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4-H Clubs, Affiliates, Banking and Taxes

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

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4-H Clubs, Affiliates, Banking and Taxes

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  1. 4-H Clubs, Affiliates, Banking and Taxes New York State 4-H March 15, 2011

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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)

  8. 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.)

  9. 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

  10. 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)

  11. 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

  12. 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

  13. 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

  14. 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

  15. Questions?

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