Incorporated Entity. Elects Tax Exempt Status with the Internal Revenue Service. Treated as a public charity per I.R.S. guidelines

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1 1 2 3 Incorporated Entity Elects Tax Exempt Status with the Internal Revenue Service Treated as a public charity per I.R.S. guidelines 1

2 PROS Recognized Legal Entity Insurable Entity Required Monetary Accountability Searchable on IRS Look-Up Site Donations Can Be Accepted Tax Deductibility for Donors Public Trust Open Records Governing Board Legal Bylaws and Articles More Formality to Structure CONS Fees Involved to Incorporate - $125 Ohio Fees Involved for Entity Election $400-$1,200 I.R.S. Annual I.R.S. Reporting Form 990 More Recordkeeping Requirements Annual Ohio Reporting online I.R.S. Compliance Possible 1099 Filings Incorporation is the first step in becoming recognized as a charitable organization File paperwork with State of Ohio Incorporate as a business entity and appoint an agent to receive mailings from the State Forms available on Ohio Secretary of State Website Pay Appropriate Filing Fee Prepare Articles of Incorporation File Articles with Incorporation Paperwork Prepared by a qualified attorney Once accepted by State of Ohio, a Charter Number will be assigned 2

3 Apply for and obtain a Federal I.D. number from the I.R.S. Form SS4 File online for fastest service No fee to file Form SS4 s.gov/pub/irspdf/iss4.pdf Federal I.D. is used for all tax filing and banking purposes Once Federal I.D. is obtained, the organization can open a dedicated bank account at any banking institution Next is filing the I.R.S. Form 1023 Application for Recognition of Exemption Online version is interactive 1 Federal I.D. Number Articles of Incorporation Organization Bylaws State assigned Charter Number 3

4 1 What is your mission statement? 2 Do you have an initial board of trustees? 3 What are your anticipated sources of revenue? 4 What are your anticipated expenses?? Is there a filing fee? $450 $450 for entities with expected annual receipts of less than $10,000 $850 $850 for entities with expected annual receipts of greater than $10,000 4

5 OHIO IRS

6 CHOOSE A BOARD OF DIRECTORS CHOOSE INDIVIDUALS THAT ARE DEDICATED TO SERVE AND HAVE THE ABILITY TO HELP THE ORGANIZATION GROW Through Networking Contacts Through Specialized Knowledge With the ability to give and who can convince others to give CREATE A MISSION STATEMENT THAT WILL GUIDE THE ORGANIZATION 6

7 Create a set of organizational bylaws which will be formally adopted by the organization s board of directors. Address things such as: Mission Board Appointment Number of Board Members Board Member Recruiting Board Tenure Spending Policies Appointment of an Executive Director Investment Policy Acceptable Use of Funds Fundraising Policy BYLAWS SHOULD BE BROAD AND UNRESTRICTIVE Should always allow for growth and minor changes in policy, procedure, or spending vision 7

8 Election of officers Initial Terms for Board Members Ensure that board members rotate off in a regular cycle ú Consider three year terms ú Staggered initial terms ú Rotation of 1/3 of termed board members each year ú Actively recruit new board members all the time never ending! Establish a regular meeting schedule Create meaningful agendas BOARD COMMITTEES 8

9 Consider appointment / use of committees Committee structure spreads the tasks among members Committees are responsible for data gathering and analysis The real work is done in committee Use of committees allows regular meetings to be spent productively making decisions Possible Committees Fundraising & Development Grant Awards Finance & Budget Investment Marketing Education Board Nominating BOE Liaison TACKLE THE STRATEGIC PLANNING PROCESS 9

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11 Why hire an Executive Director? Allows board members / trustees to set direction and provide key assistance in strategic areas Allows for project management to move forward Gets results faster than waiting for board members to have time to get to the organizational to-do list Allows someone to be dedicated and devoted solely to the goals, strategies, and mission of the organization Outcomes and Milestone Achievements will be limited without a Director 11

