Nonprofit Taxes: From Preparing Form 990s to Submitting Them Electronically

carolynmappleton's picture

Hosted by Nonprofit Tech Club Austin on August 3, 2020

Even though they are tax-exempt, most nonprofit organizations are required to file annual tax returns (via a Form 990) with the IRS. James Bradley, CPA, Tax Manager for Millan & Co. P.C.: Consultants and Certified Accountants, will share nonprofit best practices for filing with the IRS. You will learn about online submissions, about Form 990 sections on disclosure and governance, about electronic IRS tax audits of that form, and more. Come with your questions – Jim will have answers!

About Our Speaker

James Bradley is the Tax Manager for Millan & Company of Austin. He received his Masters in Business Taxation from the University of Southern California and has over twenty years experience as a certified public accountant. He has spent years providing complex accounting and tax advisory services to public charities, social welfare organizations, trade associations, and political organizations and he has been with Millan & Co., P.C. since 2007.

Chat Log 

00:45:21    Verva Densmore:    can we unmute for questions?
00:45:23    Eli van der Giessen:    Hi, I’m Eli with TechSoup. I’m in Vancouver 🇨🇦
00:45:29    ellenlee:    I’m here in Austin!
00:45:37    Elaine Wiant:    Dallas!
00:45:38    Andrea Herrera Moreno (she/her):    Hi! Andrea with Texas Alliance for Minorities in Engineering calling in from Austin, TX
00:45:44    Sean Hale (He|Him|His):    Greetings and salutations from just east of I-35 and 183.
00:46:13    Verva Densmore:    I file 990EZ.  This looks like it’s more than I’ll need.  Can you please let me know?
00:46:41    Kenny Felton:    Hi everyone, it's Kenny Felton with Texas Music Partners,in Kyle.
00:46:57    Nevin Kamath:    Nevin, central Austin!
00:47:05    Susannah:    Welcome!!!
00:47:10    Verva Densmore:    It’s so easy I don’ really need more.  Thank you but I’ll sign off.
00:49:33    Susannah:    Welcome! We'll get started in a minute or two
00:49:33    David Veal:    David Veal, Central Texas Angel Network
00:49:40    Dale:    I want to know more about the 2% thing in the 990.  Why is that necessary? 
00:49:47    Kenny Felton:    If you could you please explain schedule A, part II (especially steps 4-6)?  
100% my receipts came from individual public donations last year but if I follow the formula for the 1/3 rule, as I understand it, I won’t qualify. 
00:50:02    Elaine Wiant:    My organization has a 501(c)(3) group exemption for it's local chapters. Some have had trouble with the 990N in entering the group number. Is there an obvious place to enter it?
00:50:31    Nevin Kamath:    Excuse my eating :-P
00:55:56    Elaine Wiant:    My local chapters are having trouble being verified by Tech Soup because they are part of a group exemption. Help!
00:58:02    Carolyn M. Appleton:    We are also live on our Facebook group page!
01:00:08    Susannah:    Today’s Speaker is with:
#NPTechClubATX Co-sponsors:
TechSoup & NetSquared: &
NTEN: Nonprofit Technology Network:
#NPTechClubATX RSVPs & email updates:
Facebook group:
GivePulse volunteers:

01:06:11    Carolyn M. Appleton:    We will share your questions at the conclusion of Jim's talk - keep them in mind and speak up - ca. 7:15 p.m.
01:10:20    Carolyn M. Appleton:    James A. Bradley, CPA (MBT)
Senior Tax Manager
Millan & Co., PC
Downtown Austin
(512) 479-6819
01:12:45    Andrea Herrera Moreno (she/her):    Attendees can Zoom in on the shared screen by clicking the arrow on "View Options" (usually at the top of the shared screen) and selecting the Zoom ratio
01:14:46    Carolyn M. Appleton:    Thank you, Andrea!
01:30:17    Susannah:    Eli may have mentioned this - but today's presentation is being recorded and can be accessed online case someone wants to go back and review and or share the recording. Thanks!
01:34:27    Kenny Felton:    That's exactly what I'm interested in.
01:36:01    Susannah:    If you have a question please unmute yourself and jump in. 
01:37:59    Dale:    Don't forget Kenny's question. He was before Carolyn's question. 
01:43:31    Elaine Wiant:                   Maybe the "unusal grant" is the issue
01:57:12    ellenlee:    Thank you! Good breakdown of the line items on the 990.
02:00:05    Susannah:    Thanks for coming Ellen!
02:00:45    Andrea Herrera Moreno (she/her):    Thanks


00:51:38.880 --> 00:51:40.500
Eli van der Giessen: Well hi there friends, welcome.

00:51:41.070 --> 00:51:58.980
Eli van der Giessen: So, uh, my name is Eli and I'm the Net Squared community manager, which means I get to support the team in Austin who are, you know, building tech for good community and your skills as we sort of figure out where does technology fit into our organizations.

00:52:00.510 --> 00:52:14.640
Eli van der Giessen: So that's created as a global network of tech for good meetups of, of which Austin is one and and i'm come from tech soup, which is a nonprofit that helps other nonprofits get implement and use technology effectively.

00:52:16.290 --> 00:52:26.010
Eli van der Giessen: So I wasn't lying when I said global. There are about 128 groups in 41 countries, each of which are getting together monthly

00:52:26.580 --> 00:52:35.910
Eli van der Giessen: Currently online in the past online and in person, as we all came together and talked about how technology affects our nonprofits and our own cities.

00:52:36.360 --> 00:52:46.350
Eli van der Giessen: So for those of you who aren't in Austin, I would encourage you to go and look at our website at net and find your local chapter because there's probably a group close to you already

00:52:48.600 --> 00:52:51.150
Eli van der Giessen: So like all communities. We've got rules.

00:52:52.170 --> 00:53:07.380
Eli van der Giessen: We welcome everyone we really put community first because we're here to support each other we're ultimately here less about technology, but rather to build stronger nonprofits and technology is just the tool we use to help do that.

00:53:08.520 --> 00:53:16.530
Eli van der Giessen: For me, one of the top rules is being invite participation, each one of these groups is run by a local team of volunteers.

00:53:16.980 --> 00:53:27.300
Eli van der Giessen: And they're always recruiting they need your help to make this happen. It doesn't happen by accident. It happens because Carolyn and Susanna and the whole team come together to make these events.

00:53:27.960 --> 00:53:39.030
Eli van der Giessen: For you. And then lastly, we treat each other with kindness and respect which means before you ask a question before you type something into the chat box just take a second and say,

00:53:39.420 --> 00:53:48.930
Eli van der Giessen: am I bringing my most kindest empathetic self to that question. And if the answer is yes, then type away. Otherwise, try again. We're here for you.

00:53:50.880 --> 00:53:57.150
Eli van der Giessen: As I said, we definitely need your help. There are all kinds of roles, maybe you just want to take notes at these events.

00:53:57.540 --> 00:54:09.600
Eli van der Giessen: Maybe you want to help with marketing and support. Maybe you want to be an event producer, because you know the topic this group definitely needs reach out to the team and someone like Carolyn will be able to help you out.

00:54:12.510 --> 00:54:21.060
Eli van der Giessen: So I work with tech soup, which is a nonprofit like you that works to make sure that you have access to the right technology and hardware to succeed.

00:54:22.950 --> 00:54:38.640
Eli van der Giessen: And what we do at Tech soup is we partnered with about 120 of the largest technology companies, everyone from zoom to Microsoft Google to Amazon to Dell and what we do is we help them scale their donation and discount programs.

00:54:41.430 --> 00:54:49.620
Eli van der Giessen: And so what that practically looks like is you go to tech sue you create your free account. And once we've done that proof. Once that your nonprofit.

00:54:50.070 --> 00:54:56.610
Eli van der Giessen: Or, then we don't need to make you jump through more hoops. Again, which means all these companies now know that you're an eligible nonprofit.

00:54:56.880 --> 00:55:08.640
Eli van der Giessen: And can give you instantaneous access to the discounts. They provided to nonprofits. And so here's an example for a nonprofit with 10 staff and some of the savings, you can actually make

00:55:09.120 --> 00:55:21.180
Eli van der Giessen: As a nonprofit organization. And that's everything from free email hosting for life forever from Microsoft or Google down to huge discounts for your operating system.

00:55:21.840 --> 00:55:33.030
Eli van der Giessen: Or maybe you need a 50% discount on something like zoom. It's all there in the text of catalog, as I said, it's free. You're basically throwing your money away if you don't at least start with the Texas catalog.

00:55:35.010 --> 00:55:51.390
Eli van der Giessen: And this group is amazing, you know, they are planning and scheming well towards the end of this calendar year. As you can see their events coming up, September, October, November and December. So if you haven't yet RSVP for those events get on it.

00:55:52.920 --> 00:56:09.990
Eli van der Giessen: But with that, that's my quick introduction of tech soup and this network that the Austin group is part of. Now I'm going to pass it over to Susanna earlier, who is going to actually do you know the introductions and bring us all together as a group. So, ladies and gentlemen, here we go.

00:56:12.930 --> 00:56:22.830
Susannah: Hello. Hello. Thank you. Eli, thank you very much for being such a great host for us. And thank you for all that you do.

