Filing Requirements for Not-for-Profit
Organizations in Hawaii
presentation for
May 11, 2012
Manoj Samaranayake, CPA - Partner, Tax Services
www.pkfpacifichawaii.com
Overview
• Tax Exempt vs. Nonprofit distinction
• Federal Tax Requirements in general (IRS)
• Hawaii Tax Requirements
– Administered by Hawaii Department of Taxation
– General Excise Tax New Requirements
– New Form GE-1
• Hawaii State Filing Requirements –
– Administered by Hawaii Attorney General
• Hawaii Nonprofit sector snapshot and facts
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Nonprofit vs. Tax Exempt Organizations
• Tax exempt organizations include those that are organized
as not-for-profit, such as corporations organized under
Hawaii nonprofit corporation laws.
• Merely organizing as a nonprofit entity does not
necessarily mean that the IRS will recognize it as taxexempt.
• Tax Exempt is a concept of federal tax
• Nonprofit is a concept of state law
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Tax-Exempt Status for Alumni Associations
Section 501(c)(3) – Charitable Organization
•
Contributions are deductible as charitable contributions on the donor’s
income tax return.
•
Religious, charitable, scientific, literary & educational organizations.
Section 501(c)(7) – Social & Recreation Clubs
•
A club should be supported solely by membership fees, dues, and
assessments.
•
May receive up to 35% of its gross receipts, including investment
income, from sources outside of its membership without losing its taxexempt status.
•
Up to 15% of gross receipts may be derived from the use club facilities
by general public or from unrelated purposes.
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General Federal Filing Requirements
2010 & 2011 Tax Years (Filed in 2011 or 2012)
Gross Receipts
Normally ≤ $50,000
> $50,000 and < $200,000 and total assets < $500,000
≥ $200,000 and/or total assets ≥ $500,000
Form
Form 990-N
Form 990-EZ or 990
Form 990
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Qualifying for Tax Exempt Treatment Under Hawaii Tax Laws
Hawaii Taxes
• Income taxes
– Organization will be exempt for Hawaii income tax if the
organization qualifies for exemption for federal income tax
purposes.
• General excise taxes (GET)
– GET law requires certain organizations to apply for
exemption from the payment of GET by filing Form G-6.
– Receive a letter from Hawaii approving the GET
exemption.
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GET filing Requirements
Hawaii Taxes
• General excise taxes (GET) continued
– Amounts received as dues, donations, or gifts are not
included in gross income subject to GET.
– Gross income received from the conduct of any fundraising
activity is subject to GET.
– Interest income may be subject to GET.
– File forms G-45 & G-49.
– See TIR 2010-05 for explanation of denial of GET benefits.
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GET filing Requirements
Tax Information Release 2010-05 (issued 07/29/10)
•
Discusses Act 155 from 2010 (requiring GET filings).
•
Effective June 1, 2010, any nonprofit organization who is
required to obtain a general excise tax (GET) license and fails
to do so or who has a license and fails to file Form G-49 within
12 months of the prescribed due date may be denied GET
benefits, such as exemptions, deductions, or lower rates.
•
Reasonable cause safe harbor.
•
Must file annual G-49 even if no liability.
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New Hawaii Form GE-1
Tax Information Release 2011-04 (issued 09/26/11)
•
Discusses reporting requirements of Act 105 from 2011
– Gathering info about exclusions and exemptions
•
Most for profit companies required to file Form GE-1
– For 12/31/10, 12/31/11, 12/31/12
•
Most nonprofit companies not required to file
– Unless had unrelated trade or business income &
– Claimed business deductions and exemptions
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Additional Tax Filings (if necessary)
Federal
•
Form 990-T
– Report unrelated business income of > $1000
– Same filing due date (05/15)
– Additional 6 month extension available
Hawaii
•
Form N-70NP
– Similar to Fed requirements
– Only needed if 990-T is filed
– Filing due date (04/20)
– Additional 6 month extension available
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Summary – Tax Filings
Federal (IRS)
• Federal Form 990, 990-EZ or 990-N
• Federal Form 990-T (if necessary)
Hawaii (Department of Taxation)
• Hawaii Form G-45 and G-49 (general excise tax returns)
• Hawaii Form N-70NP (if necessary)
• Hawaii Form G-1 (if necessary)
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Hawaii – State Filing Requirements
• New Requirements effective in 2009.
