Form 990 Schedule C: Mastering Complex Reporting of Political - - PowerPoint PPT Presentation

▶
form 990 schedule c mastering complex reporting
SMART_READER_LITE
LIVE PREVIEW

Form 990 Schedule C: Mastering Complex Reporting of Political - - PowerPoint PPT Presentation

Oct 12, 2023 1.58k likes •2.07k views

FOR LIVE PROGRAM ONLY Form 990 Schedule C: Mastering Complex Reporting of Political Campaign and Lobbying Activities Avoiding Excise Taxes, Penalties, Fines, and Revocation of Tax-Exempt Status Due to Noncompliance TUESDAY , APRIL 4, 2017,

slide-1
SLIDE 1

WHO TO CONTACT DURING THE LIVE EVENT

For Additional Registrations:

  • Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10)

For Assistance During the Live Program:

  • On the web, use the chat box at the bottom left of the screen

If you get disconnected during the program, you can simply log in using your original instructions and PIN.

IMPORTANT INFORMATION FOR THE LIVE PROGRAM

This program is approved for 2 CPE credit hours. To earn credit you must:

  • Participate in the program on your own computer connection (no sharing) – if you need to register

additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover.

  • Listen on-line via your computer speakers.
  • Respond to five prompts during the program plus a single verification code. You will have to write

down only the final verification code on the attestation form, which will be emailed to registered attendees.

  • To earn full credit, you must remain connected for the entire program.

Form 990 Schedule C: Mastering Complex Reporting

  • f Political Campaign and Lobbying Activities

Avoiding Excise Taxes, Penalties, Fines, and Revocation of Tax-Exempt Status Due to Noncompliance

TUESDAY , APRIL 4, 2017, 1:00-2:50 pm Eastern

FOR LIVE PROGRAM ONLY

slide-2
SLIDE 2

Tips for Optimal Quality

Sound Quality When listening via your computer speakers, please note that the quality

  • f your sound will vary depending on the speed and quality of your internet

connection. If the sound quality is not satisfactory, please e-mail sound@straffordpub.com immediately so we can address the problem.

FOR LIVE PROGRAM ONLY

slide-3
SLIDE 3

April 4, 2017

Form 990 Schedule C

Deborah Kaminski, Director of Tax Exempt Organizations DZH Phillips, San Francisco dkaminski@dzhphillips.com Eric K. Gorovitz, Principal Adler & Colvin, San Francisco egorovitz@adlercolvin.com

slide-4
SLIDE 4

Notice

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

slide-5
SLIDE 5

3/31/2017 dzhphillips.com

FORM 990 SCHEDULE C:

Mastering Complex Reporting of Political Campaign and Lobbying Activities

slide-6
SLIDE 6

3/31/2017 dzhphillips.com 6

Eric K. Gorovitz

Principal, Adler & Colvin

  • Mr. Gorovitz's practice spans the full range
  • f nonprofit and tax-exempt legal issues,

with emphasis on political advocacy and nonprofit corporate governance. He frequently presents on non-profit issues. egorovitz@adlercolvin.com

slide-7
SLIDE 7

3/31/2017 dzhphillips.com 7

Deborah Kaminski

Director Of Tax Exempt Organizations, DZH Phillips

  • Ms. Kaminski has spent 20 years in the

nonprofit taxation and trust industry. She specializes in taxation of non-traditional investments, trust dissolutions, distribution calculations, excess-benefit transactions, and tax advisory services regarding nonprofit

  • entities. She also helps clients identify and

resolve compliance oversight. dkaminski@dzhphillips.com

slide-8
SLIDE 8

3/31/2017 dzhphillips.com 8

AGENDA

Schedule C Parts I & II

Lobbying and Political Action

Part III

Proxy tax

Planning Considerations

slide-9
SLIDE 9

3/31/2017 dzhphillips.com 9

INTRODUCTION

  • a. Distribution of lobbying and political activities across the exempt organization

spectrum

  • b. 501(c)(3) – Charitable, Religious, Educational, Scientific

i. Private foundation: no lobbying ii. Public charity: limited lobbying iii. No candidate campaign intervention

  • c. 501(c)(4) – Civic Leagues & Social Welfare Orgs.
  • d. 501(c)(5) – Labor, Agricultural & Horticultural Orgs.
  • e. 501(c)(6) – Business Leagues
slide-10
SLIDE 10

