Now you have received your "501(c)(3)" letter from the IRS....

Compliance List for "501(c)(3)" Corporations in Connecticut

Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
129 Church Street, Suite 503
New Haven, CT 06510

203-776-4400
Fax 203-774-1060
davis@sharinglaw.net
www.sharinglaw.net

with hyperlinks to the necessary documents and filing instructions
(LAST UPDATED 11/14/16; PLEASE NOTIFY ME if you find BAD LINKS or other errors)

DISCLAIMERTHIS INFORMATION IS NOT PROVIDED AS  LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS.

  1. Loose Ends

Form REG-1: If you have not already done so, file with the Connecticut Department of Revenue Services, attaching your determination letter, to ensure exemption from CT business income tax.  Click for further info.

Public Charities Unit: Either file an  Initial Registration Form to register initially ($50), or Exemption Certificate CPC-54 (free) if you are exempt. You can now register (or claim exemption) online without a paper form, but you have to create a login and password and all that jazz. Select licenses issued by the Dept. of Consumer Protection.  Many exemptions apply; organizations that (a) receive less than $50,000 gross per year from "solicitations", and (b) do not use a paid solicitor, are exempt and file CPC-54. Two officers must sign these forms.  Read the instructions for more on exemptions.  BY THE WAY -- if you do interactive online donations, or if you actively solicit in other states, you may have to register there too. Get forms; read about the "online" issue and the "Charleston Principles" .....

Other Exemptions.

  • Sales Tax.   You don't have to do anything to be exempt from paying sales tax (if you use a corporate check or credit card). Simply get Form CERT-119 from the Department of Revenue Services, available online, fill it out, and attach a copy of your determination letter.  Note:  for exemption from tax on food and lodging, use CERT-123.  There are also other exemptions; check this page

  • Property Tax.  Property tax exemption is more complicated; you don't get it automatically and it usually starts on the NEXT grand list after your acquire the property. The "grand list" is when property gets valued by the town -- October 1st.  You can read the complicated statutes, particularly section 12-81(7); most organizations will have to file Form M-3 or this M-3 a similar form upon formation and then every 4 years (with 1965 as the first year, so for example, 2013 is a quadrennial filing year)  -  with the assessor.  (This form is provided here as a "fill-in" -- check to make sure it is still current and appropriate for your town.)  Property tax may apply to things like office equipment as well as real estate and automobiles!

  • There are more taxes and more exemptions.  Check with the Department of Revenue Services about any other exemptions, such as exemptions from collecting sales tax.  These rules change constantly.
  1. Ongoing IRS and other Tax Filings

Annual Filings: For larger organizations,  IRS Form 990 (or 990EZ) and Schedule A (click here and here for instructions - be sure to check for current version on www.irs.gov if this page has not been updated): If you have gross income from all sources of MORE THAN $50,000 (pre-2011, $25,000), or are classified as a "supporting organization" (509(a)(3)), file 990 or 990EZ. If you have less, you will have to file a "990-N" e-postcard EVERY YEAR, justifying that you do not need to file a 990/990EZ.   Check the IRS website for a list of who files whatFILE ANNUALLY BY THE 15TH DAY OF THE 5TH MONTH FOLLOWING THE END OF YOUR FISCAL YEAR.  (For instance -- May 15th if your year ends December 31st).   By the way -- you will find these published on the Internet at www.guidestar.org, so remember that the public is also reading what you tell the IRS.  IF YOU FAIL TO FILE FOR 3 YEARS IN A ROW, YOU WILL LOSE TAX EXEMPT STATUS AND WILL HAVE TO RE-APPLY!  Here is a list of revoked organizationsIf you have to file the 990 or 990Ez, consult an accountant or attorney -- they are complicated.  That goes double for the form required for private foundations, IRS Form 990PF.  Click to fill in and print  Form 8868 for an automatic 3-month IRS extension. If you forgot and HAVE been automatically revoked, ASAP CHECK REV. PROC. 2014-11 online or in PDF -- it's easier to get the exemption back if you see reinstatement within 15 months of revocation.

PENALTIES of $ 20.00 per day for failure to file 990
(there is a maximum, based on organizational size).
LOSS OF EXEMPT STATUS - MUST REAPPLY - if fail to file 990 OR NOTICE for 3 years

Also file IRS Form 990-T (click for instructions) and Connecticut form CT-990-T, if you have gross "unrelated business taxable income" of more than $1,000 that is from an "unrelated" "trade or business" "regularly carried on." Same due dates. Tax may be due if you made a "profit."  Consult an accountant or attorney to complete  these forms:  they are complicated. 
Watch your "Public Support" compliance: You no longer have to file Form 8734 after the end of your fifth fiscal year.  However, the IRS will review your status based on the information presented in Form 990 or 990EZ relating to the sources of your support.  For help understanding how to include the contributions, read my article "Remember Your Fractions."

Changes: You are required to send the IRS any changes to your Certificate of Incorporation and Bylaws. This can be done by letter, or by an attachment to Form 990. If you change your address, file Form 8822-B with the IRS.  If you change your "foundation status" -- which kind of public charity you are -- you may have to submit a new form 1023 with a $400 fee.  The IRS no longer has time to read scholarly letters from your lawyer or accountant about which category you should be.  (Why do you care? you may flunk the public support test under one category but not under another.)