00:56:24.750 --> 00:56:40.470
Susannah: I'm Susanna earlier and hopefully you can see my screen that says that talks about antenna Net Squared nonprofit tech club Austin. So I'm here to talk for just a minute about the Austin angle.

00:56:41.070 --> 00:56:46.170
Susannah: And we are so glad that you are here where God you found us. We're a resource for nonprofits to

00:56:46.170 --> 00:56:53.970
Susannah: help nonprofits, learn more about tech and I'll share some of the links to these the

00:56:55.560 --> 00:57:05.010
Susannah: There's a, there's a slide that has some links and I'll share them in the chat box. But basically we're part of the network of tech clubs around the nation and

00:57:05.760 --> 00:57:11.430
Susannah: Programs are free for all, we'd really like to thank some of our co sponsors.

00:57:12.030 --> 00:57:24.810
Susannah: In addition to that, squared, and then 10 there's capital factory, who in pre pandemic times was our physical host, but we're so grateful for their continued support and also train on coffee. Great.

00:57:25.110 --> 00:57:42.120
Susannah: coffee place check out their website. They've got a they call it a pandemic care pack that is for sale and other great coffee. Here's those links that I was talking about. I'll share them. We invite you to especially to

00:57:43.530 --> 00:57:56.550
Susannah: join up with us on Facebook, on our nonprofit tech club Austin group. And I'm also going to share the link to our speakers website. If you want to reach out to our speaker afterwards.

00:57:57.480 --> 00:58:03.900
Susannah: To have and also you can best reach out to the nonprofit tech club Austin on Facebook. If you haven't already.

00:58:05.280 --> 00:58:08.250
Susannah: With some questions or suggestions. If you have any

00:58:08.640 --> 00:58:25.650
Susannah: And on to our presentation. So I see the questions coming in. Already, and Jim's asked me to give him a time check at 715 so he can be sure and take questions at that point and Carolyn and Dale are also going to be pitching. Some of those from the chat box. So do

00:58:26.580 --> 00:58:41.610
Susannah: Do type those in, or will open up your mic or you can open your mic and and speak your question. So without further ado, we're going to be talking about nonprofit taxes from preparing for 992 submitting them electronically.

00:58:42.150 --> 00:58:54.900
Susannah: The word taxes starts here and many, but especially in the nonprofit world, mainly because nonprofit professionals are so busy with mission driven activities that sometimes learning about nonprofit taxes just

00:58:55.170 --> 00:59:04.800
Susannah: falls to the bottom of the list, which was why we are so grateful to have our speaker here today. Jim Bradley. He's a tax manager for Milan and company in Boston.

00:59:05.220 --> 00:59:15.060
Susannah: He's received his master's in business taxation from the University of Southern California, and has over 20 years of experience as a certified public accountant.

00:59:15.660 --> 00:59:29.430
Susannah: He spent years providing complex accounting and tax advisory services to public charities social well well for organizations and others, and he's been with Milan and company VC since 2007

00:59:29.790 --> 00:59:41.730
Susannah: We are so grateful that he is here with us today to share his vast tech tax knowledge with us. And without further ado, Jim, the floor is yours.

00:59:42.450 --> 01:00:04.140
 Jim Bradley : Thank you. Susanna. Good evening, everyone. I'm Jim Bradley and I'm the Senior tax manager at bland and company in downtown Austin. I have over 20 years of experience as a tech CPA and I've been working with various tax exempt organizations for 12 years that will land and continue

01:00:05.220 --> 01:00:15.330
 Jim Bradley : We only have one hour tonight, and I want to present an overview of the Internal Revenue Service for 990 for tax exempt organization.

01:00:16.230 --> 01:00:32.730
 Jim Bradley : The IRS Form 980 is used primarily by public charities to disclose their operations to both the IRS and the general public, public charities are granted tax exempt status by the Internal Revenue Code.

01:00:34.380 --> 01:00:42.960
 Jim Bradley : Public charities must prove to the IRS annually, that they are worthy of this tax exempt status by filing

01:00:43.440 --> 01:00:58.530
 Jim Bradley : Or 990 with the IRS. The IRS for 990 is a public document. It's not confidential and it is available to the public for inspection and each year.

01:00:59.400 --> 01:01:14.010
 Jim Bradley : If the tax exempt organization fails to prove each year that it is a legitimate public charity, it will be taxed, the same as a regular Corporation, it would be taxed, the same as Microsoft Corporation

01:01:18.540 --> 01:01:31.110
 Jim Bradley : Tonight. In this brief overview of IRS Form 994 tax exempt organizations. I want to focus on several of the most important sections of this tax form.

01:01:31.620 --> 01:01:41.520
 Jim Bradley : I want to focus on the header on page one on form 990 I want to focus on for 998 the summary of operations for the year.

01:01:42.030 --> 01:01:48.840
 Jim Bradley : Finally, I wanted to discuss the program service accomplishments. On page two of the form 990

01:01:49.830 --> 01:02:00.990
 Jim Bradley : I'm going to first briefly discuss the IRS for 990 and for small tax exempt organizations with total revenue and $50,000 or less.

01:02:01.560 --> 01:02:14.940
 Jim Bradley : I assume that there are at least several organizations tonight that are small nonprofits that are just starting up and at the present time, you have total revenue of $50,000 or less.

01:02:15.450 --> 01:02:27.150
 Jim Bradley : Please pay attention to what I tell you, because you can then prepare and while the IRS 990 and by yourself. You will need professional assistance.

01:02:28.440 --> 01:02:29.580
 Jim Bradley : The sample.

01:02:33.060 --> 01:02:44.490
 Jim Bradley : That I am using is for the Purple Heart integration project I prepared this 990 M several months ago for a friend at no charge.

01:02:45.720 --> 01:02:54.270
 Jim Bradley : Now let's go to the 990 and for purple heart and I'm going to take over this sharing

01:02:55.500 --> 01:02:56.940
 Jim Bradley : And get to this form.

01:03:14.370 --> 01:03:16.260
 Jim Bradley : I'm having some trouble getting

01:03:18.150 --> 01:03:18.360

01:03:23.430 --> 01:03:27.780
 Jim Bradley : Here we go. Okay. Oh, that was the right screen.

01:03:29.070 --> 01:03:30.420
 Jim Bradley : Can you go back. Susanna

01:03:32.790 --> 01:03:36.300
Susannah: I think you you have the control of the sharing jam and so

01:03:36.750 --> 01:03:39.600
 Jim Bradley : I was on the right screen and I lost it somehow. So

01:03:39.720 --> 01:03:42.720
Carolyn M. Appleton: It just takes a couple seconds, so share and then

01:03:42.750 --> 01:03:43.800
Just give it up.

01:03:45.990 --> 01:03:46.890
Carolyn M. Appleton: It just sometimes

01:03:48.000 --> 01:03:48.210
 Jim Bradley : Now,

01:03:48.240 --> 01:03:50.190
 Jim Bradley : Don't yeah I'm gonna cheat.

01:03:52.380 --> 01:04:01.020
 Jim Bradley : Okay, this is the IRS Form 990 and it's not a paper form, it's filed electronically.

01:04:02.580 --> 01:04:16.410
 Jim Bradley : And again, I did this a couple of months ago, the name of the organization is purple heart integration project, you can see that right here. There are roughly eight items that you

01:04:16.410 --> 01:04:16.860
 Jim Bradley : Have to

01:04:16.890 --> 01:04:20.460
 Jim Bradley : Enter, and it takes maybe 10 to 15 minutes

01:04:20.670 --> 01:04:23.280
 Jim Bradley : To go on to the IRS website, which is

01:04:23.280 --> 01:04:24.690
 Jim Bradley :

01:04:25.020 --> 01:04:26.520
 Jim Bradley : You go into the charity.

01:04:26.520 --> 01:04:29.040
 Jim Bradley : Section nonprofit.

01:04:29.220 --> 01:04:41.580
 Jim Bradley : And you locate the filing of the 990 and and you enter that. And that section and you enter this information. Now over here you can see it's the 990 and

01:04:42.120 --> 01:04:53.970
 Jim Bradley : And it says electronic notice a postcard it's referred to as an E postcard for small nonprofits. Here's the 2019 the year and

01:04:54.600 --> 01:05:03.540
 Jim Bradley : Then it says right here gross receipts are normally $50,000 or less, you have to certify that

01:05:04.230 --> 01:05:15.030
 Jim Bradley : For your organization for the past calendar year that the grocery seeds were 50,000 or less you put in the name of the organization, the address.

01:05:15.660 --> 01:05:22.830
 Jim Bradley : The employee identification number now employer identification number is a tax identification number

01:05:23.250 --> 01:05:44.640
 Jim Bradley : And you must put in that number. Also, you must put in the exact legal name of this organization. And if it's a corporation look to the articles in the kitchen and put in exactly the same name for the organization that used in the Articles of Incorporation

01:05:45.960 --> 01:05:57.180
 Jim Bradley : Again, you have the address and then you have a name of a principal officer. In this case, it was Ted Atchison and he happens to be the president and that's his home address.

