Presented by DG Chet Dal Santo

2013 Assemblies

IRS Classification Tax Deductible

Status Fundraising Disclosures

Required Unrelated Business

Income Tax General Excise Tax

Filing Requirement Charities

Registration Accounting Net Assets Functional

Expenses Financial

Statements Recommendations

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The IRS has 29 types of 501(c) designations which grant exemption from taxes

So what designation does our Rotary Clubs fall

under?

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May 13, 1958, the IRS declared Rotary International and its clubs and districts exempt from federal income taxes under IRC Section 501(c)(4).

IRC 501(c)(4)

Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively

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General Concept:

Organizations that promote social welfare should primarily promote the common

good and general welfare of the people of the community as a whole.

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Although very similar to a 501(c)(3), there are differences 501(c)(3) organizations are prohibited from

“carrying on propaganda, or otherwise attempting to influence legislation” as a “substantial part” of its activities.

Social welfare organizations, cannot attract charitable donations that are deductible for income, gift, and estate tax purposes.

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Donations to your club are not deductible as charitable donations by the donor.

Membership dues may be deductible for some Rotarians as a business expense.

Rotary meetings may be deductible for Rotarians as a Meal & Entertainment Expense.

Deductibility is determined by Rotarians status; business vs. individual

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All fundraising income is subject to State of Hawaii General Excise Taxes

Sponsorships may be deductible for Rotarians as a business expenses. Business expenses are generally preferred

over charitable contributions for businesses

Ticket Sales do not have a charitable donation allocation.

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IRC Section 6113 requires certain tax-exempt organizations that are ineligible to receive tax deductible charitable contributions to disclose, in “an express statement (in a conspicuous and easily recognizable format), “ the nondeductibility of contributions during fundraising solicitations.

Organizations whose annual gross receipts do not normally exceed $100,000 are excepted from this disclosure requirement

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Disclosure must be: Medium in Print At least same size type as the primary message Included on the message side of any card or

tear off section that the contributor returns with the contribution

First sentence in a paragraph or a paragraph itself

See IRS Notice 88-120: included in your handouts for more information

August 16, 2011

“Contributions or gifts to [name of organization] are not deductible as charitable contributions for Federal income tax purposes”

“Contributions or gifts to [name of organization] are not tax deductible”

“Contributions or gifts to [name of organization] are not tax deductible as charitable contributions

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Aka – UBIT or UBTI IRS Publication 598 – Tax on Unrelated

Business Income of Exempt Organizations Unrelated business income is the income

from a trade or business regularly carried on by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity.

Certain trade or businesses are not treated as an unrelated trade or business.

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Membership list sales – taxable

Advertising – taxable

Sponsorship – not taxable

Selling Donated Merchandise – not taxable

Volunteer Workforce – not taxable

UBIT is a Gray area – seek professional assistance to assist in determination

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State of Hawaii

Membership and donations are generally exempt

Must pay on fundraising and unrelated business income

Effective July 1, 2010 – State placed a trust fund liability unto unpaid taxes.

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Form 990 Due 15th day of the 5th month after your fiscal

year end. December 31st yearend, due date is May 15th

Up to 6 month extension

Form 990-T and N-70NP Unrelated business income tax returns for

federal and state; same due date Extension available, but payments are due on

15th day of the 5th month after your fiscal year end

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Form G-45 General Excise Tax Return Monthly, quarterly or semi-annually Due on 20th day after period close

Month – following month Quarterly – April 20th, July 20th, October 20th, January

20th Semi-annually – July 20th and January 20th

Form G-49 Annual Reconciliation Due April 20th

No Extensions available for G-45 or G-49

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State of Hawaii Attorney General Charities registration law requires charitable organizations that solicit contributions to register [see handout]

Filing due dates are linked to Form 990 Tiered annual fees based upon gross

revenues Generally, less than $25,000 in gross

revenues, exempts organization from registration requirements

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Generally Accepted Accounting Principles GAAP

Accural based accounting Income is recorded when earned

Contributions are recorded when there is a detrimental reliance on the income

Expenses are recorded when incurred Prepare a budget Reconciliations should be performed monthly Person doing books should not have check

signing authority Copies of all deposits should be made Invoices should be properly coded and

canceled2013 Assemblies

Unrestricted Net Assets BOD Designated

Temporarily Restricted Net Assets Donor Restricted Time Restricted Transfer to Unrestricted

