Group Subordination 990 Compliance Liability Insurance Resources 2018-2020 In this session we will discuss group subordination, form 990 compliance, Liability Insurance and resources for treasurers.

Zonta Club Registered at state level as corporation 501(C)4 Subordinate of ZI - 1219 Before we get into details let’s first talk about the traditional set up of a Zonta club. Clubs should be registered at the state level. Many states don’t require an exempt organization to register. However, new clubs and some older clubs are being forced to do this for banking purposes. You can register as a corporation or an association. An association, is considered a collection of people working together for a common good. Each state varies, but some states don’t see these as legal entities and the liability falls to the members. The corporate structure provides greater protection for the members as the liability would fall to the entity rather than the members. Clubs apply for an EIN with the IRS as a 501(C)4 and as a subordinate of ZI with group ID 1219. This process allows clubs to form without having to fill out the 1024 application and pay the application fee. They just use the exempt status of ZI.

Group Subordination ZI is required to file list of subordinates with IRS Difficulty receiving information from clubs Don’t know the information Filing a 990 postcard is different Therefore, ZI is required to file a listing of their subordinate clubs. If ZI doesn’t file correctly it risks losing its status and since ZI has the exempt status for most clubs then if ZI loses its status so do all of the clubs. In the past we have reached out to club treasurers to obtain the information necessary to file the IRS group subordination form but have been having difficulty receiving the information and the most importantly the correct information. Many clubs don’t know their EIN, status, Exempt type, etc. There is often confusion that since they file a 990 series they think they are not a subordinate. Clubs should be a subordinate but sometimes there are reasons that a club may not be a subordinate and we will talk more about that as we work through the presentation.

Club Database IRS Data EIN Date of last filing Type of Exemption 501(C) 3 or 4 Foundation information Any revocation information We are asking District treasurers to work with club treasurers to compile the basic club information. We are recommending that you create an Excel workbook with tabs representing each club. Then collect the information listed here for each club, EIN#, Type of status, date of recent 990 filing. We also need to collect information about the foundations that clubs have set up. Then of course any information about clubs that have lost their status.

Group Subordination Filing Due to IRS end of February Send worksheet to District Treasurers August 15 Information back to HQ December 15 ZI has to file the Group Subordination list the end of February. We will send out a worksheet by August 15th. This would give District treasurers the opportunity to gather information from club treasurers at district conferences. Then if we could get the information back by December 15 we still have time to follow up on any questions that may arise. Moving forward we hope that the District treasurers can send the spreadsheet page to each club, ask if any changes have occurred and just submit changes. Another issue is that we have to have a signature on record that indicates the club has agreed to be part of our group subordination.

Group Subordination Any questions about group subordination?

Club 990 Compliance Loss of exempt status Required to file tax return and pay income tax Loss of Foundation exemption Donations no longer tax deductible Another reason we are reaching out to District treasurers is that many clubs already have or are in danger of losing their exempt status. Clubs that do not file their 990 for 3 years in a row automatically lose their exempt status. That means those clubs are no longer exempt and are required to file income tax returns. Of course 501c3’s that lose exempt status, donations are no longer tax deductible.

How to verify IRS compliance IRS.Gov EO Select Check https://apps.irs.gov/app/eos So how do you know for sure the status of your clubs? Go to IRS website. Access the site and access several examples: There are 2 ways to access club information.

Tax Exempt Organization Search Example

Tax Exempt Organization Search Select Organization name Zonta Enter state This makes the search the most broad If a club doesn’t come up you can enter the EIN number and sometimes it finds it that way. If the club doesn’t have their EIN you can check with ZI Membership to see if they have it on file.

4 OPTIONS Continue with non Exempt Status Reinstatement Processes Get new EIN Create 501(C)3 For clubs that have lost their status there are 4 options. The first is to continue with the non exempt status. The second is to follow one of the 4 reinstatement processes to reinstate the existing club. The third option is to make a slight name change and reapply for a new EIN. The fourth is to create a 501(C)3 to operate your club.

Continue with Non Exempt Status Pay taxes on revenue received It is possible for a club to just continue with the non exempt status. You would then be required to file a tax return and pay tax on the revenue you received. The tax return you file will be determined by the type of entity you set up as at the state level. These clubs of course would not be under the ZI group subordination.

Reinstatement Processes Streamline Retroactive 990EZ and 990N filers Retroactive Reinstatement 990 filers Retroactive Reinstatement after 15 months Reasonable cause Postmark Date Reinstatement Without reasonable cause Clubs can choose to reinstate the existing club. This requires a lengthy application process and a $600 fee. In addition these clubs cannot be part of a group subordination because they have applied on their own. The first retroactive reinstatement is for 990 postcard filers like most of our clubs. The second one is for 990 filers. These are only available if you are reinstating within 15 months of having lost your status. If you are outside the 15 months and can show reasonable cause for not filing timely your can use procedure #3. Procedures 1-3 will reinstate you back to the date your lost your status. If you are outside of the 15 months and can not show reasonable cause you can only reinstate back to the postmark date of your application. You will then be required to file tax returns and pay taxes on the time period between your loss of status and the postmark date.