Lobbying. If you have not already done so, and want to elect the numerical test for measuring whether your lobbying activity is "substantial," file IRS Form 5768. If you want to revoke your election, use the same form. The election is retroactive:  you can file at the end of the year to cover the entire year.  File Form 990 to report lobbying expenses annually.  ALSO VERY IMPORTANT:  Connecticut ethics laws are stricter than the IRS.  You may have to file with the State Ethics Commission even if what you are doing would not be considered "lobbying" by the IRS at all.
  1. Ongoing State Filings

  1. Secretary of State.

Annual Report. This will be sent to you by the Secretary of State, but if you do not receive it, you should contact them. There is a small annual fee, and if you miss any reports you will have to file back reports with fees for each missed year.  Very cool:  you can now file ONLINE and pay the fee with a credit card!   If you fail to file, you are not "in good standing" which can be annoying if you apply for a mortgage, or need to sue someone.  NEW in 2014: per Public Act 14-154, if an organization is delinquent in filing, it can be notified that unless the filing is done within 3 months it will be "administratively dissolved."  If that happens, it CEASES TO EXIST -- unless it reinstates and pays a large fee.  Comment:  the Act seems to require certified or registered mail for the notice of imminent dissolution; will this actually be done? 

Change of Address. This is important to file. VITAL if you are worried about that notice of impending dissolution going to the wrong plaace!  You don't have to, but can, report additional directors too.

Change in "statutory agent for service." If the agent you had initially is no longer involved with you, be sure to change this.  File any change in your agent's address as well.

Changes to governing documents: Don't change your Certificate of Incorporation without filing a Certificate of Amendment (fill-in online). Don't change your Bylaws without checking your Certificate!! Don't change either without checking the statute, section 33-1000 and following of the Conn. General Statutes.

  1. Public Charities Unit. Since 10/2005, registration expires annually, and you will have to use the registration form above annually to re-register. This will include a copy of your Form 990. Organizations with revenues of $500,000 or more annually must submit audited financial statements.  If you are not required to register (for example, annual receipts under $50,000 and no paid solicitors -- but you still must file an exemption certificate), you should still check the requirements and forms if you hire a "fund-raising counsel" (non-employee paid to advice regarding solicitation/fund-raising) or a "paid solicitor" (non-employee who makes direct solicitations on your behalf). In general, contracts must be filed with the Secretary of State and you should only engage "registered" counselors or solicitors.  Remember that if you fundraise in other states (including in some cases using on-line solicitations especially interactive sites accepting credit cards) you may have to register and report in those states.

  1. PUBLIC DISCLOSURE.  You are required to make certain documents available to the public when requested, so make sure you can find the documents when asked.  These include your governing documents; your exemption application (Form 1023) and all attachments (if you filed after 1987 or had a copy of your 1023 in hand at the time); and three years of Form 990 or 990-EZ, if you filed one.  You'll have to provide these for viewing the same day as a request in person (30 days for mailed-in requests) or face $20/day penalties.  You also have to make copies of anything not posted on the Internet in PDF format, and can only charge $1 for the first page and $0.15 for subsequent pages.  For a detailed article on this topic, click HERE; the IRS also has a powerpoint on this topic.

  2. Other reminders.

Keeping Accounts.  All the filings and forms above will be impossible if you do not keep good, organized accounts as well as a minute book documenting corporate decisions officially adopted.  It is worth it to consult with an accountant about how to keep your "books" from the very start.  If you get grants, and have to report on the use of funds, this is essential -- you may have all kinds of liabilities if you don't maintain good records.  This is a MUST.

"Business." If you have employees, or engage in ANY sales, talk to your accountant -- there will be many additional forms required.  See quick summary.  The Treasurer may be personally responsible for some of these.  And don't forget about INSURANCE!!!  Another quick summary!

Fund-raising Issues. Check the IRS VERY BIG/SLOW PDF DOWNLOAD (graphics) Publication 1771, IRS information on federal requirements relating to charitable gifts, including the requirement that you provide a "disclosure of benefit" to individuals who make gifts of $75 or more and receive a "benefit" in return.  There are all kinds of special rules for different fund-raising activities.  NOTE:  the Pension Protection Act of 2006, signed in August, 2006, adds additional requirements and limits some deductions.  Skip to the end of my article...

Other States. If you conduct activities in other states (which in some cases may include "interactive" on-line fund-raising, or appearing at a fundraising event) you may need to file or register in those states.

Watch your Step - Look out for Conflicts of Interest.  The IRS can impose financial penalties if an "insider" or related party receives "excess benefit" from a transaction with a tax-exempt organization.  In case of doubt consult your attorney or accountant.  COMPENSATION TO "INSIDERS" that is not adequately documented at the time of the payment -- for example by reporting on a 990, W-2, etc. -- may be an "excess benefit" even if reasonable.  And as recent events indicate -- image is often everything.  Even if there is no conflict of interest as a legal matter, front page news implying otherwise will hurt donations or have other unpleasant consequences.

Watch for Terrorists -- if the government thinks you are aiding them, you may have your assets seized.  The IRS has  suggested "best practices" and a list of persons to avoid (or at least investigate).  (Can you say McCarthy??  I wrote that over 10 years ago, by the way!)

I'll say it one more time:  DON'T FORGET TO FILE THAT FORM 990 N / 990 EZ / 990 !!! THREE STRIKES AND YOU ARE OUT!!

For further information, contact
Lisa Nachmias Davis
Davis O'Sullivan & Priest LLC
129 Church Street, Suite 503
New Haven, CT 06510
203-776-4400
Fax 203-774-1060
davis@sharinglaw.net
www.sharinglaw.net

 

DISCLAIMER:
THIS INFORMATION IS NOT PROVIDED AS  LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS.