Rotary clubs = IRS 501c4 (not tax exempt, not tax deductible) & their foundations = IRS 501c3 (tax exempt & tax deductible to the extent of the law)

Ronny (Ronney@ReynoldsFranke.com & 512-206-3141), Many thanks for your club-finances presentation at Lone Star PETS last week.  Folks who weren’t in your class (& some of us who were) would like an e-set of your handouts (with answers) & your comments … for us to share with others … topics such as

 

  • the legality & “do’s” & “don’t’s” about raffles (e.g., raffle* tickets are NOT tax deductible; e.g., if I win a car via a raffle, then I have to file an IRS W-2G & pay 28% back-up withholding tax on the value of the car I won; the raffle item has to be paid for by the organization … in advance of the raffle)
  • Rotary clubs must provide IRS 1099 forms to all individuals & organizations for payment of goods / services of $600+ (due date?)
  • Rotary club 501c4 is not exempt from federal income taxes & is required to have a federal identification number; Rotary members’ dues are not tax deductible.
  • Our club’s 501c3 is income-tax exempt via our foundation’s IRS group-exemption number, BUT we must read exactly which purposes the IRS 1023 exemption letter allows (e.g., some 501c3 foundations don’t allow scholarships to individuals … those foundations must donate scholarships to another 501c3 – that, in turn, chooses the recipients).
  • All Rotary clubs must file IRS 990N on line for receipts under $50,000
  • All Rotary clubs must file IRS 990EZ form for receipts $50,000-$200,000
  • All Rotary clubs must file 990 long form (very long & very complicated!) for receipts $200,000+
  • Both our 501c4 Rotary club & its local 501c3 foundation must file separate IRS returns on or before Nov. 15 each year
  • Our 501c4 Rotary club doesn’t have to pay sales tax (for hotel lodgings, products for projects, etc.):  get the required paperwork (to provide each vendor & thus not have to pay sales tax) from District Treasurer
  • WalMart routinely honors the “no sales tax due” for 501c3 organizations (such as our club’s 501c3 foundation)
  • Each club needs at least 2 bank accounts:  for 501c4 club business & for 501c3 non-profit / foundation business … & 1 more separate account for each Rotary Foundation global grant – if financially administered by our club
  • Banks’ statements should go to pres., treasurer & maybe one or two others
  • Each account should be audited at the end of every fiscal year by 2 or 3 members (or by a CPA)
  • For clarity’s sake (for officers, board members & members):  treasurer should provide a Budget (last year’s & this year’s budget for easy comparison & wiser decision-making); year-to-date summary of income & expenses; & a net-worth balance sheet (all assets minus all liabilities)
  • Ideal:  for officers, board members & all members to see financial reports

 

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