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IRS Classification
Tax Deductible
Status
Fundraising
Disclosures
Required
Unrelated Business
Income Tax
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Filing Requirements
Accounting
Financial Statements
Recommendations
501(c)(3) Tax Exempt
Organization
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The IRS has 29 types of 501(c) designations which grant exemption from taxes
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May 13, 1958, the IRS declared Rotary
International and its clubs and districts exempt from federal income taxes under
IRC Section 501(c)(4).
IRC 501(c)(4)
 Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare , or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively
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Although very similar to a 501(c)(3), there is a big difference:
 Social welfare organizations, cannot attract charitable donations that are deductible for income, gift, and estate tax purposes.
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Donations to your club are not deductible as charitable donations by the donor.
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Membership dues may be deductible for some Rotarians as a business expense.
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Rotary meetings may be deductible for
Rotarians as a Meal & Entertainment
Expense.
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Deductibility is determined by Rotarians status; business vs. individual
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Sponsorships may be deductible for
Rotarians as a business expenses.
 Business expenses are generally preferred over charitable contributions for businesses
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Ticket Sales do not have a charitable donation allocation.
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IRC Section 6113 requires certain taxexempt organizations that are ineligible to receive tax deductible charitable contributions to disclose, in “an express statement (in a conspicuous and easily recognizable format), “ the nondeductibility of contributions during fundraising solicitations.
Organizations whose annual gross receipts do not normally exceed
$100,000 are excepted from this disclosure requirement
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Aka – UBIT or UBTI
IRS Publication 598 – Tax on Unrelated
Business Income of Exempt Organizations
Unrelated business income is the income from a trade or business regularly carried on by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity.
Certain trade or businesses are not treated as

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Membership list sales – taxable
Advertising – taxable
Sponsorship – not taxable
Selling Donated Merchandise – not taxable
Volunteer Workforce – not taxable
UBIT is a Gray area – seek professional assistance to assist in determination
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Form 990
 Due 15 th day of the 5 th month after your fiscal year end.
 December 31 st yearend, due date is May
15 th
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Up to 6 month extension
Form 990-T
 Unrelated business income tax returns for federal and state; same due date
 Extension available, but payments are due on 15 th day of the 5 th month after your fiscal year end
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Generally Accepted Accounting Principles
 GAAP
Accrual-based (not cash) accounting
 Income is recorded when earned
 Expenses are recorded when incurred
Prepare a budget
Reconciliations should be performed monthly
Person doing books should not have check signing authority
Copies of all deposits should be made
Invoices should be properly coded and canceled

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Program Services
 International Service project
 Community Service Projects
 RYLA, Interact, other
Management and General
Fundraising
 Event 1
 Event 2
Membership
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Statement of Financial Condition
 aka – Balance Sheet
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Statement of Activities aka – Income Statement or Profit & Loss
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Statement of Functional Expenses
Program
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Management & General
Fundraising
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Membership
Statement of Cash Flows
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Form 990-N (e-postcard)
For small tax exempt organizations where annual “… gross receipts are normally $50,000 or less .”
You need basic information – EIN, tax year, legal name and address, any other names used by the organization, name and address of the principal officer, web site (if applicable), confirmation of gross receipts normally $50,000 or less, confirmation that the organization has not terminated operations.

Form 990-EZ and Form 990
File the Form 990 –EZ when:
Gross receipts are less than $200,000 and total assets are less than $500,000
File the Form 990 when:
Gross receipts equal or exceed $200,000 or total assets equal or exceed $500,000.

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Identify all income sources and classify them accordingly
Utilize professionals to assist in compliance
Utilize accounting software ( Like Quick
Books )
Ensure persons handling finances is knowledgeable
2 signatures on all Checks or approved memo signed by 2 members.
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To check clubs status:
 http://www.irs.gov/Charities-&-Non-
Profits/Automatic-Revocation-of-
Exemption-List
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