01:05:57.630 --> 01:06:12.240
 Jim Bradley : And then you put in the website over here or the the nonprofit. So you can see it's a simple as that. It takes 10 minutes 15 minutes at the most to fill this out.

01:06:12.750 --> 01:06:25.770
 Jim Bradley : If we're a small nonprofit that it's best if you can find somebody that has the computer expertise to do it. You can see how simple it is. You should have all of this information on and

01:06:26.310 --> 01:06:38.100
 Jim Bradley : When you start at the IRS website so you can see how simple it is. This is just for nonprofits or tax exempt organizations where the gross receipts.

01:06:38.370 --> 01:06:59.970
 Jim Bradley : Are $50,000 or less. Now I finished that. Are there any questions about this course. It's really you can save possibly $100 a year and professional fees if you file this yourself. This is a 990 and are there any questions about this this form and filing this on the IRS website.

01:07:02.700 --> 01:07:05.730
 Jim Bradley : If not, I'll move on to the 1990

01:07:07.350 --> 01:07:08.070
Susannah: I see.

01:07:08.100 --> 01:07:10.110
Susannah: Elaine has typed in the question.

01:07:10.230 --> 01:07:10.680
Elaine Wiant: Yeah.

01:07:11.670 --> 01:07:14.490
 Jim Bradley : What does it say Suzanne. I can't see the chat.

01:07:15.000 --> 01:07:32.550
Susannah: That's okay. I'll read it to you. Elaine rights my organization has a 501 C three group exemption for its local chapters. Some have had trouble with the 990 and entering the group number. Is there an obvious place to enter it.

01:07:33.750 --> 01:07:35.130
 Jim Bradley : That that's a problem.

01:07:35.790 --> 01:07:44.130
 Jim Bradley : When we get into the 990 I'll show you. There is a place where the parent organization can file for all the affiliates.

01:07:44.640 --> 01:08:02.850
 Jim Bradley : And it sounds like your parent organization is done that and in theory, the IRS or the parent has given the IRS all the necessary information for each of the affiliates. This can get pretty complicated. We have a lot to discuss tonight.

01:08:03.270 --> 01:08:06.600
 Jim Bradley : And I'd be happy to spend time with you afterwards I

01:08:06.630 --> 01:08:10.080
 Jim Bradley : Don't want to get into detail of this because it's

01:08:10.080 --> 01:08:11.340
 Jim Bradley : somewhat complicated

01:08:11.610 --> 01:08:20.040
 Jim Bradley : I think most of the members wouldn't have an interest in this, but I'd be happy to talk to you personally about this if you want to contact me or

01:08:20.850 --> 01:08:41.370
 Jim Bradley : Maybe after the webinar. We can discuss it individually, but I'd like to move on. We're limited in time. And I'd like I there's certain really important things that I want to cover in the night. It was a good question, and I wish I could spend more time in answering that, but

01:08:42.840 --> 01:09:06.240
 Jim Bradley : This is the the large 990 now this is the type of form that the Red Cross will file annually Toastmasters International file and your parent group your n 10 Nonprofit Technology enterprise network in Portland, Oregon. They headquarters as filed this and

01:09:07.410 --> 01:09:13.770
 Jim Bradley : This form has to be filed each year in order to maintain its

01:09:14.850 --> 01:09:25.050
 Jim Bradley : The organization status as a tax exempt organization. You can see up here, it says form 990. This is the primary form that you

01:09:25.530 --> 01:09:42.120
 Jim Bradley : As someone mentioned and 990 easy a 990 easy is an abbreviated form 990 and only. It consists of about five pages roughly this form consists of 12 pages and has potentially 16

01:09:42.630 --> 01:09:51.660
 Jim Bradley : schedules that can be attached. So, this can be huge. Some of these 990 let's say for Toastmasters International can be hundred pages long.

01:09:52.680 --> 01:10:15.240
 Jim Bradley : The entire form. So here's the year right here. It's 2017 that's what's called the form year and it just happens that n 10 the parent and Portland is on a fiscal year starting July 1 2017 so that's why the 2017 form IRS Form is used

01:10:17.700 --> 01:10:41.730
 Jim Bradley : In item be there are about six boxes that could be checked, one of the boxes is for initial return. So when the first return is file or in 10 the initial return boxes checked and this lets you know and the IRS know that this is a first return. There are no earlier returns. There is no

01:10:43.770 --> 01:10:44.550
 Jim Bradley : Return.

01:10:45.780 --> 01:10:54.720
 Jim Bradley : Or not the organization. If it, if this box where check the box below. That is the final return or the terminated.

01:10:55.170 --> 01:11:13.800
 Jim Bradley : So that if that box is checked. That means that this is the last night, and at the end 10 would file, but this is really an ongoing return. So neither of these boxes are checked for this tax return is just an ongoing disclosure

01:11:15.030 --> 01:11:24.150
 Jim Bradley : The name of the organization Nonprofit Technology enterprise network in 10 the street address and then Portland, Oregon.

01:11:24.960 --> 01:11:38.730
 Jim Bradley : So that's here and then here's the employer identification number for the parent and 10 organization in Portland, and it must have this is extremely important. The IRS

01:11:39.390 --> 01:11:48.570
 Jim Bradley : Focuses on the tax identification number almost more than the name so it's it's it's crucial that that number big correct

01:11:49.470 --> 01:12:05.670
 Jim Bradley : Down Below is the telephone number of the person that the IRS could contact if there's a question. Normally, the IRS will contact the taxpayer or the organization by by letter and not by telephone, but

01:12:06.600 --> 01:12:13.230
 Jim Bradley : That it would be a good idea to have either the organization's treasure or President listed there.

01:12:13.860 --> 01:12:31.770
 Jim Bradley : Below that use me is a gross receipts and you can see the gross receipts for the intent. The National Organization now is about $3.2 million. I'm not going to discuss the smaller numbers. I'm going to do it in round numbers. So we can do this.

01:12:32.970 --> 01:12:43.800
 Jim Bradley : A little easier. And then below that is the name and address of the principal officer. Well that's Amy sample ward with her home address in Portland, Oregon.

01:12:44.670 --> 01:13:01.650
 Jim Bradley : Or that could be the company's address that here, over here in age. You'd mentioned, is this a group return for a subordinate, and the answer for intent is. No, this is just for the parent and each of the individual the chapters or

01:13:03.000 --> 01:13:03.300
 Jim Bradley : The

01:13:04.620 --> 01:13:13.830
 Jim Bradley : local organizations are not covered by this and that lady that asked the question before with her organization.

01:13:14.430 --> 01:13:34.200
 Jim Bradley : This blocked would have been checked. Yes, this is somewhat complicated and I don't want to spend the time we don't have the time to get into this in detail, but that's on the main at this is the area that she was talking about right here. Now I want to move down a little bit.

01:13:35.430 --> 01:13:52.440
 Jim Bradley : Okay, now on item i, the tax exempt status and 10 is a 501 c three organization 501 c three organization is basically a public charity. It's this is a

01:13:53.250 --> 01:14:07.650
 Jim Bradley : Form of an educational organization and it qualifies under Internal Revenue Code section 501 C three as a public charity and what it's best to be a public charity because

01:14:08.220 --> 01:14:20.910
 Jim Bradley : A don't or if someone wants to contribute. Let's say $10,000 to end. And let's say in Portland, they can deduct that on their tax return on their 1040

01:14:21.870 --> 01:14:34.710
 Jim Bradley : Schedule as an itemized deduction. If this weren't a 501 c three organization they couldn't take the tax deduction for the $10,000 so for a large donors.

01:14:35.880 --> 01:14:49.890
 Jim Bradley : That's really important if you're giving $20 it's not that big a deal. If you're giving $20,000 it's a big deal. So and if if it's a Bible one c three organization.

01:14:50.700 --> 01:15:06.510
 Jim Bradley : It's there's no problem and deducting the gift to this organization, then it's the form of the organization intended as a corporation. It could be a trust or an association, but it is a

01:15:07.200 --> 01:15:30.750
 Jim Bradley : Widget. And then the year formation. It was formed in the year 2000 the state of legal drama soil is the state of Washington, just north of Portland. So this is the heading part of the IRS Form nine eight and it's really, this has a lot of very important information on. Now I want to

01:15:32.460 --> 01:15:34.530
 Jim Bradley : Talk about the summary, a little bit.

01:15:35.640 --> 01:15:52.590
 Jim Bradley : The summary also handle a lot of extremely important information. And as I said, the form 980 is a 12 page document and much of the important information is brought forward to part one in the summary.

01:15:54.030 --> 01:16:05.640
 Jim Bradley : The contributions. They're brought forward from a supporting schedule program service revenues brought forward, but I want to start at the top on number one.

01:16:07.020 --> 01:16:23.700
 Jim Bradley : And that is the organization's mission and you're supposed to briefly state with the mission of n 10 is. And let me read that this is on the IRS document now intense support organizations by

01:16:24.660 --> 01:16:36.390
 Jim Bradley : convening the nonprofit community offering professional credentials and training and facilitating and open exchange of ideas. Now this mission qualifies.

01:16:36.960 --> 01:16:44.130
 Jim Bradley : Under a 501 C three as a public charity, it's, it's an educational organization.

