submitted by: Ruth Russell, NAS Regional Board Member
(e-mail: rrussell@audubon.org).

We have recently acquired some information about tax-exempt organizations that may be helpful to chapters. First, some background concerning tax-exempt status:

Each chapter of NAS is autonomous and has its own governing board. Because chapters are independent organizations, the tax exemption of NAS does not extend to the chapters or their activities. Many chapters are incorporated in their state and have been recognized by the Internal Revenue Service (IRS) as tax-exempt under Section 501(c)(3) of the Internal Revenue Code.

Incorporation is a state process; tax exemption is a federal one. Both steps are best undertaken together by a chapter with the help of local counsel who can provide guidance in related areas as well, i.e., other issues of state law and reporting requirements. Once a chapter is incorporated, it may then apply for tax-exempt status by filing an application (Form 1023) with the IRS. If the application is filed within 27 months of incorporation, the exemption, when approved, is retroactive to the date of incorporation. The application process generally takes about six months. The IRS informs an organization that it is exempt under Section 501(c)(3) by sending it a Determination Letter to that effect. Once an organization is exempt, it is required to file an annual information return with the IRS (Form 990, if gross annual receipts are normally $100,000 or more; or the simpler Form 990EZ, if annual receipts are more than $25,000 and less than $100,000. If gross annual receipts are normally not more than $25,000, the form is optional.)

In general, it is a good idea for every chapter to incorporate and also to obtain a tax exemption. There are benefits with respect to limiting individual liability, obtaining sales tax and property tax exemptions, and most important -- fundraising. Many individuals and corporations will not donate to an organization unless it has 501(c)(3) status, which allows a donor to take an income tax deduction for the donation. In addition, law and internal policy preclude many foundations and governmental entities from making grants to an organization that is not exempt under Section 501(c)(3). The IRS publishes Publication 78, which it describes as a comprehensive nationwide list of 501(c)(3) entities. Publication 78 is used by many donors in deciding whether or not to make a donation or grant.

We have learned that the IRS has been dropping many organizations from Publication 78 because they have not filed Form 990 or 990EZ each year even though many of the omitted organizations are not required to file because their annual receipts are below $25,000. In such cases the tax-exempt status continues, but the de-listing may cause fundraising problems because some donors contribute only to listed organizations.

Annual Audubon Chapter Report Forms were mailed to all chapters in early May, to be returned by July 31. Chapters were asked their status regarding incorporation and 501(c)(3) exemption. Using current chapter information and this year's reports, we are working to determine the status of each chapter. In September we will write to each chapter president and treasurer with regard to their reported status, with additional information on incorporation, exemption, annual reporting requirements, state fundraising solicitation laws and related issues as appropriate.

In the meantime, for those chapters that are interested, Publication 78 is found in many libraries, and may be searched on-line at the IRS Web site at http://www.irs.ustreas.gov/bus_info/eo/index.html. If your chapter is not in Publication 78 and you believe it should be, or, if you do not have a copy of a Determination Letter for your chapter and are not sure whether or not your chapter is exempt, you may contact IRS Exempt Organizations' Customer Service by writing to: Internal Revenue Service, EP/EO Division, Customer Service; P.O. Box 2508; Cincinnati, OH 45201; or calling: 513/241-5199. When writing or calling, provide the IRS with, if possible, the exact name of your chapter, its address and its federal employer ID number (required for all exempt organizations with or without employees). If you have misplaced your Determination Letter and are, in fact, exempt, it is my understanding that the IRS will provide you with a replacement if you request it by writing to them at the above address.

If you determine that your chapter has 501(c)(3) status but is not listed in Publication 78, you may want to consider filing Form 990 or 990EZ (also available at the IRS Web site). Filing must be done within four months and fifteen days after the close of your fiscal year, or you may request an extension of the filing deadline.