presentation for wwwpkfpacifichawaiicom May 11 2012 Manoj Samaranayake CPA Partner Tax Services Tax Exempt vs Nonprofit distinction Federal Tax Requirements in general IRS Hawaii Tax Requirements ID: 757735
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Slide1
Filing Requirements for Not-for-Profit Organizations in Hawaiipresentation for
www.pkfpacifichawaii.com
May 11, 2012
Manoj Samaranayake, CPA
- Partner, Tax ServicesSlide2
Tax Exempt vs. Nonprofit distinctionFederal Tax Requirements in general (IRS)Hawaii Tax Requirements Administered by Hawaii Department of Taxation
General Excise Tax New RequirementsNew Form GE-1
Hawaii State Filing Requirements – Administered by Hawaii Attorney GeneralHawaii Nonprofit sector snapshot and facts
Overview
www.pkfpacifichawaii.comSlide3
Tax exempt organizations include those that are organized as not-for-profit, such as corporations organized under Hawaii nonprofit corporation laws.Merely organizing as a nonprofit entity does not necessarily mean that the IRS will recognize it as tax-exempt.Tax Exempt is a concept of federal tax
Nonprofit is a concept of state law
Nonprofit vs. Tax Exempt Organizations
www.pkfpacifichawaii.comSlide4
Tax-Exempt Status for Alumni AssociationsSection 501(c)(3) – Charitable Organization
Contributions are deductible as charitable contributions on the donor’s income tax return.Religious, charitable, scientific, literary & educational organizations.
Section 501(c)(7) – Social & Recreation ClubsA club should be supported solely by membership fees, dues, and assessments.
May receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status.Up to 15% of gross receipts may be derived from the use club facilities by general public or from unrelated purposes.www.pkfpacifichawaii.comSlide5
General Federal Filing Requirements2010 & 2011 Tax Years (Filed in 2011 or 2012)
www.pkfpacifichawaii.com
Gross Receipts
Form
Normally ≤ $50,000
Form 990-N
> $50,000 and < $200,000 and total assets < $500,000
Form 990-EZ or 990
≥
$200,000 and/or total assets
≥ $500,000
Form 990Slide6
Qualifying for Tax Exempt Treatment Under Hawaii Tax LawsHawaii Taxes
Income taxesOrganization will be exempt for Hawaii income tax if the organization qualifies for exemption for federal income tax purposes
.General excise taxes (GET)GET law requires certain organizations to apply for exemption from the payment of GET by filing Form G-6.
Receive a letter from Hawaii approving the GET exemption.www.pkfpacifichawaii.comSlide7
GET filing RequirementsHawaii TaxesGeneral excise taxes (GET) continued
Amounts received as dues, donations, or gifts are not included in gross income subject to GET.
Gross income received from the conduct of any fundraising activity is subject to GET.Interest income may be subject to GET.File forms G-45 & G-49.
See TIR 2010-05 for explanation of denial of GET benefits.www.pkfpacifichawaii.comSlide8
GET filing RequirementsTax Information Release 2010-05 (issued 07/29/10)
Discusses Act 155 from 2010 (requiring GET filings).
Effective June 1, 2010, any nonprofit organization who is required to obtain a general excise tax (GET) license and fails to do so or who has a license and fails to file Form G-49 within 12 months of the prescribed due date may be denied GET benefits, such as exemptions, deductions, or lower rates.