01:16:45.060 --> 01:16:54.540
 Jim Bradley : Congress when they enacted this and in the Internal Revenue Code. They felt that an organization that promotes the public goodwill.

01:16:55.440 --> 01:17:14.220
 Jim Bradley : Deserved not to pay taxes because they promoted the the welfare of the general public and the if and and they granted this organization tax exempt status. So in most cases the organization will pay no income tax.

01:17:15.570 --> 01:17:34.320
 Jim Bradley : There are some exceptions and I'll cover that a little later. Next, let's go down to number three. It lists the number of voting members of the governing body now and 10 has 11 members of the governing body. And that's the board of directors.

01:17:35.520 --> 01:17:44.730
 Jim Bradley : The next one item number for the number of independent voting members of the governing body that would be 11 and

01:17:45.750 --> 01:17:54.810
 Jim Bradley : These are the independent voting members. So all of the 11 members are independent. Now this is extremely important for good management.

01:17:55.350 --> 01:18:03.150
 Jim Bradley : By independent. That means that the members of the board are unrelated to each other. They're not family members.

01:18:03.630 --> 01:18:16.260
 Jim Bradley : And they don't have any business relationships with the organization that's why they're independent, and you can imagine if you had an organization that was made up of a family.

01:18:16.950 --> 01:18:26.220
 Jim Bradley : Let's say, or, you know, cousins or uncles, or, you know, let's say, family members, it could create a problem. It could collude and

01:18:26.880 --> 01:18:32.520
 Jim Bradley : You know, if there is a potential for fraud there. If you have independent

01:18:33.030 --> 01:18:41.400
 Jim Bradley : Board members. They're independent and they don't want anything to go wrong if something goes wrong with this organization, the Internal Revenue Service.

01:18:41.700 --> 01:18:53.070
 Jim Bradley : Is going to look towards the board of directors your governing board and say why you know it's your obligation to oversee the activities. This and this went wrong.

01:18:54.450 --> 01:19:02.580
 Jim Bradley : Do you have an explanation. Can you defend yourself and there could be some legal problems if if they can't defend themselves.

01:19:02.940 --> 01:19:09.120
 Jim Bradley : Or if there were some kind of collusion. When you have independent board members. They don't know each other, they're

01:19:10.050 --> 01:19:18.180
 Jim Bradley : They're not. They're not family members. They don't have business relationships. So it's more likely that they would make the

01:19:18.930 --> 01:19:32.070
 Jim Bradley : Decisions that would benefit the organization, rather than decisions that would benefit themselves, their family members or their related businesses so independent board that's extremely important.

01:19:32.850 --> 01:19:50.340
 Jim Bradley : Okay, the number of individuals employed in the calendar year okay and 10 has it looks like it's 15 so that lets you know how large it is. And these members would be employed these employees would be employed in Portland, Oregon.

01:19:51.870 --> 01:20:02.490
 Jim Bradley : Now the number of volunteers is 38 so there are quite a few volunteers in addition to the full time employees and there could be some part time employees.

01:20:03.240 --> 01:20:17.550
 Jim Bradley : The unrelated business revenue that's the line, seven, eight. It's this right here. It's $13,600 now I'm not that familiar within 10 but I'm going to

01:20:17.970 --> 01:20:41.610
 Jim Bradley : Guess that intent has a monthly newsletter that they send out to the the 2000 or so national members and I'm going to guess that they have some advertising within this monthly newsletter and maybe Microsoft or Cisco Systems or whatever advertises it may pay and can

01:20:43.380 --> 01:20:47.190
 Jim Bradley : For this advertising, will that the total of all this.

01:20:48.270 --> 01:21:06.150
 Jim Bradley : advertising revenue is a $13,600 and this would be taxed as if it were a regular Corporation. This has been related to the the organization's mission. So the net proceeds are used by intent.

01:21:06.510 --> 01:21:13.710
 Jim Bradley : To further the mission, but this is not within the scope of the mission. The mission is not advertised.

01:21:14.160 --> 01:21:25.380
 Jim Bradley : So this is what they call unrelated business income and this has to be reported. Just as if and 10 were a regular for profit corporation, however.

01:21:25.920 --> 01:21:36.390
 Jim Bradley : The going down to seven be the unrelated business taxable income is zero and that would mean that the expenses exceed

01:21:36.930 --> 01:21:47.490
 Jim Bradley : The revenue in this case and that the income was wiped out. So there was no unrelated business income tax because of the expenses and that would be

01:21:48.240 --> 01:22:03.390
 Jim Bradley : Just expenses incurred in in producing the newsletter and they can allocate some indirect expenses. So the organization didn't pay any unrelated business income tax. Let's move down to

01:22:05.040 --> 01:22:28.170
 Jim Bradley : Eight than that. This is revenue that. Now again, this is the summary. So this would be contributions and grant, and you can. Here's the prior year. And here's the current year. So you can see in the prior year the total of the contribution by various individuals or corporations, let's say,

01:22:29.190 --> 01:22:42.510
 Jim Bradley : In the prior year. It was 380 4000 and again I'm going to round off, not the same time and in the current year. It increased to 820 4000

01:22:42.930 --> 01:22:57.480
 Jim Bradley : So that's a good thing for one reason or another. The contributions and the grants increase by several hundred thousand dollars. So the organization is is moving in the right direction. Although this is a non profit.

01:22:59.310 --> 01:23:12.540
 Jim Bradley : In order to pay us expenses that that they have revenue that does exceed the expenses. They can have several years maybe where it doesn't. But overall the revenue has to cover the

01:23:13.260 --> 01:23:30.150
 Jim Bradley : The expenses, even in a non profit. The next line down line nine program service revenue. It was 3.2 million in the prior year and 2.3 million in the current year for some reason.

01:23:30.690 --> 01:23:50.940
 Jim Bradley : The program service revenue went down by about a million dollars. I don't know your organization that well, if I were a manager, an officer. I would want to know why the program service revenue decreased by a substantial amount about a million dollars but

01:23:52.050 --> 01:24:04.830
 Jim Bradley : In this webinar we're discussing errs for 990 and not we're really not getting into the management of your but that's something. And if there may not be a problem there. But that did happen so

01:24:05.940 --> 01:24:11.700
 Jim Bradley : And you have a great organization. By the way, I looked at the 990 and I'm very impressed.

01:24:12.930 --> 01:24:26.610
 Jim Bradley : The next line item 10 is the investment income that's probably bank interest income and it went from $109 a little over 2000 so that's good. You're moving in the right direction there.

01:24:27.030 --> 01:24:45.660
 Jim Bradley : The total revenue went from on line well went from 3.6 million to 3.2 million. So there were the small decrease in a manager would want to know why, but we're not managers here tonight. We're just trying to understand attacks so

01:24:47.310 --> 01:24:49.620
 Jim Bradley : Let's, let's move on.

01:24:53.190 --> 01:25:07.800
 Jim Bradley : The next line 13 grants and similar amounts paid. Now these are grants that are paid out to individuals or whatever in the prior year. It was none in the current year $11,000 so

01:25:08.550 --> 01:25:23.610
 Jim Bradley : Pay it out and that has there is a form a schedule schedule I that is filed for grants and explains who got the money they want to make sure that it's an unrelated party.

01:25:26.070 --> 01:25:34.380
 Jim Bradley : Okay line 15 salaries and other compensation employee benefits that went from 1 million in the prior year.

01:25:34.800 --> 01:25:41.940
 Jim Bradley : To 1.1 million in the current year. So I went up a little bit. Let's say inflation and that would include

01:25:42.420 --> 01:25:59.190
 Jim Bradley : The officers compensation and it would also include administrative staff so that includes everyone other expenses that would be miscellaneous things. And for head office, you can understand what that would be. That would be utilities and ran the

01:26:00.810 --> 01:26:03.180
 Jim Bradley : main office in Portland, so

01:26:04.500 --> 01:26:06.780
 Jim Bradley : The revenue less expenses.

01:26:07.830 --> 01:26:19.770
 Jim Bradley : And this is important, even for a non profit line night team that was a negative hundred thousand dollars in the prior year. So that was a loss. But again,

01:26:20.430 --> 01:26:28.590
 Jim Bradley : It's a nonprofit. So, you know, a bad happens. Insert years they can't go on your year but, you know, there can be some

01:26:29.070 --> 01:26:38.130
 Jim Bradley : Some bad years next year they'll just have to increase the fees or makeup work. Now the next year in the current year it was 32,000 plus

01:26:38.670 --> 01:26:45.690
 Jim Bradley : Revenue less expenses and that was on a million dollars less program service revenue so

01:26:46.440 --> 01:27:02.700
 Jim Bradley : We don't have time to look into that. But that, that's interesting. And as a manager you would want to look into that. Again, I, I've looked at your 990 it's been the financial statements for and 10 have been audited by

01:27:03.810 --> 01:27:16.020
 Jim Bradley : A CPA firm, I believe it was in Portland, Oregon, and I'm very impressed with the 990 and it's supported by audited financials. So I it looks good.