3/31/2017 dzhphillips.com

FORM 990 “TRIGGER” QUESTIONS

slide-11
SLIDE 11

3/31/2017 dzhphillips.com 11

FORM 990 “TRIGGER” QUESTIONS

Part IV, Line 3: Political activities?  Sch. C, Part I (All Types) Part IV, Line 4: Lobbying, or 501(h) election?  Sch. C, Part II (501(c)(3) only) Part IV, Line 5: Subject to proxy tax?  Sch. C, Part III (501(c)(4-6) only)

slide-12
SLIDE 12

3/31/2017 dzhphillips.com 12

FORM 990, SCHEDULE C

Part I: Political Activities (All Types) Part II (A&B) : Lobbying Activities (501(c)(3) only) Part III: Proxy Tax (501(c)(4-6) only) Part IV: Supplemental Info (All types)

slide-13
SLIDE 13

3/31/2017 dzhphillips.com 13

BAGELS AND POLITICS

Two entities: 501(c)(3): Bagels Are Good Eating League (B.A.G.E.L.) conducts research and educates the public about the features and merits of quality bagels 501(c)(6): American Bagel Association (A.B.A.) is a membership organization that promotes the line of business of bagel making in various ways

slide-14
SLIDE 14

3/31/2017 dzhphillips.com 14

 Public education:

  • Hosting non-partisan candidate forum

$ 50,000

  • Education about quality bagels

$ 250,000

  • Research and reports on bagel issues

$ 500,000

  • Nonpartisan analysis of seed preferences

$ 25,000 Public Education: $ 825,000  Influencing legislation on bagels:

  • Grant to support a state ballot measure

$ 20,000

  • Encouraging the public to contact Congress

$ 50,000

  • BAGEL Lobby Day (including 200 volunteer hours)

$ 55,000 Influencing Leg. $ 125,000 $ 950,000  Contribution to pro-bagel candidate: $ 50,000 $ 50,000 Total Program Expenses $1,000,000 $1,000,000

BAGEL ACTIVITIES

slide-15
SLIDE 15

3/31/2017 dzhphillips.com 15

BAGEL FUNCTIONAL EXPENSE ALLOCATION

Form 990, Page 10  Program Expenses: $1,000,000  Fundraising Expenses: $ 100,000  Capital Expenses $ 100,000 Total Expenses: $1,200,000

slide-16
SLIDE 16
slide-17
SLIDE 17

3/31/2017 dzhphillips.com 17

BAGEL’S FORM 990:

Part IV, Line 3: Political activities? Yes. (UH-OH . . .)  Sch. C, Part I Part IV, Line 4: Lobbying, or 501(h) election? Yes.  Sch. C, Part II Part IV, Line 5: Subject to proxy tax? No.  SKIP Sch. C, Part III

slide-18
SLIDE 18

3/31/2017 dzhphillips.com 18

50,000 200

slide-19
SLIDE 19

3/31/2017 dzhphillips.com 19

Line 1: Description of filing organization’s own political activities; not SSF activities; narrative on Part IV (just lines for text) Line 2: Political activity expenditures Line 3: Estimate of volunteer hours on political activities (using “any reasonable method” for estimation)

Part 1-A

HOW TO COMPLETE

slide-20
SLIDE 20

3/31/2017 dzhphillips.com 20

Used for c3 to disclose excise taxes under IRC § 4955 for political campaign activity. SHOULD BE BLANK because c3 should never conduct these activities. Amount of tax = 10% Line 4 requires description of steps taken to correct improper expenditures i. Recovery

  • ii. Safeguards to prevent

Part 1-B

HOW TO COMPLETE

slide-21
SLIDE 21

3/31/2017 dzhphillips.com 21

BAGEL’S FORM 990:

Part IV, Line 3: Political activities? Yes. (UH-OH . . .)  Sch. C, Part I Part IV, Line 4: Lobbying, or 501(h) election? Yes.  Sch. C, Part II Part IV, Line 5: Subject to proxy tax? No.  SKIP Sch. C, Part III

slide-22
SLIDE 22

3/31/2017 dzhphillips.com 22

LOBBYING

  • a. All activities intended to influence foreign, national, state
  • r local legislation
  • b. Two Types:

i. Direct lobbying: attempting to influence the legislators

  • ii. Grassroots Lobbying: attempting to influence

legislation by influencing the general public

slide-23
SLIDE 23

3/31/2017 dzhphillips.com 23

Limit for Public Charities

  • a. How much is “Substantial”?
  • b. Consequences for engaging in “substantial” lobbying

i.