Reasonable cause safe harbor.Must file annual G-49 even if no liability.
www.pkfpacifichawaii.comSlide9
New Hawaii Form GE-1Tax Information Release 2011-04 (issued 09/26/11)
Discusses reporting requirements of Act 105 from 2011
Gathering info about exclusions and exemptions Most for profit companies required to file Form GE-1For 12/31/10, 12/31/11, 12/31/12
Most nonprofit companies not required to fileUnless had unrelated trade or business income &Claimed business deductions and exemptions
www.pkfpacifichawaii.comSlide10
Additional Tax Filings (if necessary)Federal
Form 990-TReport unrelated business income of > $1000
Same filing due date (05/15) Additional 6 month extension availableHawaii
Form N-70NPSimilar to Fed requirementsOnly needed if 990-T is filedFiling due date (04/20)Additional 6 month extension available
www.pkfpacifichawaii.comSlide11
Summary – Tax FilingsFederal (IRS)
Federal Form 990, 990-EZ or 990-NFederal Form 990-T (if necessary)
Hawaii (Department of Taxation)Hawaii Form G-45 and G-49 (general excise tax returns)
Hawaii Form N-70NP (if necessary)Hawaii Form G-1 (if necessary)www.pkfpacifichawaii.comSlide12
Hawaii – State Filing RequirementsNew Requirements effective in 2009.
Administered by Attorney General.http://
hawaii.gov/ag/charitiesAct 174 requires charities that solicit contributions to register with the Attorney General unless exempted from the registration requirement.
Amended Hawaii Revised Statutes 467B.www.pkfpacifichawaii.comSlide13
Hawaii – State Filing RequirementsOne-Time Charity
Registration
-Link to the Hawaii registration site: http://efile.form990.org/frmNPParticipatingStateSCOHI.asp
- There is no fee to register - Registration statement requires two officers to electronically sign - Request Login ID and password for two officers of the organization
- Create registration using the File Creation Wizard - Online tutorial is available at this site and recommended before starting the registration process
www.pkfpacifichawaii.comSlide14
Hawaii – State Filing RequirementsWhat is a “Charitable Organization” for the purposes of the registration law?
A “charitable organization” is any organization that solicits funds in Hawaii that is exempt under section 501(c)(3) of the Internal Revenue Code. Charitable organizations also include any person who is or holds itself out to be established for any benevolent, educational, philanthropic, humane, scientific, patriotic, social welfare or advocacy, public health, environmental conservation, civic, or other eleemosynary purpose, or any person who in any manner employs a charitable appeal as the basis of any solicitation or an appeal that has a tendency to suggest there is a charitable purpose to the solicitation.
www.pkfpacifichawaii.comSlide15
Hawaii – State Filing RequirementsThe term solicit or solicitation is already defined in the current law as:
“Solicit” and “Solicitation” mean a request directly or indirectly for money, credit, property, financial assistance, or thing of value on the plea or representation that the money, credit, property, financial assistance, or thing of value, or any portion thereof, will be used for a charitable purpose or to benefit a charitable organization.
A grant received from the government, or another 501(c)(3) organization is not a contribution. Nor are membership dues and assessments.
www.pkfpacifichawaii.comSlide16
Hawaii – State Filing RequirementsThe following charitable organizations are exempt from the registration requirements:
Any duly organized religious corporation, institution, or society;Any parent-teacher association; An educational institution that is licensed or accredited by an accrediting body;
A 501(c)(3) organization that primarily solicit contributions from parents, alumni, students and faculty of the foregoing accredited educational institutions;Any nonprofit hospital licensed by the State or any similar provision of the laws of any other state;Any governmental unit or instrumentality of any state or the United States; and
Any charitable organization that normally receives less than $25,000 in contributions annually, if the organization does not compensate any professional solicitor or professional fundraising counsel.www.pkfpacifichawaii.comSlide17
Hawaii – State Filing RequirementsRequires the submission of an annual financial report
Provides that the report shall be the charity's IRS Form 990 or 990-EZ.Must be filed with the Attorney General on or before the date that the charity files the Form 990 or
990-EZ with the IRS.Requires submission of an audited financial statement if the charity has over $500,000 in gross income, or where the charity prepares
an audited financial statement required by a governmental authority or third party. Gross income does not include grants from governmental authorities. Thus, only those charities with public contributions that exceed $500,000 as shown on line 1a of the Form 990 or 990-EZ need obtain an audited financial statement.