01:27:16.950 --> 01:27:29.190
 Jim Bradley : So, okay, let's go down to part two, the signature block. Now this is it signed under penalty of perjury by an officer of the

01:27:30.090 --> 01:27:39.180
 Jim Bradley : The entity, the organization intent in Portland, and this is normally not Amy sample war or the chief

01:27:39.660 --> 01:27:50.880
 Jim Bradley : Executive Officer scientists so good it normally it's signed by the President, the CEO or let's say the treasure, but this is signed under penalty of perjury.

01:27:51.480 --> 01:28:03.900
 Jim Bradley : And they're sticking their neck out. Let me read this, it says under penalty of perjury, I declare that I examine this return, including a company schedules and statements.

01:28:04.350 --> 01:28:12.330
 Jim Bradley : And to the best of my knowledge, and believe it is true correct and complete declaration and prepare, other than

01:28:12.870 --> 01:28:25.380
 Jim Bradley : Officer is based on all information of what prepare has any knowledge and prepare would be down here and that's the CPA firm and that's a CPA firm in Portland, Oregon.

01:28:25.980 --> 01:28:42.330
 Jim Bradley : So, and I'm sure they specialize in nonprofit audit and I'm sure they did an excellent job. So, and they're signing off. There's as prepare and the person that's really sticking their neck out is Amy sample board.

01:28:43.410 --> 01:28:59.430
 Jim Bradley : But again, it's a nonprofit and I'm very impressed with your name at it's been audited. So I don't think there's much of anything to worry about. But I'm not giving a professional certification rating. So, don't you know

01:29:00.450 --> 01:29:13.440
 Jim Bradley : It felt like a page to this is really important. That's part three up here. This statement of programs servants accomplish with. Now again you have to restate

01:29:14.520 --> 01:29:24.510
 Jim Bradley : In describe the organization's mission and I discussed that the few minutes ago, on page one. This is just a repetition of the same statement.

01:29:25.020 --> 01:29:34.500
 Jim Bradley : So I'm not going to read it again. But all of the activities of the organization have to further the organization's mission.

01:29:34.950 --> 01:29:54.510
 Jim Bradley : If, if the activities don't further the mission there can be a serious problem. And in an extreme case, the organization could lose its tax exempt status and it could be taxed as a regular Corporation as Microsoft. Let's say the same thing.

01:29:56.610 --> 01:30:07.980
 Jim Bradley : With it have what they call intermediate sanctions and they can impose excise taxes on some of the managers to kind of slap their hands and say, hey, this is a good change this.

01:30:08.700 --> 01:30:19.560
 Jim Bradley : And that's an inner rather than taking the extreme position of revoking the tax exempt status. They can impose these substantial excise tax so

01:30:20.670 --> 01:30:21.120
 Jim Bradley : That

01:30:22.230 --> 01:30:24.600
 Jim Bradley : The IRS has the choice of doing that.

01:30:27.450 --> 01:30:48.150
 Jim Bradley : I want to go on for a potential donor this part three statement program service accomplishments is really important sophisticated donors to give organizations 10,000 $100,000 in gifts or contributions they would look at this, because

01:30:49.500 --> 01:31:03.180
 Jim Bradley : I eat them for here says describe the organization's program service accomplishments for each of the three largest programs services as measured by expenses so

01:31:03.900 --> 01:31:15.690
 Jim Bradley : A potential donor wants to say, hey, you guys have a very noble mission but precisely how, what have you done how you benefited the general public and this

01:31:17.010 --> 01:31:34.260
 Jim Bradley : You put down the three largest programs that you have that have your mission by an expense. And if there isn't enough room here. So there's a schedule or you can attach statements and there is

01:31:35.580 --> 01:31:48.000
 Jim Bradley : Additional data and the explanation would be for this 990 on the supporting schedule and it. Yeah, you should brag about what you've done again.

01:31:48.450 --> 01:32:08.040
 Jim Bradley : The IRS is looking at this form, but also potential donors have access to the score and they're attracted to this right here. What have you guys done over the last year. Why, why should I give you $10,000. Why should I give you $50,000. That's right. What you've done right here if you

01:32:09.420 --> 01:32:10.620
 Jim Bradley : Let's say

01:32:11.670 --> 01:32:19.560
 Jim Bradley : Enhance or, you know, it had computer education for, you know, let's say inner city children or something like that that

01:32:20.130 --> 01:32:33.360
 Jim Bradley : You know 10,000 inner city children and you know you did a super job. Quit it down here brag, don't be modest about this, your doors are looking right here to see what you did.

01:32:33.690 --> 01:32:34.530
 Jim Bradley : That's a great goal.

01:32:35.610 --> 01:32:36.510
 Jim Bradley : Yeah, don't be

01:32:37.050 --> 01:32:49.710
Susannah: Fine. And then, sorry to jump in. That's thanks for making that point about, don't be modest for nonprofit organizations. It's a very good point, you'd asked me to give you a time check out several

01:32:49.830 --> 01:32:50.400
 Jim Bradley : Yeah.

01:32:50.460 --> 01:32:55.770
 Jim Bradley : Yeah, we've got about nine more pages to go. We're not going to make it and

01:32:56.190 --> 01:32:59.010
 Jim Bradley : I've covered the important stuff and

01:33:00.510 --> 01:33:10.680
 Jim Bradley : How much time. Let's see, Stephen. I have 717. And so we've got the what a little over 10 minutes that we

01:33:11.700 --> 01:33:31.290
Susannah: Have a suggestion and others chime in. Perhaps we could take questions until 730 and then if there, if we can sort of take the pulse of the group at that time and see what we want to do at that point. But how people feel about that.

01:33:33.600 --> 01:33:34.620
Carolyn M. Appleton: Sounds good to me.

01:33:35.550 --> 01:33:37.890
 Jim Bradley : Yeah, but I'll do whatever you want.

01:33:39.030 --> 01:33:54.510
 Jim Bradley : We've really covered for the, the average person the layman, let's say that's not, you know, a tax specialist we've covered the really important stuff. And a lot of the other stuff. It's the subsidiary like

01:33:56.490 --> 01:34:03.150
 Jim Bradley : Proving that you're not a private foundation. That's pretty technical, you probably wouldn't be interested in that.

01:34:03.810 --> 01:34:18.420
 Jim Bradley : That's proving that you're not a private foundation like that. The Bill Gates Foundation and you have, there's a form that you get public support rather than support by one go. A Warren Buffett or Bill Gates.

01:34:19.770 --> 01:34:22.050
 Jim Bradley : Because of private that foundation is

01:34:23.790 --> 01:34:36.960
 Jim Bradley : subject to strict supervision and excise taxes if they do anything wrong. So in a sense, to this kind of work. This type of organization and public charity.

01:34:37.650 --> 01:34:47.970
 Jim Bradley : It's given more lenient treatment that because like like go dates. If you control one of these things you could manipulate it to benefit yourself.

01:34:50.010 --> 01:34:52.200
 Jim Bradley : Seems like a nice guy and he's not going to do

01:34:52.200 --> 01:34:56.610
 Jim Bradley : That but there are others out there that could, and I'm sure they did.

01:34:57.000 --> 01:34:57.720
Susannah: Well, so, Jim.

01:34:58.500 --> 01:35:07.230
Susannah: Thing that you're talking about. It looks like there's somebody here that has an. He says, Kenny says that's exactly what I'm interested in. So

01:35:07.950 --> 01:35:15.810
Susannah: Kenny. If you have a question about it. Please unmute yourself and then I also don't want to forget. There were a couple of questions at the top of the

01:35:17.430 --> 01:35:26.610
Susannah: At the top of the hour. The top started the origins of the presentation. If people can just unmute yourself and jump in. Oh, and Carolyn head is raising your hand. Go ahead.

01:35:28.140 --> 01:35:28.890
 Jim Bradley : Okay, I

01:35:28.980 --> 01:35:29.610
 Jim Bradley : Know I have

01:35:30.210 --> 01:35:53.520
Carolyn M. Appleton: A question about the nonprofit efficiency rating platform Charity Navigator, which if you know it's kind of a mixed blessing. I mean, it's a easy way for people to get on and they get, you know, who's highest rated for not having any operational costs, basically.

01:35:53.940 --> 01:36:00.630
Carolyn M. Appleton: Ours is program and you know programs don't happen without operating

01:36:00.720 --> 01:36:01.890
Carolyn M. Appleton: You know, so it's a

01:36:01.890 --> 01:36:08.670
Carolyn M. Appleton: Real but it's a real problem because really good nonprofits. If they don't prepare their tax return.

01:36:09.930 --> 01:36:24.360
Carolyn M. Appleton: Properly their formula that Charity Navigator uses will put them way down. And so I think it's, you obviously want to be transparent and honest, but at the same time.

01:36:25.560 --> 01:36:37.770
Carolyn M. Appleton: What, how do you navigate that to reflect the fact that you know programs don't happen without staff to do it but staff often get lumped into admin, you know, I

01:36:38.640 --> 01:36:47.190
 Jim Bradley : Can see, we don't have time to discuss all this tonight, but I'm going to the statement of function. Functional Expenses and

01:36:47.550 --> 01:36:48.900
 Jim Bradley : I'd like to show you that.

01:36:49.710 --> 01:36:58.770
 Jim Bradley : That here's the statement of revenue. This is all the stuff that this is why I couldn't get involved with in a lot of detail questions in the beginning.

