Nonprofits Archives - Dillwood Burkel & Millar, LLP

Host a Nonprofit Fundraising Event without Getting Tangled up in Government Regulations

by Hillary Erbert, Associate Accountant

A fundraising event is a fun way to raise money for a good cause and attract more attention to a nonprofit organization. However, they can take a tremendous amount of hard work and financial resources to host. In addition, the government provides extra hurdles to jump through by requiring permits and enforcing specific regulations concerning how money is reported and how taxes are paid. It’s important for nonprofits to understand these requirements to avoid unexpected fees and circumstances that could jeopardize the success of the event. Certain types of events that are subject to these regulations include raffles, auctions, gambling, and events that serve alcoholic beverages.

Considerations for hosting a raffle:

The organization must register with the Attorney General’s Registry of Charitable Trusts by September 1^st OR at least 60 days before the event.
At least 90% of the gross proceeds from the raffle must be used for charitable purposes.
A Nonprofit Raffle Report must be submitted by October 1 to the Attorney General the year following the raffle.
Prizes may need to be reported on a W-2G.

Considerations for hosting an auction:

A seller permit may be required.
Sales tax must be paid on items sold based on the auction price (not the actual value of the item).
A sales tax return must be filed with the BOE as soon as the last day of the month following the event.

Considerations for hosting a gaming event:

The organization must submit the Annual Registration Form to the Bureau of Gambling Control via mail no more than 90 days and no less than 30 days prior to the proposed date.
Games that can be played at the event are limited.
Prizes to participants are limited and may need to be reported on a W-2G.

Considerations for serving alcoholic beverages:

The organization may need to hire a licensed caterer or obtain a 1-day license
The organization may need to pay tax on beverage sales

In addition, there might be more complicated revenue recognition rules that are specific to your events. DBM is here to help you identify and address those specific reporting requirements. Ensuring your organization is prepared will save time and costs down the road.

For detailed information on all of these topics, visit our Best Practices on Nonprofit Fundraising Events.

Help for Small Organizations Seeking Tax-Exempt Status

By Penny Millar, CPA, Partner

The IRS released a new, simplified application for organizations seeking tax-exempt status, Form 1023-EZ. Recognizing the backlog of more than 60,000 applications, most of which are small organizations, this new form will greatly speed up the approval process. The original application is 26 pages plus multiple attachments. The new application is only three pages long, consisting of contact information for officers and directors, yes/no questions concerning the organization, and a declaration and signature. There is no need to submit financial information, organization documents, or supplemental information. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

The IRS believes as many as 70% of applicants will qualify for the simplified application. The application must be completed online by going to www.irs.gov/form1023. A fee of $400 is due with the application. Prior to submitting the 1023-EZ, all applicants must complete a seven-page questionnaire confirming eligibility for the shortened form. If you answer “Yes” to any of the questions, you are not eligible to apply for exemption using Form 1023-EZ, and you must use Form 1023.

If your organization was properly formed, and you meet the requirements of all non-profit organizations, the shortened application will enable you to receive tax-exempt status in a matter of weeks rather than months.