www.pkfpacifichawaii.comSlide18
Hawaii – State Filing RequirementsThe law requires each registered charity to pay an annual fee based on the charity’s annual gross income:
www.pkfpacifichawaii.com
Annual
Gross Income
Annual Fee
< $25,000
$10
$25,000 < $50,000
$25
$50,000 < $100,000
$50
$100,000 < $250,000
$100
$250,000 < $500,000
$150
$500,000 < $1,000,000
$200
$1,000,000 < $2,000,000
$250
$2,000,000 < $5,000,000
$350
≥ $5,000,000
$600Slide19
Hawaii – State Filing RequirementsAnnual Business Filing with the Department of Commerce and Consumer Affairs
State of Hawaii – DCCA Business Registration website for form – “domestic non profit” sectionUpdate new officers and directors
Validate addressOnline filing fee is a nominal $5.00Renew at www.ehawaii.gov/annuals
www.pkfpacifichawaii.comSlide20
Hawaii Alliance of Nonprofit Organizations(HANO)2011 Hawaii Nonprofit Sector Reportreleased 02/07/12
www.pkfpacifichawaii.comSlide21
How the sector breaks down in HawaiiThere were 7,777 total nonprofits in Hawaii in 2008
www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)Slide22
How the sector breaks down in Hawaiiwww.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Tax-Exempt Organizations
Filing Annual IRS Report**
(over $25k in gross receipts)
Registered with
IRS
(over $5k in gross receipts)
Under 501(c)
(3)*
2,801
5,778
Charitable Nonprofits
2,525
5,448
Private
Foundations
(orgs. that grant funding to nonprofits)
276
330
Under Other 501(c)
886
1,669
501(c)(4) Social Welfare
224
509
501(c)(5) Labor/Agriculture
122
208
501(c)(6) Business Leagues
275
427
501(c)(other)
265
525
* Does not include religious congregations. Data from 12/2008 Business Master File data may not match other figures in this report. SOURCES:
NCCS
Data Web, National Center for Charitable Statistics,
http://nccsdataweb.urban.org/
© 2010
** Includes 990, 990-PF, 990-EZ, and 990-NSlide23
Number of reporting Hawaii Nonprofits by field, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Types of Charities
Number
Total %
Arts, Culture, Humanities
276
15.03%
Education
330
17.97%
Environment
or
Animal
Related
111
6.05%
Community Improvement,
Public/Societal Benefit
186
10.13%
Health Care or Mental
Health
222
12.09%
Human Services
561
30.56%
Religion Related, Spiritual
Development
76
4.14%
Research: Science, Technology, Social Science
19
1.03%
All Others
55
3.00%
Total
1,836
100.00%Slide24
Number of reporting Hawaii Nonprofits by field, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)Slide25
Key ObservationsHealth Care, Mental Health, and Human Services together comprise 40% of Hawaii’s nonprofits, followed by Education at 17%, and Arts, Culture & Humanities at 15%.
Educational nonprofits hold the most assets of all the categories, at 60%.
Of all the categories, Hospitals are the nonprofits with the highest expenditures, at almost 42%.