01:36:59.640 --> 01:37:10.140
 Jim Bradley : There's so much to cover, but this part nine. It's part of the the form 990 this file each year. It's the state, but the functional expenses.

01:37:10.530 --> 01:37:22.020
 Jim Bradley : And it's the kind of what you're talking about here, the total expenses for the year. And then it's these total expenses are broken out in the program service expenses.

01:37:22.470 --> 01:37:44.310
 Jim Bradley : Management and general expenses and then Fundraising Expenses. So these are all of the expenses right here and there. It's hard to read, small numbers, but the, this has all of the expenses for the year for and and the national and apparent and the total Functional Expenses. It looks like.

01:37:45.360 --> 01:38:09.990
 Jim Bradley : A 3.1 million and then it's broken out into programs service expenses administration management expenses and Fundraising Expenses over here and the IRS and donors, look at this, too, because they want as much of the total expenses to be for program services.

01:38:11.100 --> 01:38:11.880
 Jim Bradley : They would look

01:38:13.380 --> 01:38:23.970
 Jim Bradley : They would not be happy if you know if you had, let's say $3.1 million of total Functional Expenses and let's say you had

01:38:25.230 --> 01:38:29.280
 Jim Bradley : $100 of program service expense and then

01:38:30.840 --> 01:38:43.860
 Jim Bradley : 3.13 million of management expense and fundraising expense. They wouldn't like you know the donors wouldn't like that. So this is where what you're talking about stands out and

01:38:44.370 --> 01:39:02.310
 Jim Bradley : Each tax exempt organization is required to file this and present this information, each year to the Internal Revenue Service. And again, the general public. Don't orders have access to this. So this is really important and

01:39:03.120 --> 01:39:22.110
 Jim Bradley : It's good. What the percentages that I've heard the good percentages are where you have let's say 100% of the statement of the functional expenses you have let's say 85% or program service expenses, maybe 10% our management and

01:39:22.230 --> 01:39:23.610
 Jim Bradley : Administration expenses.

01:39:24.000 --> 01:39:25.860
 Jim Bradley : And 5% fundraising.

01:39:26.160 --> 01:39:28.800
 Jim Bradley : That that's the norm and

01:39:30.150 --> 01:39:31.950
 Jim Bradley : That that's what they expect if you

01:39:31.950 --> 01:39:32.250
Carolyn M. Appleton: Can

01:39:32.460 --> 01:39:33.750
Carolyn M. Appleton: If your percentages.

01:39:33.810 --> 01:39:36.060
 Jim Bradley : Are different from that the

01:39:37.140 --> 01:39:37.860
It might be

01:39:39.450 --> 01:39:40.770
 Jim Bradley : That could cause an odd.

01:39:42.030 --> 01:39:42.420
Carolyn M. Appleton: Yes.

01:39:45.330 --> 01:39:47.670
Susannah: Oh, I'm sorry. I was gonna say can you have a question.

01:39:48.330 --> 01:39:50.610
 Jim Bradley : Oh yeah. Does that answer your question.

01:39:51.210 --> 01:39:52.620
Carolyn M. Appleton: Yes. Yeah, that was great.

01:39:52.740 --> 01:39:53.370
 Jim Bradley : You know, it's

01:39:53.670 --> 01:39:54.030
 Jim Bradley : Yeah.

01:39:54.240 --> 01:39:56.520
 Jim Bradley : So take a look at the Statement of Functional

01:39:57.810 --> 01:39:58.590
 Jim Bradley : Part nine

01:39:58.770 --> 01:40:03.000
 Jim Bradley : And it's about page nine of the 990 and that breaks about

01:40:06.210 --> 01:40:06.600
Carolyn M. Appleton: Me.

01:40:07.560 --> 01:40:11.550
Kenny Felton: Kim. Hi. Yeah. My question was at the beginning.

01:40:13.050 --> 01:40:17.100
Kenny Felton: My I I'm pretty good with everything going on, except for the

01:40:19.140 --> 01:40:26.310
Kenny Felton: Schedule A section to the one third rule. It just seems like if I follow the rule. I've got 100%

01:40:27.360 --> 01:40:29.160
Kenny Felton: Individual donor.

01:40:30.450 --> 01:40:36.150
Kenny Felton: Donations okay all my receipts are from individual donors, but if I go by the rules that they

01:40:37.500 --> 01:40:40.500
Kenny Felton: That they propose, I wouldn't qualify

01:40:42.780 --> 01:40:54.930
 Jim Bradley : Yeah, here's the Schedule A, and I've mentioned the 501 C three of the Internal Revenue Code both charities and private foundations fall into

01:40:55.800 --> 01:41:09.660
 Jim Bradley : This subsection of the Internal Revenue Code and a public charity has to prove that it's not a private foundation and it does this with the form 990 Schedule A, and I've highlighted.

01:41:10.890 --> 01:41:20.250
 Jim Bradley : This and the intent. The parent organization to file the Schedule A proving that it's not a private foundation

01:41:20.580 --> 01:41:25.920
Kenny Felton: Right, I'm specifically about section to Step five.

01:41:27.390 --> 01:41:27.630
 Jim Bradley : I

01:41:31.020 --> 01:41:31.890
Kenny Felton: On the next page.

01:41:32.220 --> 01:41:34.020
 Jim Bradley : On the next page. Okay, let's do

01:41:35.880 --> 01:41:37.830
Kenny Felton: Part two. Step five.

01:41:38.430 --> 01:41:40.860
 Jim Bradley : Okay, yeah. Part two. Okay.

01:41:42.840 --> 01:41:49.890
Kenny Felton: That if I follow that that I don't qualify but 100% of my receipts are from individual donations

01:41:50.400 --> 01:41:59.610
 Jim Bradley : Yeah. So in that case, you have substantial public support and there shouldn't be a problem. You should be a public charity, then it's

01:41:59.670 --> 01:42:00.960
Kenny Felton: Right, but it's

01:42:01.320 --> 01:42:01.530

01:42:02.850 --> 01:42:05.010
 Jim Bradley : If you think of a private foundation. It's like

01:42:06.060 --> 01:42:28.530
 Jim Bradley : Warren Buffett's foundation. It's Bill and Melinda Gates Foundation, you just have a few donors, a fan, maybe one person, let's say, Warren Buffett or family Bill and Melinda Gates, so they control that. And if they wanted to, they could play games with the product foundation now.

01:42:29.700 --> 01:42:35.880
 Jim Bradley : Both of the individuals that I've mentioned seem to be very honest and everything so they don't I

01:42:36.720 --> 01:42:47.280
 Jim Bradley : I really doubt that there's any real substantial problem with their private foundations, but that's why there are these extra rules that apply to private foundation

01:42:48.210 --> 01:43:07.050
 Jim Bradley : You don't want to be a private foundation, if you can avoid it because you're subject to more stringent rules and because if something goes wrong, the excise taxes that are imposed are a lot worse. So, you know, it's not the end of the world if you're a private foundation, but

01:43:08.070 --> 01:43:11.250
 Jim Bradley : It's, it's more restrictive environment.

01:43:16.410 --> 01:43:16.740

01:43:18.630 --> 01:43:20.130
 Jim Bradley : Did I answer your question or

01:43:22.620 --> 01:43:27.840
Kenny Felton: Not really. Is that 2% of the amount shown on line 11. That's what I don't understand.

01:43:28.200 --> 01:43:28.680

01:43:29.970 --> 01:43:31.140
 Jim Bradley : Okay, well, this

01:43:32.430 --> 01:43:50.040
 Jim Bradley : The portion of the total contributions by each person other than a governmental unit or publicly reported organization included online one that exceeds 2% human okay that's excluded from the total support so that could create a problem.

01:43:52.350 --> 01:44:09.150
Kenny Felton: Yeah. So if I'm 100% publicly funded by individuals and I take out the other 98% then I then i'm not i don't pass the one third rule, even though 100% of my receipts are from individual donations, which is

01:44:09.750 --> 01:44:10.830
 Jim Bradley : pulling that out.

01:44:12.180 --> 01:44:18.270
 Jim Bradley : Hey guys it's. These are the percentages right here that you're talking about, for n 10 and this is

01:44:18.510 --> 01:44:29.790
 Jim Bradley : This is something so it says a public support percentage for 2017 that's this number right here line 14 it's 57% roughly

01:44:30.300 --> 01:44:30.720
 Jim Bradley : And

01:44:30.900 --> 01:44:36.630
 Jim Bradley : In the prior year 2016 it was 71% so uh

01:44:37.050 --> 01:44:43.260
Susannah: Anyway organization. Are you with. I mean, I think you put in the chat box but Jimmy seen it.

01:44:43.680 --> 01:44:44.940
Kenny Felton: Texas music partners.

01:44:45.960 --> 01:44:49.980
Kenny Felton: And it's just something that worries me because that that

01:44:51.480 --> 01:44:53.910
Kenny Felton: Formula does not seem fair

01:44:56.370 --> 01:44:57.960
 Jim Bradley : Well, um,

01:44:58.440 --> 01:45:10.170
Kenny Felton: Because if you're 100% publicly funded you're 100% publicly funded, but if I have to only take 2% of my publicly funded donations, then I'm no longer one third. Yep.