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14 WHAT YOU SHOULD KNOW ABOUT GRANTS Where to find them? Foundation Center Who are these funders? Government, Private Foundations, Corporate Foundations What do they fund? Review of 990 schedule of grants given Search Foundation Center for keywords Find potential matches between your mission and foundation purpose Establish a relationship with the funder call them! Tell them all about your organization, ask if you re a fit. Be invited to apply this is critical! Apply for the grant. Include ALL the information requested. WHAT YOU SHOULD YOU INCLUDE IN THE GRANT APPLICATION Include ALL the information requested. Follow the directions implicitly! Typical information includes: Letter of introduction Brief information on your organization and mission. WHY you are applying? State your NEED WHO will benefit? HOW does the program fulfill your mission? HOW does your program fulfill the mission of the funder? WHO will be administering the program? WHO are the personnel involved? WHAT are their QUALIFICATIONS? HOW WILL YOU MEASURE SUCCESS? How will you document progress and outcomes? WHAT S IN IT FOR THEM? (the funder) PREPARE YOUR CASE STATEMENT AND CASE OUTLINE INCLUDE A REAL AND ACCURATE BUDGET 14

15 KEEP IT 15

16 FILE ANNUAL TAX REPORTS WITH I.R.S. ( Form 990 just previously discussed) COMPLY WITH I.R.S. REGULATIONS RELATING TO FUNDRAISING AND ALLOCATION OF FUNDRAISING PROCEEDS SEND / GIVE RECEIPTS FOR ALL DONATIONS GREATER THAN $ REPORT ALL PAYMENTS GREATER THAN $600 TO ANY INDIVIDUAL Be sure to have all vendors and payees complete an I.R.S. Form W9 Request for Taxpayer Identification Number. Keep these on file. NO USE OF TAX-FREE STATUS FOR PERSONAL GAIN IF DONATING TO DISTRICT TAX LEVY CAMPAIGNS BE SURE TO COMPLETE PROPER TAX ELECTIONS ALLOWING THE ENTITY TO DO SO. FOLLOW ALL DOLLAR LIMITAIONS CLOSELY. Status Form to File Gross receipts normally $50,000 Note: Organizations eligible to file thee-postcard may choose to file a full return 990-N Gross receipts < $200,000, and Total assets < $500,000 Gross receipts $200,000, or Total assets $500, EZ or Private foundation - regardless of financial status 990-PF 16

17 COMPLIANCE ISSUE Missing annual tax forms (Form 990) RESULT PENALTIES (expensive) More Penalties (including interest from date of non-compliance) EVENTUAL LOSS OF PREFERRED TAX EXEMPT STATUS (after 3 years of continued non reporting) Noncompliance with private inurement rules Lack of receipts provided to donors Sale of Advertising (advertising is considered a taxable sale) LOSS OF TAX EXEMPT STATUS PENALTIES (per occurrence) LOSS OF TAX EXEMPT STATUS If sales are not reported properly and taxes are unpaid: Penalties charged for nonpayment of Federal Income Tax if truly a reporting error or mistake. Taxes assessed. If INTENTIONALLY UNDER REPORTED - Could be considered Tax-Evasion by Tax Courts Fines / Criminal Charges / Jail Not issuing 1099 Forms to those required to receive them Use of Preferred Tax Status for personal gain Election law violations relating to donation of charitable funds to influence lobbying activities or the support of political campaigns $500 penalty for each missing 1099 Form Criminal Fraud charges in Federal Court system Tax Evasion Jail LOSS OF TAX EXEMPT STATUS TAX PENALTIES ARE PROHIBITIVELY EXPENSIVE. INTEREST CHARGES APPLY AND WILL BE ASSESSED TO ALL PENALTIES ORGANIZATIONS TRUSTEES / BOARD OF DIRECTORS COULD BECOME PERSONALLY LIABLE FOR PENALTY & INTEREST CHARGES NORMALLY TAX-DEDUCTIBLE DONATIONS WILL NO LONGER HAVE CHARITABLE CONTRIBUTION STATUS TO THE DONOR ALL REVENUE GENERATED BECOMES TAXABLE TO THE CORPORATE ENTITY BUSINESS TAX RETURNS MAY BE REQUIRED NO LONGER HAVE THE ABILITY TO DO FUNDRAISERS AS CHARITABLE EVENTS 17

18 Belinda Glavic Grassi, C.P.A. Board Member (8 years) Riverside Local School District (Lake) 32 year practicing C.P.A. Controller The Centers for Families and Children Health & Wellness, Behavioral Health, AOD, Employee Assistance, Workforce Development, Ohio Headstart & Early Learning Former School Treasurer / Current ODE Treasure Licensure 2018 John Carroll University MA Nonprofit Administration Belinda.grassi@riversideschools.net (440) Jennifer Harden President / Board Member (4 years) Riverside Local School District (Lake) Jennifer.Harden@riversideschools.net (440)