State Chapter Finance/Accounting FAQ

1. What kind of records does our Chapter need to keep? What is an EIN#? State ChapterFinance/Accounting FAQ Does our Chapter need to apply for Tax Exemption? Does our Chapter need to file taxes? The information contained in this presentation is to serve as a general guideline. Please verify information and direct questions to your State and/or the IRS. Reference: www.IRS.gov

2. Overview • Obtaining an Employer Identification Number (EIN) • Applying for State Sales & Use Tax Exemption • Applying for Federal Tax Exemption • Filing a 990-N Tax Form • Record Keeping Guidelines Reference: www.IRS.gov

3. Obtaining an Employer Identification Number (EIN) • An EIN is a nine-digit number issued by the IRS and used to identify the tax accounts of employers and certain other organizations with no employees. This number is merely an identifier, similar to a Social Security number for an individual. • Applying for and receiving an EIN says nothing about the organization’s tax exemption status; however, your organization needs an EIN in order to apply for tax exemption or file tax documents. Reference: www.IRS.gov

4. Obtaining an EIN (continued) • Banks will not open a nonprofit organization account without an EIN. Most banks will assist in acquiring an EIN when an account is opened. • SHCA recommends as a best practice that affiliated chapters have a federal EIN. This recommendation is in keeping with the requirements of the Association Finance Department of the American Hospital Association, SHCA’s parent organization. • NOTE: Prior to applying for an EIN, make sure your state chapter does not fall under the EIN of a parent organization if part of a state hospital association or other entity. • For more information on obtaining an EIN go to: http://www.irs.gov/charities/article/0,,id=136198,00.html Reference: www.IRS.gov

5. Applying for State Sales & Use Tax Exemption • Each state differs in its requirements for qualifying for sales and use tax exemption. • Most states require organizations to obtain federal exempt status prior to applying for state tax exemption. Some states will only recognize 501c3 federal exemption. • It is important to think about your chapters objectives and future goals when considering applying for exemption (ie. tax expenses incurred when holding conferences and vendor contributions/donations being tax deductible). • To find out your state requirements you may go to: www.ky.gov and perform a search on sales and use tax exemption. (Replace ky in the weblink with your state’s two letter initial). Reference: www.IRS.gov

6. Applying for Federal Tax Exemption • Although State Chapters are affiliated with SHCA, they are not under an umbrella exemption with SHCA. • To be recognized as exempt from federal income taxation, most organizations are required to apply for recognition of exemption. Applying for recognition of exemption results in formal IRS recognition of an organization’s status. • Organizations applying for exempt status are required to complete an application (IRS Form 1023 or Form 1024). Reference: www.IRS.gov

7. Applying for Federal Tax Exemption (continued) • 501(c) exempt status is a broad term. There are actually 27 subsections of 501c depending on the type of the organization, i.e., 501c3 is for charitable/religious and educational organizations and 501c6 is for business leagues. SHCA has 501c6 exemption as well as some other State Chapters. Some states (such as Kentucky) will not accept 501c6 exemption when organizations apply for state sales & use tax exemption. • Contributions/Donations to organizations with 501c6 recognition are not deductible on the donor’s federal income tax return unless it could be considered as an ordinary business expense. Reference: www.IRS.gov

8. Applying for Federal Tax Exemption (continued) Helpful links when applying for Federal Tax Exemption: http://www.irs.gov/pub/irs-pdf/f1023.pdf http://www.irs.gov/pub/irs-pdf/i1023.pdf http://www.irs.gov/pub/irs-pdf/k1024.pdf http://www.irs.gov/pub/irs-pdf/p557.pdf Reference: www.IRS.gov

9. Filing a 990-N Tax Form • Smaller tax-exempt organizations (those normally with annual gross receipts up to $25,000 & who are not required to file a form 990 or 990-EZ) may be required to file an annual electronic notice, Form 990-N. • This requirement began in 2008 and may apply to organizations that previously were not required to file returns. • The 990-N is an e-Postcard Form that is easily completed and mainly asks for updates to contact information. It is due annually by the 15th day of the 5th month after your Chapter’s tax year. The 990-N cannot be filed until after your tax year ends. For further information on completing a 990-N Form go to: http://www.irs.gov/charities/article/0,,id=169250,00.html http://www.irs.gov/charities/article/0,,id=177782,00.html Reference: www.IRS.gov

10. Record Keeping • Tax exempt organizations should keep books and records detailing all activities, both financial and non-financial. • Financial records, particularly information on sources of support (contributions, grants, sponsorships, and other sources of revenue) and expenses should be detailed and include receipts, letters, cancelled checks, treasurer reports, previous tax returns, etc. • Other records would include historical documents such as bylaws and originating documents, detailed minutes of Board meetings, Committee/Activity reports, newsletters, website information, etc. • Federally recognized tax exempt organizations are required to make their tax exempt application, federal tax exempt recognition letter, and recent annual tax returns available to the public for viewing upon request. Reference: www.IRS.gov

11. The End Reference: www.IRS.gov