01:45:10.410 --> 01:45:11.400
 Jim Bradley : They're trying to

01:45:12.450 --> 01:45:21.900
 Jim Bradley : The intent here is that they want to make sure that one person, let's say one huge donor doesn't have control of the organization.

01:45:22.380 --> 01:45:43.080
 Jim Bradley : Now in the Bill Gates Foundation one huge donor does have control. And it's a private foundation and it's subject to a lot of restriction and the it scrutinize carefully by the IRS, especially when it's worth. Let's say $50 billion, believe me.

01:45:44.220 --> 01:45:45.510
 Jim Bradley : Take a look here.

01:45:46.710 --> 01:45:48.000
 Jim Bradley : Right, but

01:45:49.230 --> 01:46:05.160
 Jim Bradley : The intent behind all this is with a public charity. They want to make sure that there are 10s of thousands, let's say, in theory, 10s of thousands of donors, an extreme case would be like the Red Cross on everybody gets to the Red Cross, so

01:46:05.730 --> 01:46:07.230
 Jim Bradley : You know, it's going to meet this

01:46:07.860 --> 01:46:14.910
 Jim Bradley : Past. I haven't seen their schedule A but I'm sure that you know there's no I'm sure that they get a lot of $10 donation.

01:46:15.360 --> 01:46:22.050
 Jim Bradley : And that's what with a public charity, that's what Congress wants because they don't want

01:46:22.560 --> 01:46:34.560
 Jim Bradley : A dominant boys in in the management. If you get a a charity. Let's say that it has the total revenue of 200,000, let's say, and if you have a going or that gives

01:46:34.980 --> 01:46:43.980
 Jim Bradley : 120 5000 he's going to be able to flex those muscles and he can go to the board of directors and say I want to do this, this, this.

01:46:44.460 --> 01:47:01.380
 Jim Bradley : And the board since he's giving 120 5000 he's going to listen to this guy. But if Joe Smith goes up, and he gives $10 to the same organization goes and goes to the board and said, Well, I want to do this, this, this. The board is going to tell them to go away.

01:47:02.730 --> 01:47:08.700
 Jim Bradley : And it picks. You're not going to tell the somebody who gives your organization, you know, 120 5000 go away.

01:47:09.600 --> 01:47:28.170
 Jim Bradley : So that's an the IRS or the Internal Revenue Code is trying to prevent that from happening because human nature being what it is. If somebody gets control of an organization, they can do bad things. And in the past.

01:47:30.840 --> 01:47:35.250
 Jim Bradley : Public charities have been abused. That's why about 10 years ago, the IRS.

01:47:36.150 --> 01:47:47.310
 Jim Bradley : Design this really involved 990 20 years ago. You didn't have to disclose all of this information to the Internal Revenue Service and there was a lot of

01:47:48.180 --> 01:48:01.170
 Jim Bradley : Let's call it hanky panky stuff going on. And, you know, the IRS said no enough of this. We're going to revise our form. We're going to require a lot more information. We're going to scrutinize these things and

01:48:02.430 --> 01:48:07.170
 Jim Bradley : Some of the things that I haven't had time to discuss like compensation.

01:48:08.190 --> 01:48:22.410
 Jim Bradley : The things that there. There's a forum is scheduled Jay that's attached to the 990 and that's for each of the officers that are paid over 150,000 in compensation so

01:48:23.670 --> 01:48:47.400
 Jim Bradley : The IRS makes the, the organization itemize this and and it stands out and the IRS is trying to make sure that the general the mission is being achieved and the public is getting the benefit of the organization and not the the officers of the founders, or whatever.

01:48:49.140 --> 01:48:49.410
 Jim Bradley : And

01:48:51.840 --> 01:48:52.140
 Jim Bradley : Yeah.

01:48:52.470 --> 01:48:53.430
Susannah: It sounds like

01:48:54.480 --> 01:49:02.400
Susannah: Any scenario is describing one in which it's a group of people who are making donations, and it's not a single donor.

01:49:02.730 --> 01:49:03.150
 Jim Bradley : I know

01:49:03.450 --> 01:49:05.010
Susannah: So I so I

01:49:06.330 --> 01:49:12.990
Susannah: With that it can you further explain why what he has to do

01:49:14.610 --> 01:49:15.780
Susannah: In his situation.

01:49:16.590 --> 01:49:19.170
 Jim Bradley : Yeah, uh, let's go to

01:49:20.610 --> 01:49:25.350
 Jim Bradley : This form right here because here's a similar situation within 10

01:49:26.370 --> 01:49:30.240
 Jim Bradley : He saw it. He said part to schedule a

01:49:30.870 --> 01:49:32.970
 Jim Bradley : The public support and then

01:49:33.600 --> 01:49:34.890
 Jim Bradley : This number right here.

01:49:36.750 --> 01:49:37.500
 Jim Bradley : Is that correct,

01:49:38.430 --> 01:49:39.150
Susannah: Something can I

01:49:40.830 --> 01:49:42.030
Kenny Felton: just unmuted myself.

01:49:45.090 --> 01:49:46.740
Kenny Felton: Yes, the, what is it,

01:49:50.070 --> 01:49:55.290
Kenny Felton: It has to be on line 11, I think it was, and then

01:49:57.000 --> 01:50:01.860
Kenny Felton: Yeah, the yeah the public support for the pet for the past five years, right.

01:50:02.250 --> 01:50:06.780
 Jim Bradley : Yeah, that's correct presumed the first five years of

01:50:07.920 --> 01:50:15.570
 Jim Bradley : A nonprofit tax exempt organization, it's presumed to be a public charity and not a private foundation

01:50:16.080 --> 01:50:25.500
 Jim Bradley : Correct. Then after the fifth year, you have to prove that you're you're you're you're not a private foundation, the vast majority of

01:50:26.910 --> 01:50:36.330
 Jim Bradley : nonprofits are public charities and non profit foundation. There aren't that many Bill Gates's around for Warren Buffett, you know,

01:50:37.410 --> 01:50:46.590
Kenny Felton: But if I follow that formula I don't make it. Now the good news is I'm within that five year timeframe, but I'm looking at it right now, so that when I hit the sixth year that I'm not going to

01:50:48.720 --> 01:50:49.620
Kenny Felton: Have to worry about it.

01:50:50.160 --> 01:50:52.140
 Jim Bradley : Yeah, it's, it's a different

01:50:53.190 --> 01:51:04.230
 Jim Bradley : Perception as you as you just said for the first five years is that you're not a private foundation in the sixth year, you have to prove it, and you're proven by

01:51:04.890 --> 01:51:15.630
 Jim Bradley : This section. See here the computation of public support percentage and as you pointed out, there's a 33 and a third support test that has to be met.

01:51:16.740 --> 01:51:17.640
 Jim Bradley : And embedded

01:51:19.410 --> 01:51:29.580
 Jim Bradley : In the. Hopefully, you know, you don't have to worry about this until the sixth year. So, but I would, you know, try to project and see what's going to happen in this year.

01:51:30.870 --> 01:51:43.230
 Jim Bradley : Because it can become a private foundation and if you are a private foundation, then you're not allowed to file a 990, you have to file a 990 PDF, which are

01:51:44.550 --> 01:51:51.540
 Jim Bradley : Is specifically for private foundations and it's a lot more strict there's a lot

01:51:52.650 --> 01:52:10.200
 Jim Bradley : excise taxes are can be imposed and they just want to make sure that the member with the muscle, you know, has the money is not taking advantage of what should be a public charity right and a lot more disclosure is required.

01:52:11.610 --> 01:52:17.610
Kenny Felton: I know my town last year, she just ignored the formula 100%

01:52:18.750 --> 01:52:20.340
 Jim Bradley : Yeah, that would be dangerous. Yeah.

01:52:20.730 --> 01:52:29.370
Kenny Felton: Well, I mean, the thing is is that I'm sorry but I think we made maybe 15,000 and so if I'm looking at, I have to discount anybody that

01:52:30.690 --> 01:52:39.330
Kenny Felton: donated more than $331 for the year. Well, I've got people that are donating $100 a year. So that's 1200 dollars. I can

01:52:40.050 --> 01:52:42.990
 Jim Bradley : Review filing a 999 or

01:52:43.380 --> 01:52:49.800
Kenny Felton: I'm filing the 990 easy because if I filed a 990 and that just qualifies me for a number of grants.

01:52:50.370 --> 01:52:51.690
 Jim Bradley : Okay, okay.

01:52:54.840 --> 01:53:04.410
 Jim Bradley : This is somewhat complicated. I would look into it and without knowing you know more the details. I hate to give you an

01:53:05.850 --> 01:53:27.090
 Jim Bradley : You know, this is an informal and that I meant to cover just the basics of nine days. And this is an overview and you have a potentially a problem and remember this 990 or the 990 easy it's filed under penalty of perjury. So I wouldn't just tweak the numbers to make them look good and

01:53:27.090 --> 01:53:27.270
 Jim Bradley : I

01:53:27.600 --> 01:53:28.200
Kenny Felton: I don't give

01:53:28.290 --> 01:53:29.760
 Jim Bradley : The IRS honest number

01:53:30.210 --> 01:53:31.380
Kenny Felton: I pay the IRS.