www.pkfpacifichawaii.comSlide26
Percent of Charities by Expenditure Levelwww.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)Slide27
Percent of Charities by Expenditure Levelwww.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Expenditure Level
# of Charities
Assets
Expenditures
%
of Total Charities
% of Total Assets
% of Total Expend-
itures
< $100K
816
$268,684,395
$36,454,955
44.44%
1.67%
0.84%
$100K < $500K
516
$397,161,935
$118,833,501
28.10%
2.47%
2.72%
$500K < $1M
164
$363,048,660
$116,280,889
8.93%
2.26%
2.67%
$1M < $5M
226
$1,354,939,438
$480,905,292
12.31%
8.44%
11.02%
$5M < $10M
50
$666,563,511
$348,144,421
2.72%
4.15%
7.89%
> $10M
64
$12,999,807,833
$3,262,551,440
3.49%
80.99%
74.77%
Total
1,836
$16,050,205,773
$4,363,170,498
100%
100%
100%Slide28
Number of Hawaii Nonprofits by County, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Kauai
112 nonprofits
1%
Honolulu
1,206 nonprofits
91%
Maui, Molokai, Lanai
254 nonprofits
3%
Hawaii Island
264 nonprofits
5%Slide29
Hawaii Foundations, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Foundation Type
# of Foundations
Assets
Total Giving
Independent Foundations
275
$977,958,460
$61,608,773
Corporate Foundations
19
$174,144,601
$8,440,805
Community Foundations
2
$386,168,222
$23,357,205
Operating Foundations
28
$362,196,814
$3,067,450
Total
in Hawaii
324
$1,900,468,097
$96,474,233
Total in United
States
75,595
$564,950,926,000
$46,781,305,000
Hawaii as a % of US
0.43%
0.34%
0.21%Slide30
Top 10 Hawaii Foundations by Assets, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Foundation Name
Assets
Foundation Type
1
Hawaii Community Foundation
$385,186,618
Community
2
Harold K. L. Castle Foundation
$178,943,822
Independent
3
The
Hau’oli
Mau Loa Foundation
$147,387,323
Operating
4
The Clarence T. C. Ching Foundation
$124,894,370
Corporate
5
Consuelo
Zobel
Alger Foundation
$118,214,718
Operating
6
Atherton Family Foundation
$80,397,394
Independent
7
McInerny
Foundation
$63,260,233
Independent
8
New Moon Foundation
$44,081,318
Operating
9
The Shaw “U.S.” Foundation
$41,509,297
Independent
10
Na ‘
Aina
Kai Botanical Gardens
$35,450,906
Operating
Total
$1,219,325,999Slide31
Top 10 Hawaii Foundations by Total Giving, 2008www.pkfpacifichawaii.com
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Foundation Name
Total
Giving
Foundation Type
1
Hawaii Community Foundation
$23,282,204
Community
2
Harold
K. L. Castle Foundation
$6,922,581
Independent
3
The Shaw “U.S.” Foundation
$6,211,304
Independent
4
Atherton
Family Foundation
$4,567,670
Independent
5
McInerny
Foundation
$2,898,187
Independent
6
Victoria S. and Bradley L. Geist Foundation
$2,137,801
Independent
7
Alexander
& Baldwin Foundation
$2,123,675
Corporate
8
Samuel N. and Mary Castle Foundation
$2,069,075
Independent
9
HMSA
Foundation
$1,790,695
Independent
10
First Hawaiian Bank Foundation
$1,777,731
Corporate
Total
$53,780,923Slide32
ResourcesBoardSource
(www.boardsource.org)
Dedicated to advancing the public good by building exceptional nonprofit boards and inspiring board service.Strives to support and promote excellence in board service.
Premier source of cutting-edge thinking and resources related to nonprofit boards.Engages and develops the next generation.GuideStar
(www.guidestar.org)Mission: to revolutionize philanthropy and nonprofit practice by providing information that advances transparency, enables users to make better decisions, and encourages charitable giving.
On their site, you can view the IRS Form 990 for any nonprofit organization registered with the
IRS.
www.pkfpacifichawaii.comSlide33
ResourcesHawaii Alliance of Nonprofit Organizations
(www.hano-hawaii.org)
Unites and strengthens the nonprofit sector as a collective to improve the quality of life in Hawaii.National Council of Nonprofits (
www.councilofnonprofits.org)Nation’s largest nonprofit network.Works through member State Associations to amplify the voices of America’s local community-based nonprofit organizations, help them engage in critical policy issues affecting the sector, manage and lead more effectively, collaborate and exchange solutions, and achieve greater impact in their communities.
www.pkfpacifichawaii.comSlide34
www.pkfpacifichawaii.comAny final questions or comments?Slide35
THANK YOU!
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