Instructions for Reinstatement of Tax-Exempt Status

Transcription

1 Instructions for Reinstatement of Tax-Exempt Status Dear Local PTA: The IRS has issued letters revoking the tax-exempt status of numerous organizations, including many local PTAs, for failure to file information returns for 3 consecutive years. In particular, the revocations resulted from a failure to file required Form 990 (Return of Organization Exempt from Income Tax), Form 990-EZ (Short Form Return of Organization Exempt From Income Tax), or Form 990-N (e-postcard), for three consecutive tax years. If your local PTA received a letter from the IRS stating that your tax-exempt status has been revoked, please follow the instructions in the attachment to this letter to reinstate your organization s tax-exempt status. If your application is accepted and you provide evidence of reasonable cause for the failure to file your returns, the IRS will issue a letter reinstating the organization s tax exemption retroactive to the date of the revocation. The packet you send to the IRS must include: 1. Cover Letter to the IRS 2. Reasonable Cause Statement (if seeking retroactive reinstatement) 3. Forms 990 or Forms 990-EZ for all taxable years not previously filed (if applicable see instructions!) 4. IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3)) 5. Attachments to IRS Form Check made payable to the United States Treasury. Please follow the attached instructions carefully to complete IRS Form 1023 and the attachments. Please carefully review the portions of the form already completed, and make changes to any responses that are incorrect. Please contact me by at hdean@pta.org if you have questions. Sincerely, Enclosure Heather Dean Deputy Executive Director, Programs and Operations

2 Instructions for Reinstatement of Local PTA Tax Exemption Please follow these instructions carefully. These instructions will help you complete the IRS Form 1023 and required attachments. Do not submit these instructions to the IRS. Please review any already completed responses on Form 1023 for accuracy and make any necessary changes. Keep in mind that terms in bold used in Form 1023 have specific meanings, which are provided in the Instructions to Form 1023, which can be obtained by searching Form 1023 Instructions at You can type right on the form, or fill in the blanks with a pen. If you start with a fresh Form 1023 which you print from the IRS website, be sure to put Automatically Revoked on top of the first page, as we have on the model. 1. IRS Cover Letter Complete the blanks by filling in the date, name of the local PTA, and the title of the local PTA officer submitting the application for exemption to the IRS. The officer should sign the letter. 2. Reasonable Cause Statement In order for the local PTA s tax exemption to be reinstated effective as of the date of revocation, you must provide the IRS a reasonable cause statement explaining the local PTA s failure to file information returns for 3 consecutive years. If the IRS determines that reasonable cause does not exist, the local PTA s exemption will only be effective as of the prospective date of reinstatement, instead of being effective retroactive to the date of revocation. Please be aware that acceptance of a reasonable cause statement is VERY rare. According to the IRS, the local PTA s reasonable cause statement must include each of the following: a. A written statement setting forth all of the facts that support its claim for reasonable cause for failing to file a required return or notice in each of the 3 consecutive years and over the entire consecutive 3-year period, including a detailed description of all the facts and circumstances that led to each failure and the continuous failure, the discovery of the failures, and the steps taken to avoid or mitigate the failures; b. A written statement describing the safeguards the local PTA has put into place to ensure that the local PTA will not fail to file returns or notices in the future; c. Evidence to substantiate all material aspects of the written statements described in paragraphs (a) and (b) of this section; d. A list of the annual information returns for the taxable years not filed, which are enclosed. (In other words, all delinquent Forms 990 or 990-EZ must be enclosed with the packet.)

3 IRS Reinstatement Instructions Page 2 of 6 e. An original declaration, dated and signed under penalties of perjury by an officer, director, trustee, or other official who is authorized to sign for the local PTA in the following form: I, (Name), (Title) declare, under penalties of perjury, that I am authorized to sign this request for retroactive reinstatement on behalf of [Name of Local PTA], and I further declare that I have examined this request for retroactive reinstatement, including the written explanation of all the facts and information pertaining to the claim for reasonable cause and the evidence to substantiate the claim for reasonable cause, and to the best of my knowledge and belief, this request is true, correct, and complete. Note: In preparing your reasonable cause statement, be sure to explain not only why the returns were not filed for each of the 3 years but also why the returns were not filed later during the 3-year period. The local PTA should demonstrate that it exercised ordinary business care and prudence in attempting to comply with its reporting requirements. The IRS has provided the following 5 factors that weigh in favor of finding reasonable cause, which should be addressed in the reasonable cause statement, if applicable: i. Evidence that substantially all of the organization s activities are performed by volunteers. ii. The organization s failure was due to its reasonable, good faith reliance on erroneous written information from the IRS, stating that the organization was not required to file a return or notice, provided the IRS was made aware of all relevant facts. iii. The failure to file the returns or notices arose from events beyond the organization s control that made it impossible for the organization to file returns or notices for each of the 3 years at issue and over the entire 3-year period. iv. The organization acted in a responsible manner by undertaking significant steps to avoid or mitigate the failure to file the required returns or notices and to prevent similar failures in the future, including, but not limited to - Attempting to prevent an impediment or a failure, if it was foreseeable; - Acting as promptly as possible to remove an impediment or the cause of the reporting failure, once the failure was discovered; and - After the failure was discovered, implementing sufficient safeguards to ensure future compliance with the reporting requirements.