• Administered by Attorney General.
– http://hawaii.gov/ag/charities
– Act 174 requires charities that solicit contributions to
register with the Attorney General unless exempted
from the registration requirement.
– Amended Hawaii Revised Statutes 467B.
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Hawaii – State Filing Requirements
One-Time Charity Registration
-Link to the Hawaii registration site:
http://efile.form990.org/frmNPParticipatingStateSCOHI.asp
- There is no fee to register
- Registration statement requires two officers to
electronically sign
- Request Login ID and password for two officers of the
organization
- Create registration using the File Creation Wizard
- Online tutorial is available at this site and
recommended before starting the registration process
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Hawaii – State Filing Requirements
What is a “Charitable Organization” for the purposes of
the registration law?
•
A “charitable organization” is any organization that solicits
funds in Hawaii that is exempt under section 501(c)(3) of the
Internal Revenue Code. Charitable organizations also include
any person who is or holds itself out to be established for any
benevolent, educational, philanthropic, humane, scientific,
patriotic, social welfare or advocacy, public health,
environmental conservation, civic, or other eleemosynary
purpose, or any person who in any manner employs a
charitable appeal as the basis of any solicitation or an appeal
that has a tendency to suggest there is a charitable purpose to
the solicitation.
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Hawaii – State Filing Requirements
The term solicit or solicitation is already defined in the
current law as:
•
“Solicit” and “Solicitation” mean a request directly or indirectly
for money, credit, property, financial assistance, or thing of
value on the plea or representation that the money, credit,
property, financial assistance, or thing of value, or any portion
thereof, will be used for a charitable purpose or to benefit a
charitable organization.
•
A grant received from the government, or another 501(c)(3)
organization is not a contribution. Nor are membership dues
and assessments.
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Hawaii – State Filing Requirements
•
The following charitable organizations are exempt from the
registration requirements:
– Any duly organized religious corporation, institution, or society;
– Any parent-teacher association;
– An educational institution that is licensed or accredited by an
accrediting body;
– A 501(c)(3) organization that primarily solicit contributions from
parents, alumni, students and faculty of the foregoing accredited
educational institutions;
– Any nonprofit hospital licensed by the State or any similar provision
of the laws of any other state;
– Any governmental unit or instrumentality of any state or the United
States; and
– Any charitable organization that normally receives less than $25,000
in contributions annually, if the organization does not compensate
any professional solicitor or professional fundraising counsel.
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Hawaii – State Filing Requirements
• Requires the submission of an annual financial report
– Provides that the report shall be the charity's IRS Form 990
or 990-EZ.
– Must be filed with the Attorney General on or before the date
that the charity files the Form 990 or 990-EZ with the IRS.
– Requires submission of an audited financial statement if the
charity has over $500,000 in gross income, or where the
charity prepares an audited financial statement required by a
governmental authority or third party. Gross income does not
include grants from governmental authorities. Thus, only
those charities with public contributions that exceed $500,000
as shown on line 1a of the Form 990 or 990-EZ need obtain
an audited financial statement.
