Summary of U.S. Non-profit Organisation Reporting Requirements
Certain non-profit organisations are exempt from federal income taxation, but they may have taxable income from unrelated businesses they conduct.
Examples of non-profit Organisations: Cemetery organisations, Civic and community organization, Colleges and universities, Elementary and secondary schools, Federated fund-raising organisations, Fraternal organisations, Health care entities, Labor unions, Libraries, Museums, other cultural organizations, performing arts organisations, political parties, political action committees, private and community foundations, professional associations, public broadcasting stations, religious organisations, research and scientific organisations, zoological and botanical societies.
An unrelated business is a trade or business (i.e. carried on for the production of income, whether or not profit results) regularly carried on (including seasonally) by the organisation, that isn’t substantially related (aside from providing funds) to the exercise or performance of its exempt purpose or function.
Federal tax fillings
An organisation must apply in writing (on Form 1023 for code Sec. 501(c)(3) organisations, Form 1024 for most others), and with the appropriate user fee for an IRS ruling or determination that it’s exempt from federal income tax.
Must file informational form 990 by the 15th day of the 5th month after the end of the fiscal year.
Any unrelated taxable business income is reported on federal form 990-T
May file Form 8870 for a 3 month extension. This is an extension of filing the forms, not for paying any taxes due.
Audited statements are often needed for the following purposes unique to non-profit organisations
State charities Registration. Many states have charitable registration requirements that include submission of an annual report with audited financial statements when the non-profit organisations’ revenue exceeds a certain specified amount.
Requirement of National or Regional Organisation or Association. The central governing board of a national or regional organisation that has affiliates or separate units in various parts of the county may require those affiliates to submit audited financial statements.
Requirements of a grantor or national fund-raising organisation. A funding source, including a private grantor or a federated fund-raising organisation such as the united way, may require audited financial statements as part of the agreement to make grants to the organisation, solicit contributions on its behalf, or allocate to it a portion of the funds raised nationally, regionally, or locally.
Requirements of Governmental Agencies. If a non-profit organisation receives financial assistance/awards from a state or local government or receives federal awards directly from a federal funding agency or indirectly through another level of government, it may be subject to audit requirements.
Reviews and compilations of Financial Statements
• In some case a third party may want an independent CPA firm to compile or review financial statements in lieu of an audit.
• A compilation is limited to presenting in the form of financial statements information’s that is the representation of management. The accountant does not express an opinion or any other form of assurance on them.
• A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. All information included in the financial statements is the representation of the management of the entity. A review is substantially less in the scope of an audit. The accountant either states that they are not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles or indicates in the report any modifications that need to be made.