Time's Up! What You Need to Know about Your 990

I'm a little late on posting this one, the deadlines mentioned in this article have passed.  However, I felt it was important to post if only to remind people to check on their filing status, contact the IRS if necessary and find out what needs to be done.  For many small nonprofits, timely and proper filing can be a struggle.  I am also reminded that nonprofits in every country have to be familiar with their own laws.  Thanks to Nonprofit Quarterly for sending me this article.  Bunnie

Time's Up! What You Need to Know about Your 990

by Jeff Narabrook, Thomas H. Pollak, and Katie L. Roeger

If the number of nonprofits registered with the IRS shrinks by 20 percent this year, don’t blame it on an ailing economy. A simpler explanation is available: thousands of small nonprofits may not meet a new filing deadline, causing revocation of their tax exempt status and removal from the IRS list.


Most nonprofits with fiscal years of January 1–December 31 and revenue under $25,000 had 3 years—or until May 17 of this year—to file form 990-N or lose their federal tax exemption. Active organizations that do not file will face fees and lost time as they reapply for their exemption unless reasonable cause is shown for not filing.

But the true story behind any large drop in registered nonprofits may prove to be that long-defunct organizations are finally being removed from the IRS list. An unknown number of inactive organizations are thought to be on the list because, unlike larger organizations that must annually file Form 990 or Form 990-EZ1, small organizations with receipts under $25,000 never had to file annual documents with the IRS. With no further IRS contact ever required, they would remain on the list indefinitely even after ceasing operation unless someone thought to update their status with the agency.

Consequently, the total number of active nonprofits registered with the IRS was long thought to be misleading. Addressing this blind spot in its regulatory system, a provision in the Pension Protection Act of 2006 gave small organizations a three year window to start annually filing the newly created Form 990-N, commonly known as the e-Postcard.[1] That deadline is now only days away for organizations operating on the calendar year.

The public won’t know exactly how many organizations were removed from the list until the IRS starts releasing the information in January 2011, but to get a sense of the large numbers that may drop off the IRS rolls, begin with over 1.5 million─the total universe of nonprofit organizations of any size registered with the IRS in April 2010. Forty percent of those are small organizations that under the 2006 provision are now required to file 990-N2. Approximately 343,000 of those met the filing deadline as of May 1, leaving over 340,000 or 21 percent of all registered nonprofits that have not filed—and that may need to reapply for tax-exemption. (214,000 of these organizations will lose their tax-exempt status on May 18th, 2010. The remaining organizations operate on different fiscal years and have some additional time.)

How many of those 340,000 groups are still active is an open question. The National Center for Charitable Statistics (NCCS) at the Urban Institute attempted to contact a random sample of 100 organizations that had not filed in the past three years and was only successful in reaching 25 of the organizations. Many organizations have been on the IRS list for decades; 47,000 of them were incorporated before 1950 and over 40 percent were registered sometime before 1980.

While some of the organizations may have ceased to exist long ago, it’s also easy to see how active organizations may have never heard of the requirement. The list of non-filers includes 30,000 sports and recreation clubs, 15,000 student fraternity and sorority groups, 17,000 community service clubs, 17,000 veterans’ organizations, and 8,000 parent teacher groups. Although the IRS used a variety of mediums and outreach methods to publicize the filing deadline, direct communications to these organizations were sent to the last address on file with the IRS. Because most organizations of this size are run by volunteers with addresses at the home of the board president or treasurer, the notices may have never reached the necessary person if no one voluntarily updated their address file with the IRS after a change in leadership.

The cost will be significant for those that lose their exemption and need to reapply. They will have to pay the standard application fee of $400 or $850 depending on anticipated gross receipts. A new IRS Web-based application system in the works would provide a cheaper $200 online application option. But assuming only a quarter of the organizations that have not filed are in fact still operating and will have to reapply before the online application is available, it would drain between $127 million and $272 million dollars from the nonprofit sector just to have their status’ reinstated.

Organizations that missed the deadline will have their status’ revoked immediately and will not be permitted a filing extension. Those that were never notified of the change and missed the deadline may want to make a case for retroactive reinstatement of their tax status, which the law provides if reasonable cause can be shown for failure to file.

