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					                               State of California
                               Franchise Tax Board




                  Exempt Organizations
         State of California
         Franchise Tax Board




      Exempt Organizations




Exempt Organizations are:
Exempt Organizations are:
 Business Leagues                          Civic Leagues               Homeowners’ Associations     Schools
 Cemeteries                                Credit Unions               Labor Unions                 Scientific Organizations
 Chambers of Commerce                      Educational Organizations   Literary Organizations       Social Clubs
 Charitable Organizations                  Employee Associations       Recreational Organizations   Veterans Organizations
 Churches                                  Fraternal Societies         Religious Organizations      Voluntary Employee Beneficiary Associations
                   What does tax-exempt mean to the
                   Franchise Tax Board?
Overview of Exempt Organizations

Introduction
People commonly refer to tax-exempt organizations as nonprofit         A nonprofit entity does not have shareholders or owners.
organizations. Although tax-exempt entities are generally nonprofit,   We characterize it according to how it was created.
some tax-exempt entities are for-profit.                                 Nonprofit corporations incorporate through the California
                                                                         Secretary of State (SOS) under one of the following parts of the
This publication explains the laws applicable to California tax-         California Nonprofit Corporation Law:
exempt organizations, including:                                            Nonprofit Public Benefit Corporations.
  Differences between federal and state laws.                               Nonprofit Mutual Benefit Corporations.
  What we may disclose about a specific organization.                       Nonprofit Religious Corporations.
  Filing requirements.                                                      Corporations Sole.
  Unique provisions.                                                     An unincorporated association is nonprofit if its creating
                                                                         document contains nonprofit language. A creating document
Assembly Bill 897, effective January 1, 2008, allows organizations       may be one of the following types of documents:
that obtained federal tax exemption under the Internal Revenue               Articles of association.
Code (IRC) Section 501(c)(3) to have their tax-exempt status                 Bylaws.
acknowledged in California.                                                  Constitution.
                                                                             Trust Instrument.
To receive tax-exempt status in California, the organization files           Other documents that set forth how the association
one of the following with the Franchise Tax Board (FTB):                     will operate.
  FTB 3500, Exemption Application.
  FTB 3500A, Submission of Exemption Request.                          Confidentiality
                                                                       We may not disclose the business and financial matters of a
Exempt vs. Nonprofit                                                   tax-exempt organization to the public; however, once we grant
A tax-exempt entity is a corporation, unincorporated association,      tax-exempt status, we may disclose the information included
or trust that has either:                                              with FTB 3500. If we deny exemption, that information
   Applied for and received a determination letter from FTB            remains confidential.
   stating it is exempt from California franchise or income tax
   (California Revenue and Taxation Code (R&TC)                        We do not disclose information submitted with FTB 3500A or
   Section 23701).                                                     the acknowledgement letter to the public.
   Submitted a copy of the federal determination letter issued by
   the Internal Revenue Service (IRS) approving the organization’s     Note: Federal law regarding disclosure of information about
   tax-exempt status under IRC Section 501(c)(3).                      tax-exempt organizations is different from California law.
                                                                       It requires IRS to disclose certain business details and
                                                                       financial information.




                                                                                                                                PAGE 1
Federal and State Exemption                                           Contact the IRS for information regarding federal tax exemption.
Although most California laws deal with tax exemption patterned       The following federal forms may be helpful:
after the IRC, obtaining state exemption is a separate process          Tax-Exempt Status for Your Organization (Pub. 557).
from obtaining federal exemption. To obtain state tax-exempt            Application for Recognition of Exemption Under Section 501(c)
status, do one of the following:                                        (3) of the Internal Revenue Code (Form 1023).
   Submit FTB 3500, Exemption Application, if you do not have           Application for Recognition of Exemption Under Section 501(a)
   federal exemption or have obtained federal exemption, but not        for Determination Under Section 120 of the Internal Revenue
   under IRC Section 501(c)(3).                                         Code (Form 1024).
   Submit FTB 3500A, Submission of Exemption Request, if you
   obtained federal exemption under IRC Section 501(c)(3).            Incorporation as a Nonprofit Corporation
                                                                      Incorporating under the California Nonprofit Corporation Law does
Note: If you do not obtain state tax-exempt status for your           not mean the organization is exempt from California corporation
organization, it remains subject to the California R&TC as a          taxes, regardless of the language in the Articles of Incorporation or
taxable entity.                                                       the status of the organization for federal purposes.

