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Q regarding charitable tax-exempt organization
Old 06-01-2017, 09:38 PM   #1
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Q regarding charitable tax-exempt organization

The charitable/educational group to which I'm a member has 501-3-c tax exempt status. We have 110 or so members & a question has been voiced as to what is the $ limit we are legally allowed in our treasury. Some say it is $25k.
I found nothing in Publication 557, Tax-Exempt Status for Your Organization.

Is anyone familiar with the regulations on this? Did I miss something? Is there a limit on treasury balance, that if exceeded would risk our group being bumped from tax-exempt? We are in the $23k range & some members are getting jittery.
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Old 06-02-2017, 05:21 AM   #2
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IIRC, the rules are relaxed for very small organizations.

This may give you a start:

Small Nonprofits: Qualifying for Tax-Exempt Status Without Filing an IRS Application | Nolo.com
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Old 06-02-2017, 05:39 AM   #3
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Quote:
Originally Posted by Bram View Post
....We are in the $23k range & some members are getting jittery.
If you're jittery, then just think what United Way and some of the big charitable organizations are!
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Old 06-02-2017, 08:29 AM   #4
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I've never heard of a 501c3 organization limit on assets held jeopardizing their tax exempt status once obtained.

However, the more gross income and/or assets your organization has, the more information must be revealed to the IRS and the public. At one time, $25K in gross receipts was the threshold for required filing of an informational return to the IRS Form 990Z.

If required, hope your organization has stayed current filing the Form 990N, failure can be a quick way to lose your 501c3 status. The 990N just tells the IRS the organization still exists and who has the financial books.

Here's a link with the current thresholds of information reporting.
https://www.irs.gov/charities-non-pr...iling-phase-in

Note that the threshold for filing is based on GROSS receipts, ie, all money coming in from all sources, before any expenses or outgoing funds.
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Old 06-02-2017, 08:33 AM   #5
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Who came up with that? Never heard of a "treasury balance," whatever that means. Balance sheet numbers of $25k are not unusual at all.

Some organizations hold events that may require $100k or more in fees (think, a retreat conference) that push their checkbook over $100k for a while, only to drop to near zero once the event is over. And that's fine. Most multi-day conferences with a few hundred attendees could not operate under this $25k number.

One number that you DO have to pay attention to is your yearly receipts. Over $50k and you have to file 990-EZ or 990. Otherwise, under $50k, you can just file the postcard. Get this right so the IRS doesn't get cranky.

Another thing to keep in mind is what happens if your organization disbands? Where does that $25k go? Is it in your charter? Your state constitution? Where? Or is someone "jittery" that someone may have designs on that pot-o-cash? If so, yeah, that's not allowed. It (along with other assets) have to be distributed correctly.

I should add that an organization that I'm part of sometimes finds ourselves a bit rich in certain years. We donate a bit to similar 501c(3) organizations when that happens. Maybe your org needs to understand your fee structure, and if you are giving back enough. Maybe that's where this question is coming from.
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Old 06-02-2017, 10:47 AM   #6
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Quote:
Originally Posted by RE2Boys View Post
I've never heard of a 501c3 organization limit on assets held jeopardizing their tax exempt status once obtained.

However, the more gross income and/or assets your organization has, the more information must be revealed to the IRS and the public. At one time, $25K in gross receipts was the threshold for required filing of an informational return to the IRS Form 990Z.

If required, hope your organization has stayed current filing the Form 990N, failure can be a quick way to lose your 501c3 status. The 990N just tells the IRS the organization still exists and who has the financial books.

Here's a link with the current thresholds of information reporting.
https://www.irs.gov/charities-non-pr...iling-phase-in

Note that the threshold for filing is based on GROSS receipts, ie, all money coming in from all sources, before any expenses or outgoing funds.
Thanks! Yes we've kept up with the annual filing of Form 990N, so we are good there. Your explanation was as I had understood, but others had a different opinion, I.e. we had to keep checking account balance <$25k.
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Old 06-02-2017, 11:08 AM   #7
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Quote:
Originally Posted by JoeWras View Post
Who came up with that? Never heard of a "treasury balance," whatever that means. Balance sheet numbers of $25k are not unusual at all.
treasury balance= $ we have in checking account

Some organizations hold events that may require $100k or more in fees (think, a retreat conference) that push their checkbook over $100k for a while, only to drop to near zero once the event is over. And that's fine. Most multi-day conferences with a few hundred attendees could not operate under this $25k number.

One number that you DO have to pay attention to is your yearly receipts. Over $50k and you have to file 990-EZ or 990. Otherwise, under $50k, you can just file the postcard. Get this right so the IRS doesn't get cranky.
Doubt we ever approach $50k, so not a problem. We do the efile postcard every year.

Another thing to keep in mind is what happens if your organization disbands? Where does that $25k go? Is it in your charter? Your state constitution? Where? Or is someone "jittery" that someone may have designs on that pot-o-cash? If so, yeah, that's not allowed. It (along with other assets) have to be distributed correctly.
We have this addressed in our bylaws & constitution.

I should add that an organization that I'm part of sometimes finds ourselves a bit rich in certain years. We donate a bit to similar 501c(3) organizations when that happens. Maybe your org needs to understand your fee structure, and if you are giving back enough. Maybe that's where this question is coming from.
We do donate to Red Cross, local needy groups, nursing homes, & military vets mainly in the form of quilts that we make. We are a quilt guild. We put on a quilt show every even year that turns a $4k-6k profit. On the odd years we have an auction of donated items that has a similar profit. We use those profits for fabric & other quilt related supplies, as well as educational programs for members.
Someone/s got it in their head we could only have $25k or less in our checking account. I suspect there has been some conflating of issues or misinformation afloat? Then you can never pound it outta their brain!
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Old 06-02-2017, 02:14 PM   #8
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I think you are good. Sounds like some conflating. And a checkbook isn't everything. Assets can be in other forms.

It is nice to do the 990N postcard. Our org has recently gone over the $50k per year and we file 990-EZ. It is, well, a pain. Even so, some orgs file it no matter what to be transparent.
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