Keeping appropriate financial records and being transparent about the way our organization obtains and spends funds is important to getting and keeping members’ and supporters’ trust and confidence in the Hearing Loss Association of America.
HLAA headquarters, for example, posts its audited financial statements and completed 990 form on our website. As part of the same organization, HLAA State organizations and Chapters would operate in the same careful, transparent and responsible manner.
In addition, HLAA recommends that each state organization and chapter seek IRS tax-exempt status either under the HLAA group exemption or get it independently for the state organization or chapter. This status is necessary for members/donors to deduct their contributions or donations from their federal and/or state income tax returns. See the text below for more information.
- Applying for exemption from federal income tax under IRS code 501(c)(3)
- Applying for federal income tax exemption through HLAA (also known as “group exemption”)
- Maintaining exemption from federal income tax under IRS code 501(c)(3)
- HLAA Requirements
- State Requirements
- State Organization/Chapter financial best practices
- Treasurer’s duties
- Funding the organization
- Receipts for donations
- Completing an IRS W-9 form
- Opening a bank account for the state organization or chapter
- Additional Resources: Helpful Organizations
Forming an organization, getting an Employer Identification Number (EIN), and obtaining tax exempt status are separate processes. To apply for tax exempt status, an organization must present to the IRS a document that specifies its purposes and it must meet the organizational and operational tests of IRS tax code 501(c) (3). For more information about tax exemption click here.
Applying for exemption from federal income tax under IRS code 501(c)(3)
Does the state organization or chapter charge membership or subscription fees/dues, collect contributions, or raise Walk4Hearing funds? If the answer is “yes,” the organization must apply for and maintain exemption from federal income tax under IRS tax code 501(c) (3).
HLAA State Offices and Chapters may apply for recognition as tax exempt using one of these options:
- File Form 1023 directly with the IRS (the most lengthy and costly option). Note: HLAA Chapters that are incorporated and all state associations must file form 1023 directly with the IRS. See www.irs.gov for information about the 1023 filing process.
- Request inclusion in the HLAA “group” exemption (the simplest and no-cost option which HLAA recommends, described below); or forgoing a formal request to be recognized as tax exempt (if the organization meets certain requirements outlined here.)
To apply for federal income tax exemption through HLAA (also known as “group exemption”), complete the steps below:
- Request an Employer Identification Number (EIN) from the IRS. (An EIN is like a Social Security number for the organization.) Click here for directions.
- Fill out the required documents noted below. HLAA has provided templates for your convenience.
- Send the EIN confirmation letter from the IRS (see here for an example) and the completed documents listed above to the HLAA State and Chapter Coordinator by email, fax (301.913.9413) or mail (HLAA, 7910 Woodmont Ave., Suite 1200, Bethesda MD 20814).
Maintaining exemption from federal income tax under IRS code 501(c)(3)
Every year after gaining recognition as exempt from federal income tax, all HLAA Chapters and State organizations must file an IRS 990 form. Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less ($25,000 for tax years ending after December 31, 2007 and before December 31, 2010) are required to electronically submit Form 990-N, also known as the e-Postcard, unless they choose to file a complete Form 990 or Form 990-EZ instead. Click here for more information about IRS form 990.
The e-Postcard is due every year by the 15th day of the fifth month after the close of the organization’s tax year. For example, if the state organization’s or chapter’s tax year ended on December 31, the e-Postcard is due May 15 of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. The organization cannot file the e-Postcard until after its tax year ends.
If you do not file your e-Postcard on time, the IRS will send you a reminder notice. There is no penalty assessment for filing the e-Postcard late, but organizations that fail to file the required e-Postcards (or information returns – Forms 990 or 990-EZ) for three consecutive years will automatically lose their tax-exempt status. The revocation of the organization’s tax-exempt status will not take place until the filing due date of the third year. It may also take 12 months or more for the IRS to inform you that the state office’s or chapter’s tax-exempt status has been revoked.
Revocation means that the contributors’ donations are not deductible on their income tax returns. This includes Walk4Hearing contributions.
The IRS has revoked the tax-exempt status of more than a dozen HLAA Chapters since 2010. To regain the exemption, each chapter must fill out a lengthy form (IRS form 1023), collect and attach numerous documents, and pay $400 - $800. Save the state organization or chapter from this hassle – file the 990 each year on time and save a printed copy of the acknowledgement of the filing from the IRS.
In order to maintain tax exempt status via HLAA, each state office and chapter must submit each year a budget and a completed Chapter/State Update form to the HLAA State and Chapter Coordinator by October 1. Failure to submit these forms on time will result in HLAA not including the organization in the renewal application for federal income tax exemption.
Caution: No person or entity may “borrow” the chapter’s or state organization’s 501c3 standing. Contact the HLAA State and Chapter Coordinator with any questions or concerns about this topic.
Make sure that the organization registers with the appropriate taxing or other authority (agency or office) if your state requires it. The states with such a requirement are as follows: CA, CO, IL, MA, MI, NJ, NY, OH, OR, PA, TN, TX, UT, WI and Washington, D.C. Click here for details.
State Organization/Chapter financial best practices
Best practices are to keep monies in a chapter checking or savings account with two signatories on the account(s). Keeping funds in a safe deposit box is not acceptable. Follow Generally Accepted Accounting Practices (known as GAAP).
Each HLAA Chapter and State organization needs a budget. It can be a simple, one-page document showing projected income and expenses like this example State offices and chapters that are part of the HLAA group exemption from federal income tax (501(c) (3)) must submit a copy of their budget each year by October 1.
See the description of the treasurer’s duties and a treasurer checklist here.
Funding the Organization
There are myriad resources to help the organization save money and gain revenue. For a complete list, click here.
Receipts for Dues, Newsletters, Advertisements, Donations, etc.
While it is good business practice to acknowledge each and every donation made to your organization, the IRS requires written substantiation from the recipient to the donor of any single donation of $250 and above (not in aggregate). All acknowledgements, regardless of amount, should also state whether any goods and/or services were exchanged, in whole or in part, for the donation. If any goods and/or services were exchanged, the acknowledgement must specify a reasonable market value for those items.
To learn more read the IRS’s Charitable Contributions Substantiation and Disclosure Requirements pamphlet.
Completing an IRS W-9 Form
Companies wishing to donate to the chapter or state organization may request that you complete a W-9 form. This is a standard business practice so do not be alarmed if you receive such a request. Please click here to learn more about the form. The Taxpayer Identification Number (TIN) would be the state organization’s or chapter’s Employer Identification Number (EIN).
Opening a Bank Account for the State Organization or Chapter
HLAA recommends that chapters and state organizations have a checking account in their own name. Click here to read the steps.
Additional Resources: Helpful Organizations
There are a number of entities that help no-profit organizations. They may just answer questions or offer free assistance. Examples are the Accountants for the Public Interest (call 202.347.1668 or send a fax to 202.347.1663), the Society for Non Profit Organizations, and the National Association of State Boards of Accountancy. Some law firms donate time and services in the interest of the community.