California law differs from federal law in various ways with regard   To obtain exemption from California income or franchise tax, the
to exempt organizations. Major differences are listed below:          corporation files one of the following with us:
   Churches and small charities apply for state tax-exempt              Form 3500, Exemption Application.
   status using Form 3500, Exemption Application, or Form               Form 3500A, Submission of Exemption Request, with the
   3500A, Submission of Exemption Request, if the entity is             federal determination letter from the IRS approving the
   federally exempt under IRC Section 501(c)(3). Until we issue         organization’s tax-exempt status under IRC Section 501(c)(3).
   a determination letter or receive FTB 3500A with a copy
   of the federal determination letter from IRS approving the         A nonprofit corporation that does not have an exempt
   organization’s tax-exempt status under IRC Section 501(c)(3),      determination letter from us, or that has not submitted to us the
   the organization remains a taxable entity.                         federal determination letter under IRC 501(c)(3), is subject to the
   Group Exemption:                                                   same franchise tax laws as any for-profit corporation. It must file
        Allows the parent organization to obtain tax-exempt status    Form 100, California Corporation Franchise or Income Tax Return,
        for its subordinates.                                         and pay at least the minimum franchise tax each year until it
   Homeowners’ Associations:                                          formally dissolves through SOS.
        For California purposes, an organization is not exempt as
        a homeowners’ association until it applies for and receives   Unincorporated Associations or Trusts
        an exempt determination letter from us. For federal           If an unincorporated association or trust wants tax-exempt status,
        purposes, an association may make an annual election          it files Form 3500, Exemption Application, or Form 3500A,
        for exemption by filing a U.S. Income Tax Return for          Submission of Exemption Request, and provides all
        Homeowners Associations (Form 1120H).                         required documentation.
        For detailed information about homeowners’ associations,
        get FTB Pub. 1028, Guidelines for Homeowners’
        Associations. Go to our website at ftb.ca.gov and search
        for 1028.
   Farm cooperatives are not exempt from tax under California
   law, but federal law may allow exemption with IRS.
   Mutual ditch or irrigation companies may be exempt under
   IRC Section 501(c)(12). California does not have a similar law;
   however, a mutual water company may qualify for exemption
   as a homeowners’ association.




 PAGE 2
If the organization is:                                               Use this table to decide if you must file Form 199.
    An unincorporated association, it files Form 100, California      If your organization                     File Form 199 if the gross
    Corporation Franchise or Income Tax Return, and computes its      has existed                              receipts/pledges exceed
    tax using the general corporation tax rate. It does not pay the   1 year or less                           $37,500
    minimum franchise tax.                                            More than 1 year, but                    $30,000 average for
    A trust, it files Form 541, California Fiduciary Income Tax       less than 3 years                        both years
    Return, and computes its tax using the appropriate trust          3 years or more                          $25,000 average
    tax rate.                                                                                                  for the current year
                                                                                                               and the immediate
Filing Requirements                                                                                            preceding 2 years
If your organization is tax-exempt for California purposes, you may
have to file one or more of the following returns with us:            File Form 199 on or before the 15th day of the 5th month after
    Form 199, California Exempt Organization Annual                   the close of your organization’s taxable year. If the taxable year
    Information Return.                                               ends on December 31, the return is due on May 15.
    Form 109, California Exempt Organization Business Income
    Tax Return.                                                       If you file Form 199, you pay a filing fee with the return. The
    Form 100, California Corporation Franchise or Income              amount depends on when you file, and when you make
    Tax Return.                                                       the payment.
                                                                          The fee is $10 if:
For detailed information about state filing requirements, fees, and         You file and pay by the original due date.
penalties, see Pub. 1068, Exempt Organizations – Requirements               You file and pay after the original due date, but on or before,
for Filing Returns and Paying Filing Fees. Go to our website at             the extended due date.
ftb.ca.gov and search for 1068.                                           The fee is $25 if:
                                                                            You file by the original due date, but pay after that date.
Form 199, California Exempt Organization Annual                             You file and pay after the extended due date.
Information Return
The requirement to file Form 199 is generally based on the            Exception: The filing fee does not apply to the following
normal amount of total gross receipts and pledges. We define          organizations exempt under R&TC Section 23701d:
“normal” as a three-year average.                                       Exclusively religious organizations.
                                                                        An exclusively educational organization if the organization
If gross receipts and pledges are normally:                             normally maintains a regular faculty and curriculum and
    Less than $25,000, you are not required to file Form 199.           normally has a regularly organized body of students in
    Greater than $25,000, you are required to file Form 199.            attendance at the place where its educational activities are
                                                                        regularly carried on.
Exception: Regardless of the total amount of gross receipts:            An exclusively charitable organization, or an organization
  Private foundations must file Form 199 every year.                    for the prevention of cruelty to children or animals, if the
  Churches, pension trusts, IRAs, and political organizations do        organization is supported, in whole or in part, by funds
  not file Form 199.                                                    contributed by the United States or any state or political
                                                                        subdivision thereof, or is primarily supported (50% or more)
                                                                        by contributions of the general public.
                                                                        An organization operated, supervised, or controlled by or in
                                                                        connection with an exclusively religious organization.




