Tax Exemption Reform Act of 2017 2017 United Way Legislation Act No. 2017-149

Defining United Appeal Fund Prior to the enactment of this legislation, Alabama law did not define Act -261 Community Chest, All and United Appeal Funds and all charitable, civic, and eleemosynary organizations and institutions for whom they solicit funds September 7, 1966 For purposes of Section 40-9-12, the Act defines the terms united appeal fund and supported charities. Bottom Line: There will be no new united appeal funds (UAF) approved for a Certificate of Exemption after July 1, 2017 To grandfather, UAF and supported charities must have been in compliance as of July 1, 2017 and/or the date of renewal

A qualifying UAF, as defined in Section 40-9-12(d), is any non- profit entity that demonstrates to the reasonable satisfaction of the Department of Revenue that it has all of the following characteristics:   Is an Alabama nonprofit corporation, or another type of legal entity, whether formed in Alabama or in another jurisdiction, which is required by its principal governing documents to be operated as a charity. Is one of a class, donations to which are deductible for federal and Alabama income tax purposes under Section 170(c) of the Internal Revenue Code. Has as its principal purpose, as stated by its principal governing documents, the raising of funds or the aggregation or consolidation of fund-raising efforts, to support other charities which are not themselves united appeal funds, known as supported charities.

The UAF has been issued a Certificate of Exemption from Alabama sales, use and lodging tax prior to July 1, 2017 and has continually maintained the Certificate of Exemption as required by Section 40-9-60. With respect to the distribution of funds raised by the UAF, the entity’s principal governing documents must require that no supported charity, as defined in this subsection, will receive de minimus support. (Section 40-9- 12(c)(2a-e))

Who Qualifies as a Supported Charity? A supported charity is any charitable, civic or eleemosynary institution for which a united appeal fund solicits funds. (Section 40-9-12(c)(1)). Each supported charity must be separately identified by name in the principal governing documents of the UAF entity.   Each supported charity must agree, in its own principal governing documents, to become or remain a member of the UAF that funded the supported charity. (Section 40-9-12(d)(1)). New supported charities will be allowed to apply for a Certificate of Exemption with required documents.

New Requirements Effective July 1, 2017, all UAF’s and supported charities will be required to attach their respective governing documents to requests for a Certificate of Exemption renewal. The term “governing documents” as used in this rule shall mean the incorporation documents, by-laws, or other documents adopted by the UAF or supported charity which govern the activities of the fund or the supported charity.

Can a Current United Appeal Fund Lose their Tax Exempt Status? If a UAF or supported charity allows their Certificate of Exemption to expire, it will not be renewed and the united appeal fund or supported charity loses the exemption. If a UAF loses their tax exempt status, the supported charities are no longer exempt unless they are supported by a UAF in good standing as of July 1, 2017. If a UAF fails to provide documentation on an annual basis that they are in compliance with all currently enacted rules as well as show evidence that the supported charities receive more than de minimis support.  All UAF’s and supported charities must comply with requirements to file informational reports