4 IRS Reinstatement Instructions Page 3 of 6 v. Aside from the 3 consecutive years in which the organization failed to file returns or notices, the organization has an established history of complying with its reporting requirements (if any) under the Internal Revenue Code. 3. Annual Information Returns Not Previously Filed Enclose properly completed and executed paper annual information returns (Forms 990 or Forms 990-EZ), whichever is applicable) for all taxable years during and after the consecutive 3-year period that the local PTA was required, but failed, to file an annual information return. If the local PTA was eligible to file a Form 990-N e-postcard (gross receipts less than $50,000) in any taxable year but failed to file either a Form 990-N e-postcard or an annual information return, the local PTA should submit a properly completed and executed Form 990-EZ for that taxable year IF they are applying for retroactive reinstatement. If you are not applying for retroactive reinstate by submitting a reasonable cause statement in 2 above and were eligible to file a Form 990-N, they are not required to file the past Form 990 annual returns. Note: In determining whether to file a Form 990 or Form 990-EZ, review the gross receipts and assets thresholds for the applicable year by following this link Who-Must-File. Tax forms for prior years can be obtained by searching for the applicable form at 4. Form 1023 Header Insert the name of the local PTA, and the local PTA s Employer Identification Number (EIN) in the header on each page of the Form Part I, Item 1 Insert the exact legal name of the local PTA as it appears on the local PTA s articles of incorporation filed with the state of incorporation. 6. Part I, Item 3 Insert the local PTA s mailing address. 7. Part I, Item 4 Insert the local PTA s 9-digit Employer Identification Number. 8. Part I, Item 5 Fill in the month the local PTA s fiscal year ends. For example, fill in 6 for a June 30 year end or 12 for a December 31 year end. 9. Part I, Item 6 Insert the primary contact name, phone number, and fax number for the local PTA. You may use the current president or another officer as the primary contact. 10. Part I, Item 9 Insert the local PTA s website and address, if any. 11. Part I, Item 11 Insert the date the local PTA was incorporated or formed. 12. Part II, Items 1 & 3 Check Yes in Item 1 and No in Item 3 if your local PTA is incorporated. Check No in Item 1 and Yes in Item 3 if your local PTA is not incorporated. Attach a copy of the local PTA s filed Articles of Incorporation, if any.

5 IRS Reinstatement Instructions Page 4 of 6 If you cannot locate a copy, contact the secretary of state of the state of incorporation to order a copy on file. If your local PTA is not incorporated, attach an organizational document indicating your local PTA s name and purpose signed by two members and dated. A sample is attached. Fill in the date of original formation. 13. Part II, Item 5 Attach a copy of the local PTA s Bylaws. Complete the enclosed Bylaws Certification, obtain the signature of an officer, and attach it to the front of the Bylaws. Please contact your state PTA office if you need your unit s bylaws. 14. Part III, Item 1 Indicate where in the local PTA s articles of incorporation, or organizational document, that its purposes are restricted to exempt purposes such as charitable and/or educational purposes. 15. Part III, Item 2 Indicate where in the local PTA s bylaws that upon dissolution, assets must be exclusively used for exempt purposes such as charitable and/or educational purposes. 16. Part V, Item 1a Attach a separate sheet of paper listing the names of all officers and all directors, their respective titles, and mailing addresses. For example, indicate John Smith, President and Director, 123 Main Street, Chicago Illinois For Item 1b and 1c, we have assumed no employee or independent contractors received more than 50,000 per year. If there are such employees or independent contractors, please list them on the sheet of paper as well. 17. Part V, Item 5a Although not required, the IRS recommends organizations adopt a conflicts of interest policy. If you have not adopted such a policy, attached is a sample Conflicts of Interest Policy for the local PTA to adopt. A copy of this policy, or the local PTA s own policy, should be included in the attachment to Form Part IX If your organization has been in existence for 5 or more completed tax years, provide a statement of revenues and expenses for each of the past 5 completed tax years, and complete the balance sheet. For example, if your organization was formed in 2006 or earlier, you would provide a statement of revenues and expenses for 2006, 2007, 2008, 2009, and 2010, along with the balance sheet for The statements of revenue and expenses, and balance sheet should be included separately in the attachment to Form If your organization has not been in existence for more than 5 completed tax years complete the statement of revenues and expenses for each year in existence and a reasonable good faith estimate of future finances for a total of 4 years, along with a balance sheet for the most recently completed fiscal year. For example, if you organization was formed in 2008, you would provide a statement of revenues and expenses for 2008, 2009, and 2010, along with projections for 2011, 2012, 2013, and 2014 along with a balance sheet for 2010.

