1. 4-H Clubs, Affiliates, Banking and Taxes New York State 4-H March 15, 2011 New York State 4-H March 15, 2011

2. Agenda History of tax exemption What are the tax exemption changes What is a tax exemption What isn’t a tax exemption What has changed for the Association What has changed for the Club EIN’s, clubs, and banking Affiliates vs. Clubs MOU’s A note about contracts

3. History of tax exemption Group Exemption 2704, Issued by the IRS in 1946 made 4-H Clubs and Groups exempt from taxes Clubs could accept donations of money, animals or items, and donors could claim this as a tax deductible donation Clubs are subordinates of the association Clubs did not have to file any tax documents

4. Tax Exemption Changes Pension Reform Act 2006 made all tax exempt organizations file tax returns USDA/4-H Headquarters dictated that clubs should file 990 series returns 2008 IRS began to look at Clubs more closely, 4-H Headquarters attempted to keep a list of all the clubs in the country Tracking of all the clubs at the federal level was deemed to be unworkable Group Exemption 2704, will not be recognized by the IRS after April 15 th 2011

5. What is a tax exemption for 4-H Clubs and Affiliates? 4-H Clubs as activities (vs. subordinate organizations) of the association, don’t pay taxes on gifts of money, animals or items 4-H Affiliates don’t pay income taxes as they are covered by the MOU with the Association In most cases 4-H Clubs don’t collect sales taxes on fundraisers 4-H Clubs and affiliates with current MOU’s (unless separately organized 501c3’s) don’t file taxes

6. What isn’t a tax exemption? 4-H Clubs do not qualify for sales sales tax exemption certificate 4-H affiliates may qualify if separately organized 501(c)3s This means club volunteer leaders shopping for supplies must pay sales tax Exception: associations, at the discretion of the ED may make purchases on behalf of the club, this would be appropriate for large purchases ie: fundraising materials

7. Changes affecting the Association Club’s activities are activities of the association Affiliate’s activities are activities of the affiliate Associations must approve new club bank accounts and monitor club banking activity Clubs with a large bank balance (average greater than $2,500) or doing a large amount of transactions (greater than $7,500) should be doing financials through the association going forward (see FORM Code 1601)

8. Changes affecting the Club Clubs with large amounts of cash or large dollar transactions need to handle their finances through the Association NY Clubs do not file any tax returns for ‘10 – ’11 program year Clubs opening new bank accounts will need an EIN and someone from the Association should be a co-signer With permission of the Extension Executive Director clubs may carry up to $750. over to the next program year (this was $500.)

9. Reminders Reports and financial procedures need to be followed closely Audits must be completed Financial reports must be turned into the association on a timely basis A club that does not follow procedures risks an unfavorable outside audit outcome for the association

10. What about taxes? (Clubs) For the 2010 year, clubs that filed the e-postcard in the past will need to do so again. This process ceases with the 2010-11 program year Clubs that do not have an EIN do not file Clubs that received a new EIN during the last program year need to fill out a form 8821 and send it to the state office (this affects very few clubs, please contact Adam for details)

11. Affiliates vs. Clubs Affiliates: stand alone organizations, able to use the 4-H Name and emblem only by having an MOU with the association Examples include: County foundations, leader’s associations, county fair boards Activities: Deliver and plan programming, ie clubs, program committees

12. MOU’s The USDA holds the 4-H name and clover in trust for the educational and character building purposes of 4-H An unchartered group using the 4-H Name and emblem must have authorization for such use This authorization is spelled out in an MOU between the affiliate and the association The MOU template has been reviewed by PW Wood and Extension Administration and is available for Associations to personalize

13. A note about contracts On occasion clubs will be asked to sign contracts, these must be submitted to the Association for ED approval and PW Wood for review Contracts are to be signed by board president or ED Clubs are activities of the association, therefore the association is responsible for anything arising from a club signing a contract

14. Conclusion NY is particularly prepared for these changes with the procedures already in place. These procedures simply become more critical. Slideshow prepared by Adam Davis, NYS 4-H Program With input from: Susan Kozykowski, Finance Manager, CCE Orange County Robin Travis, Interim 4-H Program Leader and Executive Director CCE Schuyler Ed Dwyer, Compliance Manager, CCE Administration

15. Questions?