                                                                                                                                   PAGE 3
We impose a penalty if you do not file your organization’s Form         Form 100, California Corporation Franchise or
199 by the extended due date, regardless of whether you pay the         Income Tax Return
fee. The penalty is $5 for each full month, or part of a month, the     Homeowners’ associations and political organizations with income
Form 199 is late. The maximum penalty is $40. We impose the             in excess of $100 from nonexempt functions file Form 100 and
penalty from the original due date of the return.                       use the general corporation tax rate to compute the tax.

For further information regarding due dates or extended due             Note:
dates, go to our website ftb.ca.gov and search for 199.                   These organizations do not pay the minimum franchise tax.
                                                                          Homeowners’ associations may also have to file Form 199.
Form 109, California Exempt Organization Business
Income Tax Return                                                       File Form 100 on or before the 15th day of the 3rd month after
Generally, a tax-exempt organization files Form 109 when its            the close of the organization’s taxable year. If the taxable year ends
income exceeds $1000 from a trade or business unrelated to its          on December 31, the return is due on March 15.
exempt purposes – even if the profits are used for
exempt purposes.                                                        We impose the same types of penalties and interest on
                                                                        homeowners’ associations and political organizations as we
Exception: Homeowners’ associations and political organizations         impose on for-profit corporations.
file Form 100 instead of Form 109 if they have taxable income.
                                                                        Exception: Political organizations do not have to make estimate
The computed tax rate depends on how the organization                   payments; therefore, we do not impose the estimate penalty.
was created.
  An incorporated organization or an unincorporated association         Group Exemption
  computes its tax using the general corporation tax rate.              A parent, state, district, or like organization seeking state tax-
  A trust computes its tax using the appropriate trust tax rate.        exempt status for its California subordinates may file, on their
                                                                        behalf, either:
The due date for filing Form 109 depends on how the organization          FTB 3500, Exemption Application.
was created.                                                              FTB 3500A, Submission of Exemption Request, if the entity
  An incorporated organization, unincorporated association, or            obtained federal exemption under IRC Section 501(c)(3).
  a trust other than a pension trust or IRA, files on or before the
  15th day of the 5th month after the close of its taxable year. If     Before group exemption is submitted, the parent organization
  the taxable year ends on December 31, the due date is                 must first or simultaneously receive tax-exempt status.
  May 15.
  A pension trust or IRA files on or before the 15th of the 4th         For detailed instruction about group exemption, get FTB 3500,
  month after the close of its taxable year. If the taxable year ends   Exemption Application, or FTB 3500A, Submission of Exemption
  on December 31, the due date is April 15.                             Request. Go to our website at ftb.ca.gov and search for 3500.

We impose the same types of penalties and interest on California
tax-exempt organizations as we impose on for-profit corporations.