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Hawaii – State Filing Requirements
The law requires each registered charity to pay an annual
fee based on the charity’s annual gross income:
Annual Gross Income
Annual Fee
< $25,000
$10
$25,000 < $50,000
$25
$50,000 < $100,000
$50
$100,000 < $250,000
$100
$250,000 < $500,000
$150
$500,000 < $1,000,000
$200
$1,000,000 < $2,000,000
$250
$2,000,000 < $5,000,000
$350
≥ $5,000,000
$600
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Hawaii – State Filing Requirements
• Annual Business Filing with the Department of Commerce
and Consumer Affairs
• State of Hawaii – DCCA Business Registration website for
form – “domestic non profit” section
– Update new officers and directors
– Validate address
– Online filing fee is a nominal $5.00
– Renew at www.ehawaii.gov/annuals
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Hawaii Alliance of Nonprofit
Organizations
(HANO)
2011 Hawaii Nonprofit Sector Report
released 02/07/12
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How the sector breaks down in Hawaii
There were 7,777 total nonprofits in Hawaii in 2008
1,669
22%
5,778
74%
330
4%
Charitable Nonprofits under the 501(c)(3) designation
Private Foundations
Nonprofits under other 501c subsections
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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How the sector breaks down in Hawaii
Filing Annual
IRS Report**
Registered
with IRS
(over $25k in gross
receipts)
(over $5k in gross
receipts)
2,801
5,778
2,525
5,448
276
330
886
1,669
501(c)(4) Social Welfare
224
509
501(c)(5) Labor/Agriculture
122
208
501(c)(6) Business Leagues
275
427
501(c)(other)
265
525
Tax-Exempt Organizations
Under 501(c)(3)*
Charitable Nonprofits
Private Foundations
(orgs. that grant funding to nonprofits)
Under Other 501(c)
* Does not include religious congregations. Data from 12/2008 Business Master File data may not match other
figures in this report. SOURCES: NCCS Data Web, National Center for Charitable Statistics,
http://nccsdataweb.urban.org/ © 2010
** Includes 990, 990-PF, 990-EZ, and 990-N
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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Number of reporting Hawaii Nonprofits by field, 2008
Types of Charities
Number
Total %
Arts, Culture, Humanities
276
15.03%
Education
330
17.97%
Environment or Animal Related
111
6.05%
Community Improvement, Public/Societal Benefit
186
10.13%
Health Care or Mental Health
222
12.09%
Human Services
561
30.56%
Religion Related, Spiritual Development
76
4.14%
Research: Science, Technology, Social Science
19
1.03%
All Others
55
3.00%
Total
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
1,836
100.00%
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Number of reporting Hawaii Nonprofits by field, 2008
Arts, Culture,
Humanities, 276
All Others, 55
Research:
Science,
Technology,
Social Science,
19
Religion Related,
Spiritual
Development, 76
Human Services,
561
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
Education, 330
Environment or
Animal Related,
111
Community
Improvement,
Public/Societal
Benefit, 186
Health Care or
Mental Health,
222
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Key Observations
• Health Care, Mental Health, and Human Services together
comprise 40% of Hawaii’s nonprofits, followed by
Education at 17%, and Arts, Culture & Humanities at 15%.
• Educational nonprofits hold the most assets of all the
categories, at 60%.
• Of all the categories, Hospitals are the nonprofits with the
highest expenditures, at almost 42%.