While speaking at the Urban Institute’s annual Form 990 Meeting in May of this year, Lois G. Lerner, director of the exempt organizations division of the I.R.S, stated that organizations that had received two or three notification letters, but did not find the time to file the 990-N would not considered a reasonable cause, but each case will be handled individually. Lerner also mentioned that the IRS will be “extremely careful” in notifying the public that an organization has lost its tax-exempt status. In fact, between May 2010 and January 2011, only the IRS will know the organizations whose status has been revoked. Donations to organizations that missed the deadline will remain tax deductible until public notification of the revocation is given on the IRS website.

Time will show just how many inactive nonprofits were lingering on the IRS rolls. The best thing organizations can do is to see if they need to come into compliance by visiting the Urban Institute’s National Center for Charitable Statistics searchable database of organizations that are required to file but have not. If they find they are on the list, an officer from the organization should file Form 990-N through an approved IRS 990-N e-file provider here. Those who know of small nonprofits with receipts under $25,000 in their community are encouraged to notify the organization’s officers of the requirement so that they can take immediate steps to address the situation.

[1] Organizations not required to file a Form 990 include churches, integrated auxiliaries of churches, conventions or associations of churches, 501(c)(1) government organizations, black lung trusts, and instrumentalities of states or political subdivisions.

Jeff Narabrook is the public policy assistant at the Minnesota Council of Nonprofits; Katie L. Roeger is the Assistant Program Director of the National Center for Charitable Statistics at the Urban Institute; Thomas H. Pollak is the Program Director of the National Center for Charitable Statistics at the Urban Institute.

Trends In Giving

One of the most positive people I have come across is Jenai Morehead.  Her energy just spills out in her writings and posts.  Here she talks about how times have changed and how we need to change with them.  On another point, and relevant to this conversation, Charity Channel has just published a new book called Fundraising as a Career:  What, Are You Crazy?  Read more about it at Charity Channel.  But back to Jenai, ok, so I have to pick up the phone?  Raising money for your beloved organization can feel like direct selling sometimes...and hardly anybody likes that, but, if you remember that it is your "beloved" organization, it may help you get past the "I hate asking people for money" gitters.  Bunnie

Trends In Giving
by Jenai Morehead

Times have changed. Nonprofits have been economically challenged to operate and give at a level that continues to satisfy the purpose for which they were created.

So what are they doing?

Over the last year I did some ground level observations and research for my clients. They needed answers to find money and resources to remain sustainable. The basic question: Is there any money out there? If so, how do I access it?

I studied two areas: Private foundations and public nonprofits. Normally known as grantors and grantees; those who give money and those who receive money. I came up with some interesting observations while attending several regional meetings of the Association of Small Foundations.

This wonderful organization is a gathering of small grantors whose members give generously to their regional nonprofits. It is also a resource of education to the founders and executive directors of these organizations. In one meeting founders were finding it increasingly hard to continue to pour money into their private foundations while their businesses were struggling. With employee contributions down they began coming up with creative ways to serve their constituents.

Most of the creativity was in capacity building services. Nowadays grantors are showing nonprofits “how to fish” as well as clean it, fry it and serve it. Services that public nonprofits normally would have to pay for are now being offered as capacity builders in lieu of cash grants. Sadly, a few foundations could not continue into legacy and are seeking advice as to the proper closure of their nonprofit affairs.

Believe it or not, picking up the phone and asking if there is funding available, is now in style. Because of this, I have changed the way I serve my clients. Once I match my client’s mission and goals with a funder, I pick up the phone and call the grantor myself. Executive Directors are now answering the phones and are more available to the public. With recent cutbacks and layoffs people are becoming more accessible. During the last few months I rarely have to go through more than one person to find someone who can answer my questions. If I leave a message or an email I usually get a personal response in less than 24 hours. This is straight across the board for small and large nonprofit foundations. Layoffs are causing a “nervous” productivity and founders are looking for more “bang” for their buck.

I have also found that arbitrarily writing letters does not work. Many nonprofits have wasted time sending out bulk mail without first reading guidelines. It takes more than writing “merge mail” letters to get funding. Showing determination and reading instructions is a quality that will get you a conversation with someone who can answer questions.

When I call a foundation, I introduce myself and my company. I have pen in hand and usually ask a combination of the following questions:

• Name and position of the person I am speaking too (if I don’t already know)

• I tell them briefly about my client’s project and ask if it matches their mission and goals for funding. If not, I ask if their priorities have changed and what are they? Example: One company’s priority switched to green energy projects. Another is only funding projects that are directly impacting people and are not giving capital for equipment or overhead.