 PAGE 4
Group Filing                                                               Federal law requires certain political organizations to file an
A parent, state, district, or like organization may file a group return    exempt organization information return if gross receipts are
on Form 199 for two or more subordinate organizations.                     normally more than $25,000 for the taxable year. California has
                                                                           not conformed. If your organization is a political organization, do
Two of the requirements for group filing are:                              not file California Form 199.
  Each organization included in the group return must be exempt
  from tax by the Franchise Tax Board.                                    For more information, see FTB Pub. 1075, Exempt Organizations
  Each organization must have the same taxable year-end.                  – Guide for Political Organizations. Go to our website at ftb.ca.gov
                                                                          and search for 1075.
For detailed instruction about group filing, get Form 199,
California Exempt Organization Annual Information Return. Go to           Registry of Charitable Trusts
our website at ftb.ca.gov and search for Form 199.                        The Registry of Charitable Trusts (within the California Department
                                                                          of Justice) is responsible for ensuring that charitable organizations
Note: If a subordinate organization has gross unrelated business          use their funds and manage their assets properly.
income of more than $1000 for the year, that subordinate must
file its own Form 199. The parent cannot include the subordinate          Registry of Charitable Trusts requires registration as of
in the group return.                                                      January 1, 2005, within 30 days after receiving assets. To register,
                                                                          an organization must submit Articles of Incorporation, and
Political Organizations                                                   by-laws, and pay an initial registration fee. The initial registration
For tax purposes, the term “political organization” includes a            fee applies to all charities registering with the Attorney General’s
political party, committee, association, or newsletter fund operated      Registry of Charitable Trusts for the first time, regardless of gross
primarily to support or oppose a candidate for a public office. If        revenue or assets.
the organization’s nonexempt function income exceeds $100,
it must file Form 100 and report income and expenses directly             Once registered, they must annually file a report with the registry.
related to the nonexempt function income.                                 If the organization does not file, the registry notifies our Exempt
                                                                          Organizations Unit to disallow the organization’s exempt status and
Note: The definition of “political organization” for tax purposes is      assess the minimum tax for each year the organization failed to
much more restrictive than it is for purposes of the Fair Political       file. We do not impose penalties on the minimum tax; however we
Practices Commission. For example, organizations that support             do impose interest. We cannot cancel the tax unless the Registry
or oppose propositions or ballot measures are not political               instructs us to do so.
organizations for tax purposes, but they are political organizations
for purposes of the Fair Political Practices Commission.                  Dissolution
                                                                          For detailed instruction about dissolving your exempt organization,
California law has not conformed to federal law. The most                 get FTB Pub. 1038, Guide to Dissolve, Surrender, or Cancel a
significant differences relate to the taxability of income and            California Business Entity. Go to our website at ftb.ca.gov and
requirements for filing returns.                                          search for 1038.
   Federal law provides that if a nonpolitical exempt organization
   expends any amount to influence the election or the defeat of
   an individual running for political office, then that organization
   is subject to tax to the extent of the expenditure (or of net
   investment income) as though it were a political organization.
   California has not conformed to this provision. If your
   organization is not a political organization, do not file Form 100
   to report these expenditures.




                                                                                                                                      PAGE 5
Bingo                                                                  Raffles
Certain types of organizations qualify to conduct bingo games,         Certain types of organizations qualify to conduct raffles, if they
if they meet the requirements set forth in California Penal Code       meet the requirement set under California Penal Code
Section 326.5.                                                         Section 320.5.
The organization must meet the primary requirements
listed below:                                                          The organization must meet primary requirements listed below:
    Be one of the following types of organizations:                      Be registered with the Registry of Charitable Trusts and file
       A nonexempt senior citizens organization.                         annual reports.
       A nonexempt mobile home park association.                         Be exempt under one of the following California R&TC sections,
       An organization exempt under one of the following California      or be acknowledged under IRC Section 501(c)(3):
       R&TC sections, or acknowledged under federal IRC                          23701a – labor, agricultural, or horticultural organizations
       Section 501(c)(3):                                                        23701b – fraternal organizations with benefits
         23701a – labor, agricultural, or horticultural organization             23701d – charitable organizations
         23701b – fraternal organization with benefits                           23701e – business leagues, professional associations, etc.
         23701d – charitable organization                                        23701f – social welfare organizations
         23701e – business league, professional association, etc.                23701g – social clubs
         23701f – social welfare organization                                    23701k – apostolic and religious organizations
         23701g – social club                                                    23701l – fraternal organizations without benefits
         23701l – fraternal organization without benefits                        23701t – homeowners’ associations
    Have a license to conduct bingo games.                                       23701w – veterans organizations
    Use the funds for charitable purposes.                               Submit an additional registration form (CT-NRP-1), including
                                                                         the raffle fee, with the Registry of Charitable Trusts, each year
Oversight Responsibility                                                 it plans to conduct a raffle. Your organization must receive
Various agencies have responsibility for some aspect of                  written confirmation from the Registry before holding the
bingo gaming. The following is a list of agencies and their              initial raffle.
responsibilities. Use the list to decide whom to contact if you          File a report with the Registry for each raffle conducted.
have questions.                                                          Use at least 90 percent of the gross receipts for charitable
  The local jurisdiction (city, county, or both):                        or public benefit purposes.
      Issues licenses to conduct bingo games.
         Enforces the provision in their ordinances and the
         penal code.
         Revokes licenses when facts and
         circumstances warrant.
  The Registry of Charitable Trusts ensures that the organization
  uses the funds for charitable purposes.