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Percent of Charities by Expenditure Level
45%
Expenditure Level
< $100,000
3%
$100,000 < $500,000
3%
$500,000 < $1,000,000
$1,000,000 < $5,000,000
12%
$5,000,000 < $10,000,000
> $10,000,000
9%
28%
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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Percent of Charities by Expenditure Level
Expenditure Level
# of
Charities
Assets
Expenditures
% of
Total
Charities
% of
Total
Assets
% of Total
Expenditures
< $100K
816
$268,684,395
$36,454,955
44.44%
1.67%
0.84%
$100K < $500K
516
$397,161,935
$118,833,501
28.10%
2.47%
2.72%
$500K < $1M
164
$363,048,660
$116,280,889
8.93%
2.26%
2.67%
$1M < $5M
226
$1,354,939,438
$480,905,292
12.31%
8.44%
11.02%
$5M < $10M
50
$666,563,511
$348,144,421
2.72%
4.15%
7.89%
> $10M
64
$12,999,807,833
$3,262,551,440
3.49%
80.99%
74.77%
1,836
$16,050,205,773
$4,363,170,498
100%
100%
100%
Total
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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Number of Hawaii Nonprofits by County, 2008
Kauai
112 nonprofits
1%
Maui, Molokai, Lanai
254 nonprofits
3%
Honolulu
1,206 nonprofits
91%
Hawaii Island
264 nonprofits
5%
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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Hawaii Foundations, 2008
Foundation Type
# of
Foundations
Assets
Total Giving
Independent
Foundations
275
$977,958,460
$61,608,773
Corporate Foundations
19
$174,144,601
$8,440,805
Community
Foundations
2
$386,168,222
$23,357,205
Operating Foundations
28
$362,196,814
$3,067,450
Total in Hawaii
324
$1,900,468,097
$96,474,233
Total in United States
75,595
$564,950,926,000
$46,781,305,000
Hawaii as a % of US
0.43%
0.34%
0.21%
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
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Top 10 Hawaii Foundations by Assets, 2008
Foundation Name
Assets
Foundation Type
1
Hawaii Community Foundation
$385,186,618
Community
2
Harold K. L. Castle Foundation
$178,943,822
Independent
3
The Hau’oli Mau Loa Foundation
$147,387,323
Operating
4
The Clarence T. C. Ching Foundation
$124,894,370
Corporate
5
Consuelo Zobel Alger Foundation
$118,214,718
Operating
6
Atherton Family Foundation
$80,397,394
Independent
7
McInerny Foundation
$63,260,233
Independent
8
New Moon Foundation
$44,081,318
Operating
9
The Shaw “U.S.” Foundation
$41,509,297
Independent
10
Na ‘Aina Kai Botanical Gardens
$35,450,906
Operating
Total
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
$1,219,325,999
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Top 10 Hawaii Foundations by Total Giving, 2008
Foundation Name
Total Giving
Foundation Type
1
Hawaii Community Foundation
$23,282,204
Community
2
Harold K. L. Castle Foundation
$6,922,581
Independent
3
The Shaw “U.S.” Foundation
$6,211,304
Independent
4
Atherton Family Foundation
$4,567,670
Independent
5
McInerny Foundation
$2,898,187
Independent
6
Victoria S. and Bradley L. Geist Foundation
$2,137,801
Independent
7
Alexander & Baldwin Foundation
$2,123,675
Corporate
8
Samuel N. and Mary Castle Foundation
$2,069,075
Independent
9
HMSA Foundation
$1,790,695
Independent
10
First Hawaiian Bank Foundation
$1,777,731
Corporate
Total
(Data per HANO 2011 Hawaii Nonprofit Sector Report)
$53,780,923
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Resources
BoardSource (www.boardsource.org)
• Dedicated to advancing the public good by building exceptional nonprofit
boards and inspiring board service.
• Strives to support and promote excellence in board service.
• Premier source of cutting-edge thinking and resources related to nonprofit
boards.
• Engages and develops the next generation.
GuideStar (www.guidestar.org)
•
•
Mission: to revolutionize philanthropy and nonprofit practice by providing
information that advances transparency, enables users to make better
decisions, and encourages charitable giving.
On their site, you can view the IRS Form 990 for any nonprofit
organization registered with the IRS.
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Resources
Hawaii Alliance of Nonprofit Organizations (www.hano-hawaii.org)
• Unites and strengthens the nonprofit sector as a collective to improve the
quality of life in Hawaii.
National Council of Nonprofits (www.councilofnonprofits.org)
• Nation’s largest nonprofit network.
• Works through member State Associations to amplify the voices of America’s
local community-based nonprofit organizations, help them engage in critical
policy issues affecting the sector, manage and lead more effectively,
collaborate and exchange solutions, and achieve greater impact in their
communities.
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Any final questions or comments?
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THANK YOU!
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