01:53:31.620 --> 01:53:40.020
Kenny Felton: On us numbers, but they gave me a formula that's not supportable. And I'm thinking that I'm not probably I'm probably not the only one that's got this problem.

01:53:41.490 --> 01:54:03.150
 Jim Bradley : Yeah, it said I would look into this and I hate to give you an answer, based on you know what you've told me so far because it could be serious. Because if it's a private foundation, rather than a public charity. There are substantial disadvantages in being a private foundation

01:54:03.210 --> 01:54:03.540
Kenny Felton: Oh,

01:54:03.660 --> 01:54:05.250
Kenny Felton: Oh yeah, yeah, yeah.

01:54:05.580 --> 01:54:12.300
Kenny Felton: I've researched those. It's just that I am a public charity and

01:54:14.430 --> 01:54:25.770
Kenny Felton: Their, their formula doesn't seem to work. Now, there's the section, be that I could possibly well past but but I want to, I want to do the Section eight

01:54:27.450 --> 01:54:27.870
Kenny Felton: Years.

01:54:28.710 --> 01:54:30.360
 Jim Bradley : Yeah. Oh.

01:54:30.480 --> 01:54:44.970
Susannah: I'm gonna jump in because we well first. Oh, I was gonna say I haven't heard, I haven't heard of a lot of grants that require you do the 990 instead of 999 or nine nine, etc. Instead of

01:54:46.500 --> 01:55:09.960
Susannah: So, but if you if you know some that you are going for them, then that would be the decision, you would need to make. But if you've only heard that you might not be eligible for some grants. If you follow the 990 M instead of 990 easy. I will research that to make sure that's true.

01:55:11.970 --> 01:55:12.810
Kenny Felton: Okay, thank you.

01:55:12.930 --> 01:55:18.840
Susannah: You're welcome. I'm so and I had promised the group that we would take a

01:55:20.010 --> 01:55:39.660
Susannah: Pulse check at 730 to see what folks wanted to do in terms of more questions, or are, are we good or jump in if anybody has any more questions. I'm sure we could maybe go till 745 if Jim is alright with that.

01:55:40.830 --> 01:55:41.340
Susannah: Yeah.

01:55:41.970 --> 01:56:01.680
 Jim Bradley : I learned to also give a small plug for my CPA firm Alana company. We're located in downtown Austin our telephone number is area code 512-479-6819 and we have a heavy practice got up for 990s

01:56:01.740 --> 01:56:12.510
 Jim Bradley : And nonprofits and we'd be more than happy to answer questions. Richard Bolin is the owner there and he specialized in nonprofits.

01:56:12.870 --> 01:56:15.600
 Jim Bradley : Or over 25

01:56:15.630 --> 01:56:17.910
 Jim Bradley : Years. He is an expert in this.

01:56:18.510 --> 01:56:27.690
 Jim Bradley : He's very involved with the Austin club in downtown Austin fact I understand, Richard is the secretary now of the Austin clubs, though.

01:56:28.380 --> 01:56:42.480
 Jim Bradley : You could call Richard bland at area code 51234796819. If you have any questions, and Richard has a lot. I have about 12 years and Richard has 25 years so

01:56:44.130 --> 01:56:48.540
 Jim Bradley : Right now, I thought, you know, and I specialize in the nine nine

01:56:49.680 --> 01:56:50.430
Carolyn M. Appleton: Could I ask

01:56:50.640 --> 01:56:52.680
 Jim Bradley : A question. Yeah, sure.

01:56:53.910 --> 01:57:12.540
Carolyn M. Appleton: This is something I get conflicting responses to but the independent sector, the organization publishes the value of a volunteer hour so every year it. It's about $24 basically but

01:57:13.140 --> 01:57:23.100
Carolyn M. Appleton: Can you count for those organizations that especially have a lot of volunteers and who have documented those hours.

01:57:23.730 --> 01:57:34.800
Carolyn M. Appleton: Can you can say that's the form of income or a donation to the organization those hours, times the $24. What are the official

01:57:35.100 --> 01:57:46.830
Carolyn M. Appleton: Value of one hour. Like I sometimes do reports for nonprofits. I get them to tell me how many volunteer hours and I multiplied by the number and I share that is even like a press release.

01:57:47.070 --> 01:57:49.470
Carolyn M. Appleton: But isn't something that could go on a tax return.

01:57:50.670 --> 01:57:53.820
 Jim Bradley : It can't be deducted but

01:57:54.630 --> 01:57:56.610
 Jim Bradley : The fair market value of

01:57:57.630 --> 01:58:02.940
 Jim Bradley : Items that are given to the nonprofit are reported on the tax for

01:58:04.830 --> 01:58:15.840
 Jim Bradley : So and if, if the fair market value exceeds that it's either 25,000 or 50,000 it goes on a schedule him as a

01:58:16.950 --> 01:58:18.870
 Jim Bradley : It has to be disclosed on the night night.

01:58:19.650 --> 01:58:29.580
Dale: Yes, day out. I'm thinking they there is a place on the 994 the number of volunteers, but it doesn't ask for a vault.

01:58:30.750 --> 01:58:33.120
Dale: You don't have to answer it, as I recall.

01:58:33.690 --> 01:58:36.480
Dale: And doesn't ask for the value

01:58:36.840 --> 01:58:41.340
Dale: But it's a good thing to put it on there so that you can prove that

01:58:43.290 --> 01:58:45.060
Dale: You do have public

01:58:46.230 --> 01:58:48.270
Dale: Interest and support.

01:58:48.870 --> 01:58:50.400
 Jim Bradley : You. I can show you, Jim.

01:58:51.750 --> 01:58:52.710
 Jim Bradley : Let me show you.

01:58:54.810 --> 01:58:56.400
 Jim Bradley : I'll show you where that is on here.

01:58:57.900 --> 01:59:11.940
 Jim Bradley : At the top you can see how large this is I wanted to cover more than I was able to tonight, and I knew I wasn't going to be able to cover the whole thing. But we covered the first three pages thoroughly.

01:59:12.000 --> 01:59:13.980
 Jim Bradley : And that that's

01:59:14.040 --> 01:59:24.360
 Jim Bradley : Really important stuff. But as I said I've attended eight our webinars on the 990 and that still isn't enough time to cover everything even an eight hour

01:59:25.470 --> 01:59:27.900
 Jim Bradley : But let me. Yeah, let's go down.

01:59:29.310 --> 01:59:29.880
 Jim Bradley : Here.

01:59:35.340 --> 01:59:35.700
 Jim Bradley : Yeah.

01:59:35.850 --> 01:59:47.970
 Jim Bradley : A number of volunteers is right here. It's this line six and it's 38 volunteers. So you do have to disclose the number of volunteers.

01:59:50.220 --> 01:59:51.960
 Jim Bradley : You should never, you know,

01:59:51.990 --> 01:59:54.240
 Jim Bradley : Fake a number on any kind of

01:59:54.270 --> 02:00:00.750
 Jim Bradley : Tax Return nine nine or 10 for anything but you're allowed to make a reasonable estimate if you have

02:00:01.920 --> 02:00:02.490
 Jim Bradley : And

02:00:03.000 --> 02:00:03.390
 Jim Bradley : So,

02:00:03.450 --> 02:00:05.490
 Jim Bradley : Something like volunteers. A you

02:00:05.880 --> 02:00:16.770
 Jim Bradley : Could have to. It's possible. We have any volunteers. And so you would be allowed to make up a reasonable estimate for, say, and there's tax effect to this.

02:00:18.120 --> 02:00:21.180
 Jim Bradley : But it's best to get the precise number

02:00:25.050 --> 02:00:31.770
Susannah: Questions before we, before we call it a night. And thanks, I think Jim very much. Any other

02:00:31.770 --> 02:00:33.240
Carolyn M. Appleton: Questions. Thanks.

02:00:34.440 --> 02:00:51.360
 Jim Bradley : Oh, I've enjoyed doing this a lot of fun. I love my profession I enjoy public speaking and I want to let you know I met Susanna earlier in Toastmasters that we've known each other for about seven years. She's a good friend and

02:00:53.730 --> 02:00:56.040
 Jim Bradley : I really have enjoyed giving us tonight.

02:00:56.790 --> 02:00:57.720
Susannah: To more so.

02:00:57.750 --> 02:01:03.570
Susannah: So for as I said at the top on taxes, can the word taxes can just

02:01:04.020 --> 02:01:05.820
Susannah: strike fear into the hearts of

02:01:05.880 --> 02:01:21.690
Susannah: Many and nonprofit professionals. I think there were so mission focus, we really need all the help we can get. And you've given us a lot of help and we're just so grateful. So around of jazz hands and applause thumbs up to

02:01:23.220 --> 02:01:23.580
 Jim Bradley : That

02:01:23.820 --> 02:01:45.330
 Jim Bradley : Again, I'm a senior tax manager Milan and company PC in downtown Austin, the telephone number 512 or 796819 and Richard will land is the owner there I have 12 years experience Richard has 25 years experience. So you could contact either if it's

02:01:46.080 --> 02:01:52.470
Susannah: Awesome. Jim, thank you. And I'm going to stop the recording now and stop the live