  • Sec. 4911 excise tax (electing charity)

ii.

  • Sec. 4912 excise tax (non-electing charity)

ii. Possible loss of tax-exemption

  • c. 501-h Election for clear definitions

i. Establishes the Lobbying Ceiling Amount ii. Establishes an annual and 4-year-aggregate limit for both total and grassroots lobbying expenses

  • iii. Counts expenditures only; no-cost activities don’t affect limit
  • iv. Form 5768 – in effect until rescinded by org.
  • v. Not available to Churches, Private Foundations

“NO SUBSTANTIAL PART”

slide-24
SLIDE 24

3/31/2017 dzhphillips.com 24

LOBBYING

Schedule C, Part II-A (501(h) Elector)

  • a. Lines 1a-j:
  • a. Direct and grassroots lobbying expenditures for the tax

year

  • b. Calculate total and grassroots lobbying limits for the tax

year

  • c. Limits are portion of “exempt purpose expenditures”
  • b. Lines 2a-f:
  • a. Aggregate lobbying limits, expenditures over 4 years
  • b. Calculate “ceiling amounts” (150% of aggregate limit)
  • c. Excess (if any) determines whether exempt status at risk
slide-25
SLIDE 25

3/31/2017 dzhphillips.com 25

EXEMPT PURPOSE EXPENDITURES

Included: i. Program expenses (lobbying and non-lobbying) ii. Staff compensation (including deferred comp) iii. Depreciation

  • iv. Administrative expenses allocated to exempt purpose accomplishment

v. Limited fundraising expenses Excluded: i. Most fundraising expenses (internal or external) ii. Capital expenses iii. Expenses to generate unrelated income

  • iv. UBIT
slide-26
SLIDE 26

3/31/2017 dzhphillips.com 26

slide-27
SLIDE 27

3/31/2017 dzhphillips.com 27

slide-28
SLIDE 28

3/31/2017 dzhphillips.com 28

Lines 1a-j

  • a. Yes/no questions about specific types of lobbying

activity

  • b. “Detailed” explanation required (on Part IV) for any

“yes” response

  • c. Expense amounts include in-house staff, an
  • verhead allocation, supplies

Lines 2a-d

  • a. Calculate tax for excess lobbying
  • b. Requires filer to determine on its own whether

lobbying activities cause filer to be not described in 501(c)(3) because lobbying on Line 1j was “substantial”

Schedule C, Part II-B (Non-electing charities)

LOBBYING

slide-29
SLIDE 29

3/31/2017 dzhphillips.com 29

slide-30
SLIDE 30
slide-31
SLIDE 31

3/31/2017 dzhphillips.com 31

Case Study # 2

American Bagel Association - ABA

[Trade Association exempt under §501(c)(6)] REVENUE

  • Membership dues

$ 250,000 (Members told 60% ABA, 40% SSF)

  • BAGEL and other c3 organizations:

$ 40,000

  • Bagel bakeries:

$ 150,000

  • Individual bagel industry workers:

$ 60,000

  • Bagel-eating contest

$ 50,000 Total Revenue $ 300,000 ACTIVITIES & EXPENSES

  • Bagel-eating contest

$ 100,000

  • Support for BAGEL ballot measure

$ 50,000

  • Work performed in coordination with candidate

$ 30,000

  • Payments from member dues to SSF (527)

$ 50,000

  • Payments to DNC (527)

$ 70,000 Total Expense $ 300,000 Member volunteer hours working for candidate: 100 hours.

slide-32
SLIDE 32

3/31/2017 dzhphillips.com 32

ABA’S FORM 990:

Part IV, Line 3: Political activities? Yes.  Sch. C, Part I Part IV, Line 4: Lobbying, or 501(h) election? N/A.  SKIP Sch. C, Part II Part IV, Line 5: Subject to proxy tax? Yes.  Sch. C, Part III

slide-33
SLIDE 33

3/31/2017 dzhphillips.com 33

200,00 100

slide-34
SLIDE 34

3/31/2017 dzhphillips.com 34

Reporting of Sec. 527 “exempt function activity” c3s should never have anything to report here. Line 1: Filer’s OWN funds spent on filers OWN activities Line 2: Filers OWN funds transferred to OTHERS for 527 exempt function activity Line 3: Total of Lines 1 & 2; transfers to 1120-POL for calculation of tax Line 4: Yes or No if you filed 1120-POL

