4-H Clubs, Affiliates, Banking and Taxes New York State 4-H March 15, 2011
Dec 21, 2015
4-H Clubs, Affiliates, Banking and Taxes
New York State 4-H March 15, 2011
Agenda
• History of tax exemption• What are the tax exemption changes• What is a tax exemption• What isn’t a tax exemption• What has changed for the Association• What has changed for the Club• EIN’s, clubs, and banking• Affiliates vs. Clubs• MOU’s• A note about contracts
History of tax exemption
• Group Exemption 2704, Issued by the IRS in 1946 made 4-H Clubs and Groups exempt from taxes
• Clubs could accept donations of money, animals or items, and donors could claim this as a tax deductible donation
• Clubs are subordinates of the association• Clubs did not have to file any tax documents
Tax Exemption Changes
• Pension Reform Act 2006 made all tax exempt organizations file tax returns
• USDA/4-H Headquarters dictated that clubs should file 990 series returns
• 2008 IRS began to look at Clubs more closely, 4-H Headquarters attempted to keep a list of all the clubs in the country
• Tracking of all the clubs at the federal level was deemed to be unworkable
• Group Exemption 2704, will not be recognized by the IRS after April 15th 2011
What is a tax exemption for 4-H Clubs and Affiliates?
• 4-H Clubs as activities (vs. subordinate organizations) of the association, don’t pay taxes on gifts of money, animals or items
• 4-H Affiliates don’t pay income taxes as they are covered by the MOU with the Association
• In most cases 4-H Clubs don’t collect sales taxes on fundraisers
• 4-H Clubs and affiliates with current MOU’s (unless separately organized 501c3’s) don’t file taxes
What isn’t a tax exemption?
• 4-H Clubs do not qualify for sales sales tax exemption certificate
• 4-H affiliates may qualify if separately organized 501(c)3s
• This means club volunteer leaders shopping for supplies must pay sales tax
• Exception: associations, at the discretion of the ED may make purchases on behalf of the club, this would be appropriate for large purchases ie: fundraising materials
Changes affecting the Association
• Club’s activities are activities of the association• Affiliate’s activities are activities of the affiliate• Associations must approve new club bank accounts
and monitor club banking activity• Clubs with a large bank balance (average greater
than $2,500) or doing a large amount of transactions (greater than $7,500) should be doing financials through the association going forward (see FORM Code 1601)
Changes affecting the Club
• Clubs with large amounts of cash or large dollar transactions need to handle their finances through the Association
• NY Clubs do not file any tax returns for ‘10 – ’11 program year
• Clubs opening new bank accounts will need an EIN and someone from the Association should be a co-signer
• With permission of the Extension Executive Director clubs may carry up to $750. over to the next program year (this was $500.)
Reminders
• Reports and financial procedures need to be followed closely
• Audits must be completed• Financial reports must be turned into the association on
a timely basis• A club that does not follow procedures risks an
unfavorable outside audit outcome for the association
What about taxes?(Clubs)
• For the 2010 year, clubs that filed the e-postcard in the past will need to do so again.
• This process ceases with the 2010-11 program year• Clubs that do not have an EIN do not file• Clubs that received a new EIN during the last program
year need to fill out a form 8821 and send it to the state office (this affects very few clubs, please contact Adam for details)
Affiliates vs. Clubs
• Affiliates: stand alone organizations, able to use the 4-H Name and emblem only by having an MOU with the association
• Examples include: County foundations, leader’s associations, county fair boards
• Activities: Deliver and plan programming, ie clubs, program committees
MOU’s
• The USDA holds the 4-H name and clover in trust for the educational and character building purposes of 4-H
• An unchartered group using the 4-H Name and emblem must have authorization for such use
• This authorization is spelled out in an MOU between the affiliate and the association
• The MOU template has been reviewed by PW Wood and Extension Administration and is available for Associations to personalize
A note about contracts
• On occasion clubs will be asked to sign contracts, these must be submitted to the Association for ED approval and PW Wood for review
• Contracts are to be signed by board president or ED• Clubs are activities of the association, therefore the
association is responsible for anything arising from a club signing a contract
Conclusion
NY is particularly prepared for these changes with the procedures already in place. These procedures simply become more critical.
Slideshow prepared by Adam Davis, NYS 4-H Program
With input from: Susan Kozykowski, Finance Manager, CCE Orange County
Robin Travis, Interim 4-H Program Leader and Executive Director CCE Schuyler
Ed Dwyer, Compliance Manager, CCE Administration
Questions?