6 IRS Reinstatement Instructions Page 5 of 6 Note: The directions for Part IX included on Form 1023 have since been revised and are not current. Please follow the instructions we are providing. 19. Part X, Item 5 & 6 Leave blank since the instructions for this section have been superseded. 20. Part XI, Fee Indicate whether the local PTA s annual gross receipts average $10,000 or more and whether as a result you are eligible for the reduced fee. Note that the instructions in Form 1023 on fees have been superseded. The current fee structure is as follows: - $400 for organizations whose gross receipts do not exceed $10,000 or less annually over a 4-year period. - $850 for organizations whose gross receipts exceed $10,000 annually over a 4-year period. 21. Part XI, Signature Type in the local PTA officer s name and title and have the local PTA officer sign the form on Page Check Make out a checking payable to the United States Treasury in the amount of $850 (or $400 if annual gross receipts do not exceed $10,000). 23. Checklist On the second page of the Checklist, fill in the location of the tax-exempt purposes and dissolution provisions. This will match the response given to Part III, Items 1 & Assemble Documents in the Following Order a. Check made payable to the United States Treasury in the appropriate amount. b. Cover Letter from Local PTA to IRS. c. Reasonable Cause Statement Signed by officer. d. Forms 990 or Forms 990-EZ for all taxable years not previously filed. e. Copy of Checklist for IRS Form f. IRS Form Signed by officer. g. Attachment to IRS Form h. Articles of Incorporation, or other organizational document. i. Bylaws Certification signed by officer followed by Bylaws. j. List of Officers and Directors. k. Conflict of Interest Policy. l. Statements of Revenues and Expenses. 25. Mailing Mail the documents and attachments, along with the check, to the address in the IRS cover letter. Note that the IRS address in the Checklist has been revised and is not up-to-date. The address on the sample cover letter is the correct address. Write Automatically Revoked on the top of the envelope. This is required to indicate to

7 IRS Reinstatement Instructions Page 6 of 6 the IRS that the local PTA may be eligible for retroactive reinstatement of its exempt status. 26. IRS Processing Within a few weeks after your package is sent to the IRS, you should receive a notification letter from the IRS indicating your materials have been received and are being reviewed. IRS processing times for applications for tax exemption vary from several months to a year or more. You may be contacted by the IRS if they need additional information to make a determination. Once your local PTA s tax exemption has been reinstated, you will receive an IRS determination letter.

8 Date: Internal Revenue Service P.O. Box Covington, KY Name: Dear Sir/Madam: On behalf of the applicant, enclosed herewith are the following documents: 1. Reasonable Cause Statement; 2. Information Returns (Forms 990 or 990-EZ) Not Filed for Prior Years; 3. Form 1023 Application for Recognition of Exemption; 4. Attachment to Form 1023; 5. Articles of Incorporation, if any, or other organizational document; 6. Bylaws and Bylaws Certification; 7. Conflict of Interest Policy; 8. List of Officers and Directors; 9. Statements of Revenue and Expenses; and 10. Check ($400 or $850) - User Fee Payable to Internal Revenue Service. By filing this application, the applicant is seeking relief under IRS Notice and requests retroactive reinstatement of its tax exemption to the date of automatic revocation. Sincerely, Title: Enclosures

9 ATTACHMENT TO FORM 1023 By filing this application, the applicant is seeking relief under IRS Notice and requests retroactive reinstatement of its tax exemption to the date of automatic revocation. Part IV Narrative Description of Activities The applicant was organized exclusively for charitable and educational purposes to promote children s health, well-being, and educational success through strong parent, family, and community involvement. The applicant offers a variety of programs to help parents, students, and communities in children s development. Programs promote topics such as volunteer work, after school programs, and a healthy lifestyle. The applicant also hosts events to engage parents in local schools and helps build family-school partnerships. The applicant recognizes and honors parents, teachers, and other leaders in the area of child advocacy. In fulfilling its mission, the applicant collaborates with other organizations to benefit children. In sum, the applicant serves as a resource for parents interested in student success. Part V Item 1a. Attached is a list of the names, titles, and mailing addresses of all of the officers and directors of the applicant. Officers and directors do not receive any compensation. Item 3a. The officers and directors spend approximately 5 to 10 hours per month working on the applicant s matters. The officers and directors are parents interested in the educational development of children, and govern and develop programs for the benefits of children in schools. Part VI Item 1. The applicant generally provides educational programming, materials, and events. See Narrative Description of Activities in Part IV. Part VIII 1

