeting change shall be given to members unless the change is due to weather or unforeseen circumstances. (The information here is just an example.) Section 2. The place of the meeting shall be. ARTICLE VII EXECUTIVE COMMITTEE Section 1. The officers of the club shall constitute the Executive Committee.

13 Section 2. The Executive Committee shall meet as required and have general supervision of the affairs of the club between regular meetings. ARTICLE VIII COMMITTEES Standing or Special Committees may be appointed by the President from time to time as deemed necessary to carry on the work of the club. The President shall be an ex officio member of all committees except the nominating committee. Duties, responsibilities and goal are assigned by the President. ARTICLE IX PARLIAMENTARY AUTHORITY The rules contained in the current edition of Robert s Rules of Order, Newly Revised, shall govern in all cases to which they are applicable and in which they are not inconsistent with these bylaws and any special rules of order the club may adopt. (Every organization should have a Parliamentary authority. Robert s Rules is the KEHA state level authority and is widely used by about 90% of all ordinary societies.) ARTICLE X AMENDMENT OF BYLAWS The Bylaws may be amended at a regular meeting by a two thirds vote of the members present and voting, after the proposed amendment has been read at the previous meeting. (If your club has different rules for amending the bylaws they don t have to be changed.) ARTICLE XI DISSOLUTION In case of the dissolution of this club, after providing for the debts and obligations of the organization, the remaining assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Dated, 2010 (This is the date the bylaws are accepted.) Signed Name Title Name Title

14 County Response Form Return by June 1, 2010 County Date: Completed by: Title: Phone: Have EIN? [circle] Have Bylaws or other Organizing Document? [circle] Average Gross Receipts (last 3 fiscal years) [circle category] Request Assistance [circle yes or no for each item listed] Bylaws Form 1023 Filing 990 Return County Organization* Clubs* [List each club with a treasury; Answer questions] *If your county organization or any club has previously applied for and received a designation as a tax exempt organization from the Internal Revenue Service [most likely 501(c)3 designation], please write the date of exemption in the left margin by the county organization box or club name. Send completed form to: Alice Brown, KEHA President Elect, 44 Tipton Drive, Greenup, KY Attach additional copies as need to list include all clubs with a treasury.

15 The New e-postcard (Form 990-N) What Smaller Organizations Need to Know to Stay Tax-Exempt Visit for more information Small tax-exempt organizations now have an important new reporting requirement. The e- Postcard or Form 990-N, Electronic Notice (e- Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ is a simple, electronic form which should only take a few minutes of your time each year. Filing it will protect your tax-exempt status, and also gives donors and volunteers the most up-to-date information about your organization. Protect Your Tax-Exempt Status The first e-postcards were due in 2008 and subsequent filings are due annually thereafter. The IRS will not assess a penalty if you file late or fail to file; however, after three consecutive years of non-filing, you will lose your taxexempt status. If this happens, you can request to be reinstated by filing an application for tax exemption (Form 1023 or Form 1024), along with the appropriate user fee. If you can show that you had reasonable cause for non-filing, a reinstatement, if granted, might be retroactive. Who Needs to File, and When Most small, tax-exempt organizations with $25,000 or less in gross receipts must now file the e-postcard. However, organizations that are included in a group return, as well as churches, their auxiliaries, and associations of churches are not required to file. The e-postcard is due every year by the 15th day of the fifth month after the close of your organization s tax year. For example, if your tax year closes December 31, the form is due the following May 15th. Simple and Straightforward The e-postcard is a simple, Internet-based form that asks a few identifying questions about your organization. You can only file the e-postcard online there is no paper form. All you need is access to a computer and an address. No special software is necessary, and there is no cost to file an e-postcard. It s free! To file the e-postcard, go to and click on Annual Electronic Filing Requirement for Small Exempt Organizations Form 990-N (e-postcard), where you ll find a link to the e-postcard filing system. You will file the e- Postcard through the Web site of the IRS s trusted partner, the Urban Institute. If you choose to, you can file a Form 990 or Form 990-EZ instead of the e-postcard, but it must be a complete return. An incomplete or partially completed Form 990 or Form 990- EZ will not satisfy your annual filing requirement. In addition, you may be assessed a late filing penalty if you file Form 990 or Form 990-EZ late. There is no late filing penalty associated with the e-postcard. However, if you fail to file your e-postcard (or an information return) for three consecutive tax years, your organization will lose its taxexempt status. Public Information The information on the e-postcard is public information. The IRS has a disclosure site where the public can view an individual organization s e-postcard or download the entire data base of electronically filed e-postcards. Go to click on Annual Electronic Filing Requirement for Small Exempt Organizations Form 990- N (e-postcard) and scroll down to Search for e-postcards Public Disclosure. Where to Go for Help For the latest information about the e-postcard, you can sign up for Exempt Organization s EO Update, a regular e- newsletter that highlights new information for tax-exempt organizations. To subscribe go to and click on EO Newsletter. More information about the e- Postcard can also be found on the Web site or through our customer service function, which is available toll-free at The e-postcard is easy to complete. It only requires the following information about your organization: 1. Organization s legal name, 2. Any other names the organization uses, 3. Organization s mailing address, 4. Organization s Web site address - if it has one, 5. Organization s employer identification number (also referred to as a taxpayer identification number), 6. The name and address of a principal officer of the organization, 7. Organization s annual tax year, and 8. Answers to the following questions: o Are your gross receipts normally $25,000 or less? o Has your organization terminated or gone out of business? That s it! Department of the Treasury Internal Revenue Service Publication 4752 ( ) Catalog Number 52948D