 PAGE 6
The Registry of Charitable Trusts administers the raffle law.   Where to Get Forms and Publications
Contact that office if you have questions about registration,   Internet:
reporting, or specific requirements for conducting a raffle.    Go to ftb.ca.gov to download, view, and print California tax forms,
                                                                instructions, and publications.
Website:     ag.ca.gov/charities                                Phone:
Phone:       916.445.2021 (not toll-free)                         To order current year tax forms:
Mail:                                                             1. Refer to the list below and find the code number for
             OFFICE OF THE ATTORNEY GENERAL                          the form you want to order.
             REGISTRY OF CHARITABLE TRUSTS                        2. Call 800.338.0505.
             PO BOX 903447                                        3. Select “Business Entity Information.”
             SACRAMENTO CA 94203-4770                             4. Select “Forms and Publications.”
                                                                  5. Enter the three-digit code for the form you want
FTB Internet and Telephone Assistance                                when instructed to do so.
Website:   ftb.ca.gov                                           Code     Form
Phone:     800.852.5711 from within the United States
                                                                817      Form 100, California Corporation Franchise or Income
           916.845.6500 from outside the United States
           (not toll-free)                                               Tax Return
TTY/TDD: 800.822.6268 for persons with hearing or               818      Form 100-ES, Corporation Estimated Tax
           speech impairments
                                                                814      Form 109, California Exempt Organization Business

If you have questions about exemption or are seeking                     Income Tax Return
acknowledgement of exemption from California franchise or       815      Form 199, California Exempt Organization Annual
income tax, call 916.845.4171 (not toll-free).                           Information Return
                                                                802      FTB 3500, Exemption Application


                                                                831      FTB 3500A, Submission of Exemption Request



                                                                  For prior year forms, call 800.852.5711.

                                                                Please allow two weeks to receive your order. If you live outside
                                                                California, please allow three weeks to receive your order.

                                                                Mail:
                                                                           TAX FORMS REQUEST UNIT
                                                                           FRANCHISE TAX BOARD
                                                                           PO BOX 307
                                                                           RANCHO CORDOVA CA 95741-0307




                                                                                                                            PAGE 7
Assistance: Other Governmental Agencies
If you have questions about issues that are not related to income
tax, use this table to decide whom to contact.


For questions about        Contact

Bingo issues               Your local law enforcement agency

Employment tax             Employment Development
                           Department
                           Phone: 916.653.0707 (not toll-free)
                           Website: edd.ca.gov

Federal employer           Internal Revenue Service or file an
identification number      Application for Employer Identification
(commonly referred to      Number (federal Form SS-4)
as “EIN” or “FEIN”)        Phone: 866.816.2065
                           Website: irs.gov

Federal tax exemption       Internal Revenue Service
                            Phone: 877.829.5500
                            Website: irs.gov/eo

Property tax                Your local assessor’s office


Raffle issues               Registry of Charitable Trusts
                            See page 6 of this publication.


Sales or use tax            Board of Equalization
                            Phone: 800.400.7115
                            Website: boe.ca.gov




 PAGE 8
FTB PUB 927 (REV 04-2009)

				
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