10 Item 4a, d. The applicant encourages donations and contributions from parents and may engage in fundraising activities such as candy sales in its local community. Item 15. The applicant is chartered by its state PTA and is also affiliated with the National PTA. Part IX See the attached statements of revenues and expenses, and balance sheet, for the applicable years. 2

11 Bylaws Certification THE UNDERSIGNED hereby confirms that attached hereto is a true and correct copy of the Bylaws, as of the date hereof. Name: Title: Date:

12 Organizational Document of We are an unincorporated association organized exclusively for charitable and educational purposes to promote children s health, well-being, and educational success through strong parent, family, and community involvement. 1. The association is formed exclusively for charitable and educational purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code of 1986 (or the corresponding provision of any future United States Internal Revenue Law). 2. No part of the net earnings of the association shall inure to the benefit of, or be distributable to its members, directors, officers, or other private persons, except that the association shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Section 4 hereof. No substantial part of the activities of the association shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the association shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of (or in opposition to) any candidate for public office. 3. Notwithstanding any other provisions of these articles, the association shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986 (or the corresponding provision of any future United States Internal Revenue Law), or (b) by a corporation, contributions to which are deductible under Section 170(c)(2) of the Internal Revenue Code of 1986 (or the corresponding provision of any future United States Internal Revenue Law). 4. Upon the dissolution of the association, the Board of Directors shall, after paying or making provision for the payment of all of the liabilities of the association, dispose of all of the assets of the association exclusively for the purposes of the association in such manner, or to such organization or organizations organized and operated exclusively for charitable, educational, religious, or scientific purposes as shall at the time qualify as an exempt organization or organizations under Section 501(c)(3) of the Internal Revenue Code of 1986 (or the corresponding provision of any future United States Internal Revenue Law), as the Board of Directors shall determine. Date Formed: Member Member

13 Conflict of Interest Policy Article I Purpose The purpose of the conflict of interest policy is to protect the interests of this tax-exempt organization, (the Organization ), when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Organization or might result in a possible excess benefit transaction. This policy is intended to supplement but not replace any applicable state and federal laws governing conflict of interest applicable to nonprofit and charitable organizations. 1. Interested Person Article II Definitions Any director, principal officer, or member of a committee with governing board delegated powers, who has a direct or indirect financial interest, as defined below, is an interested person. 2. Financial Interest A person has a financial interest if the person has, directly or indirectly, through business, investment, or family: a. An ownership or investment interest in any entity with which the Organization has a transaction or arrangement, b. A compensation arrangement with any entity or individual with which the Organization has a transaction or arrangement, or c. A proposal ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Organization is negotiating a transaction or arrangement. Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial. A financial interest is not necessarily a conflict of interest. Under Article III, Section 2, a person who has a financial interest may have a conflict of interest only if the appropriate governing board or committee decides that a conflict of interest exists.

14 Article III Procedures a. In connection with any actual or possible conflict of interest, an interested person must disclose the existence of the financial interest and be given the opportunity to disclose all material facts to the directors and members of committees with governing board delegated powers considering the proposed transaction or arrangement. b. The remaining board or committee members shall decide if a conflict of interest exists. c. After disclosure of the financial interest and all material facts, and after any discussion with the interested person, he/she shall leave the governing board or committee meeting while the determination of a conflict of interest is discussed and voted upon. d. An interested person may make a presentation at the governing board or committee meeting, but after the presentation, he/she shall leave the meeting during the discussion of, and the vote on, the transaction or arrangement involving the possible conflict of interest.

15 List of Officers and Directors Officer/Director Name Title Mailing Address

16 STATEMENT OF REVENUES & EXPENSES Revenues Year Ending / / Year Ending / / Year Ending / / Year Ending / / Year Ending / / Membership dues Contributions, gifts, grants, etc. Total Revenue Expenses Printing, publications, & postage Webpage Newsletter Bank fees Insurance Miscellaneous Supplies Telephone Total Expenses NET INCOME Balance Sheet as of Assets Cash Other Assets Liabilities Accounts Payable Other Liabilities

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38