No separate expense matching

Permanently Restricted Net Assets Endowment

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Program Services International Service project Community Service Projects RYLA, Interact, other

Management and General

Fundraising Event 1 Event 2

Membership2013 Assemblies

Statement of Financial Condition aka – Balance Sheet

Statement of Activities aka – Income Statement or Profit & Loss

Statement of Functional Expenses Program Management & General Fundraising Membership

Statement of Cash Flows

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Sample Rotary ClubStatements of Financial PositionJune 30, 2013   

2013Assets

Current Assets:

Cash and Cash Equivalents (Note 4) $

-

Grants Receivable (Note 5)

-

Other Receivable

-

Total Current Assets

-

Property and Equipment: (Note 6)

Property and Equipment

-

Less: Accumulated Depreciation

-

Property and Equipment-Net

-

Other Assets:

Deposits Held in Trust (Note 7)

-

Total Other Assets

-

Total Assets $ -

Liabilities and Net AssetsCurrent Liabilities:

Accrued Payroll and Payroll Taxes $

-

Total Current Liabilities

-

Other Liabilities:

Deposits Held in Trust (Note 7)

-

Accrued Earned Leave (Note 8)

-

Other Liabilities

-

Total Other Liabilities -

Total Liabilities -

Net Assets (Note 3)

Unrestricted

-

Temporarily Restricted

- Permanently Restricted

Total Net Assets -

Total Liabilities and Net Assets $ -

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Net Assets (Note 3)UnrestrictedTemporarily RestrictedPermanently Restricted

Total Net Assets

Sample Rotary ClubStatements of ActivitiesFor the Year Ended June 30, 2013                     

Temporarily

Permanently

Unrestricted

Restricted

Restricted Total

Revenues, GainsAnd Other SupportRevenues

Block Grants $ -

$ -

$ -

$ -

Other Grants -

-

-

-

Donations -

-

-

-

Fundraising -

-

-

-

County Grants -

-

-

-

Interest -

-

-

-

Miscellaneous -

-

-

-

Total Revenues, Gains

And Other Support -

-

-

-

ExpensesProgram Expenses

-

-

-

-

Management and General

-

-

-

-

Fundraising

-

-

- -

Total Expenses

-

-

-

-

Change In Net Assets -

-

-

-

Net Assets at Beginning of Year

-

-

-

-

Net Assets at End of Year

$ -

$ -

$ -

$ -

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Program ExpensesManagement and General

Fundraising

Sample Rotary ClubStatements of Functional ExpensesFor the Year Ended June 30, 2013           

Management

Program and

Services GeneralFundrais

ingMembers

hip TotalPayroll & Payroll Taxes

$ -

$ -

$ -

$ -

$ -

Clothing -

-

-

-

-

Medical -

-

-

-

-

Special Needs -

-

-

-

-

Transportation -

-

-

-

-

Education -

-

-

-

-

Character Building -

-

-

-

-

Professional Fees -

-

-

-

-

Miscellaneous -

-

-

-

-

Insurance -

-

-

-

-

Training -

-

-

-

-

Rent/Dep/Housing -

-

-

-

-

Board & Staff Training

-

-

-

-

-

Newsletter -

-

-

-

-

Advertising -

-

-

-

-

Office Expense -

-

-

-

-

Postage & Supplies

-

-

-

-

-

Depreciation -

-

-

-

-

Utilities -

-

-

-

-

Equipment Rental -

-

-

-

-

Taxes -

-

-

-

-

Dues & Subscriptions

-

-

-

-

-

Community Education

-

-

-

-

-

Travel -

-

-

-

-

Outreach -

-

-

-

-

Volunteer Expense -

-

-

-

-

Total $ -

$ -

$ -

$ -

$ -

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Functional ExpensesNatural Expenses

Identify all income sources and classify them accordingly

Utilize professionals to assist in compliance Utilize accounting software (Like Quick

Books) Ensure persons handling finances is

knowledgeable 2 signatures on all Checks or approved

memo signed by 2 members.

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To check clubs status:

http://www.irs.gov/Charities-&-Non-Profits/Automatic-Revocation-of-Exemption-List

Future Vision account name:The Rotary Club of ___________

TRF District Grants Account

2013 Assemblies