New EIN Shut down the entity that lost the status. Establish new entity with slight name change at the state level. Apply for new EIN with new name with the IRS. Get new bank account. You can keep your existing club for ZI purposes, make a slight name change and apply for a new EIN with the IRS. This gives you a fresh start but you must make sure you shut down the entity that lost the status at the state and local level and close out your bank account. You will need to apply with all state and local entities and get a new bank account. Be sure to use the group subordination code when applying for the new EIN.

Create 501(C)3 Create new entity as a 501(C)3 You can start a new entity and apply as a 501(C)3 rather than as a 501(C)4. Some clubs have done this. They had to reapply to reinstate after losing their exempt status, they currently didn’t have a 501(C)3 so created one and use that as their club as well. This is possible but I caution against making this choice. As an organization we encourage clubs to do advocacy. 501c3 organizations have restrictions as to the amount of advocacy they are allowed to do. You may need to track hours/money spent on advocacy vs service vs club activity. It can become cumbersome for the club and misreporting can result in losing the exempt status as a 501c3 and not being able to operate as a 501c4 either. It can also make it very difficult to ensure that funds are accounted for and dispersed properly. This is also a situation where the club would not be part of our group subordination.

We need your help Research your clubs to determine status Help clubs in the most immediate need Begin to build the database information So as you can see it creates a host of issues when clubs lose their status. Therefore we are asking District Treasurers for your help. Research the clubs in your district determine their status. Reach out to those in immediate need first. Build the spreadsheet of information. Help us identify which clubs are not part of our group subordination.

ZI Group 990 Filing Spreadsheet ONLY FOR DISTRICTS CLUBS Zonta International is required to complete a Zonta International Group 990 return annually.  The IRS allows the subordinate units to file with the group, but Zonta made a decision that only the Districts can file with Zonta.  Zonta clubs are asked to file on their own.  The District Treasurers will receive an email asking to submit their 990 spreadsheets to HQ by mid-September.

General Liability Insurance Protects Zonta International Claims that stem from bodily injury or property damage during a Zonta activity or event. Protects Zonta employees and volunteers Cook & Kocher Insurance, at (847) 692-9200. General liability insurance is a little known fact in the Zonta world. It is the $3 dollars you pay annually to ZI with your dues. It is required for all members in the US, Canada and Puerto Rico. It protects Zonta International from claims that stem from bodily injury or property damage during a Zonta activity or event. It also protect Zonta employees and volunteers while performing duties on behalf of the organization. If you have questions or need certificates of insurance you can contact our provider; Cook & Kocher directly.

Additional Insurance??? Event Insurance Director and Officer Insurance ZI provides basic liability insurance coverage. It may be necessary to obtain additional insurance for events, especially if alcohol is being served. Some venues will require it. You might discuss with your board the need to have Director and Officer insurance. In today’s litigious society, nonprofit organizations and their board members commonly face lawsuits for an extended list of alleged wrongdoings: Discrimination (age, race, sex, employment, membership), Harassment, Wrongful termination of employees, Inefficient administration or supervision, Waste of assets, Misleading reports or other misrepresentations, Libel and slander, Failure to deliver services, Acts beyond the granted authority. You can contact a local insurance agent or Cook and Kocher does offer coverage in several states and may be able to direct you to a company to contact in your area.

Resources – How to Sessions https://membership.zonta.org/Tools/Leadership-Development-Tools Form 990 Filings Information as to which form to file and when Tax Status for US Clubs Understanding the difference between a 501c3 vs 501c4 501c3 Organizations Learn how to set up and properly manage this type of organization. There are sessions on the ZI website to help guide district and club treasurers. These are 3 “How To” sessions that you can go into and learn about those specific topics.

Resources – E Learning https://membership.zonta.org/Dashboard/e-Learning Financial Leadership Learning series to help train club treasurers More sessions to follow There are 4 e learning sessions to help club treasurers perform their duties. The e learning sessions require you to begin at the beginning and do the sessions in order. There will be more sessions to follow, some for the e learning and some for the “how to” sessions.

Support Sessions with club treasurers Skype calls Break out sessions at seminars/conferences Let us know if you need help Send us feedback accounting@zonta.org Other ways to provide support to club treasures is to provide one on one sessions, skype calls, break out sessions. Give us feedback and let us know what we can do to help. We can’t help or make changes if we don’t realize there are problems or questions. We are here to help.