Part 1-C

HOW TO COMPLETE

slide-35
SLIDE 35

3/31/2017 dzhphillips.com 35

Line 5: Filer’s payments to 527s i. Columns a-c identify RECIPIENT 527 ii. Column d: filer’s OWN funds paid to 527 iii. Column e: “Prompt and direct” transfers to 527; NOT filer’s funds

Part 1-C (continued)

HOW TO COMPLETE

slide-36
SLIDE 36

3/31/2017 dzhphillips.com 36

slide-37
SLIDE 37

3/31/2017 dzhphillips.com 37

ABA’S FORM 990:

Part IV, Line 3: Political activities? Yes.  Sch. C, Part I Part IV, Line 4: Lobbying, or 501(h) election? N/A.  SKIP Sch. C, Part II Part IV, Line 5: Subject to proxy tax? Yes.  Sch. C, Part III

slide-38
SLIDE 38

3/31/2017 dzhphillips.com 38

I’ll take a bagel with everything, including the proxy tax.

slide-39
SLIDE 39

3/31/2017 dzhphillips.com 39

  • a. Summary
  • a. Imposed under IRC 6033(e)
  • b. Rev. Proc. 98-19 limits application to c4, c5 agricultural and horticultural
  • rgs (not labor unions), & c6, with various exceptions
  • c. Purpose: Correction for presumed impermissible deduction (IRC 162) of

dues payments to a membership organization that org uses for lobbying or political activities

  • d. Two options:
  • a. notify members, at time of assessment or payment of dues, of the

amount of their dues that is not deductible, or

  • b. pay 35% tax on the amount for which notice was not provided
  • e. If the notice exceeds the amount actually expended, excess can be

carried over to next year

Schedule C, Part III

PROXY TAX

slide-40
SLIDE 40

3/31/2017 dzhphillips.com 40

  • f. Exceptions:

i. 90% of dues were not deductible by members

  • 1. c3s
  • 2. Government
  • 3. Certain other EOs

ii. Only de minimis (< $2000) in-house lobbying expenditures iii. c4 or c5 if 90% of dues come via payments of $112 or less/year (indexed for inflation)

  • iv. c5 labor unions

v. c4 veterans orgs.

Schedule C, Part III (continued)

PROXY TAX

slide-41
SLIDE 41

3/31/2017 dzhphillips.com 41

slide-42
SLIDE 42

3/31/2017 dzhphillips.com 42

  • c. Part III-B: Calculation of proxy tax
  • a. Only complete if either

i. “NO” to Part III-A Lines 1 and 2; or ii. “YES” to Part III-A, Line 3

  • b. Line 1: dues collected from members
  • c. Line 2: nondeductible (under IRC §162(e)) expenditures - report

current year (line a), carryover from prior year (line b), total (line c)

  • d. Line 3: Aggregate amount of proxy tax notice (dollars)
  • e. Line 4: excess of expenditures over notice that org agrees to carry
  • ver into next year’s estimate
  • f. Line 5: amount of expenditures subject to tax

Schedule C, Part III (continued)

PROXY TAX

slide-43
SLIDE 43

3/31/2017 dzhphillips.com 43

PLANNING AND STRATEGIES

  • a. Legal strategies and considerations:

i. Advance planning issues summary ii. Common timing items(build your war chest for the future) iii. When to call counsel

  • b. Tax Strategies

i. Planning implications of reporting requirements ii. Frame the process with clients in advance - iii. What is the organization’s goal for participation in the electoral process? What do they want to achieve and how? Who are the constituents?

  • iv. 501h decision-making

v. Tax Strategy: Paying the proxy tax is an option for 4/5/6 orgs that want to allow members a biz deduction.

slide-44
SLIDE 44

3/31/2017 dzhphillips.com 44

slide-45
SLIDE 45

3/31/2017 dzhphillips.com

QUESTIONS?

Deborah Kaminski (415) 624-2264 dkaminski@dzhphillips.com Eric K. Gorovitz (415) 421-7555 egorovitz@adlercolvin.com