• I ask them if they are funding any projects at all and, if so, which ones? If not, when will they expect their funding cycles to begin?

Grantors always give me straight answers and sometimes give me insight to the way their boards will view my proposals. They will never tell you if they can fund your project, but will help you not to waste your time and theirs.

Today, grantor’s expectations are more stringent. The most common conversation I have with foundation administrators is to make sure your program is sustainable, measureable and able to be duplicated. They want to make sure your organization has a plan of financial support before and after the grant; that the program objectives and outcomes can be measured and that the program can be duplicated for the good of others.

With these tips I hope you are on your way to feeling more comfortable about approaching grantors with candid questions that will help you make prompt decisions about funding for your organization.

Contact Jenai at Jenaimorehead at aol dot com

2010 Foundation Growth and Giving Estimates

The Foundation Center has been one of the most important nonprofit resources for years.  Along with providing training for grant seekers, they also conduct amazing research to help nonprofits navigate giving trends.  This year is no exception as they publish their 2010 report "Foundation Growth and Giving Estimates."  While their findings may seem a bit depressing regarding the reductions in grants and giving, it is important for nonprofit boards and staff to understand the trends in order to adjust their behaviors accordingly.  Below I have excerpted a few key points, but I urge you to go to the Foundation Center and download the entire report.

On a personal note...while the current state of the economy can certainly be stressful for all who work in nonprofits, I'd like to encourage you.  The beauty of adding a few years to your life is that it gives you perspective.  In the late 1970's and early 1980's there was a terrible recession that matched what it is we are experiencing today.  I remember record unemployment, businesses going under, nonprofits struggling.  It won't always be this way, things do go through cycles.  Your challenge is to retain optimism and to do the best you can with what you have.  I hope the articles we provide here give you good information and tools to meet the challenges before you!  Bunnie

2010 Foundation Growth and Giving Estimates
A Report of the Foundation Center by

Steven Lawrence, Director of Research and Reina Mukai, Research Associate

Overview, Page 1

"The worst economic crisis since the Great Depression resulted in the biggest reduction in U.S. foundation giving on record. In 2009, the nation’s more than 75,000 grantmaking foundations cut their giving by an estimated 8.4 percent, or $3.9 billion, to $42.9 billion. Since the Foundation Center began tracking foundation giving in 1975, current-dollar giving had declined in only three
years—1983, 2002, and 2003—and in each year by less than 1 percent.

Despite its unprecedented severity, the reduction in 2009 foundation giving could have been worse. According to a 2009 Foundation Center survey, roughly four out of five foundations indicated that they determine their grants budgets based primarily on their assets, with half of these funders basing their calculations on their prior year’s assets (see Foundations Address the Impact of the Economic Crisis at foundationcenter.org). Given the 17.2 percent drop in foundation assets recorded in 2008—a $117.3 billion loss—a larger reduction in giving would not have been surprising.

Several factors helped to moderate the overall decline in foundation giving. Among foundations that base their grants budgets on their asset values, more than one-quarter do so using an average of their asset values over the prior two-to-five years. During less volatile economic periods, this practice allows grantmakers to maintain more stable levels of giving. In the current period, it enabled foundations to average in the asset growth in years prior to 2008, which lessened the amount by which they had to reduce their giving in 2009."

Community Foundations, Page 7

"Historically, community foundations have tended to fare relatively better in both more and less prosperous times from having a broad pool of individual donors. Decreased giving by some donors would tend to be balanced out by increased contributions from others. Community foundations also experienced a more modest reduction in their assets in 2008 (-12.5 percent) relative to independent foundations (-19.2 percent). Nonetheless, as institutions that must raise funds, community foundations may have been particularly hard hit by the economic panic that led individuals to pull back drastically on their personal consumption and charitable contributions."

Community foundations may also face restrictions on giving through their donor-advised funds, specifically with funds stipulating that their current value cannot drop below the value of the donors’ original contributions. Especially for donor funds established in recent years, their values may not return to the level of the donors’ original contributions until the market regains all of its 2008 losses, which could take a number of years.

Despite reductions in giving, community foundations have been leaders in responding to needs generated by the economic crisis. According to a Foundation Center survey conducted at the height of the crisis in early 2009, 35 percent of community foundation respondents were engaging in special initiatives to help their communities cope with repercussions from the economic downturn, such as rising unemployment and homelessness. By comparison, about 14 percent of overall foundation respondents reported providing exceptional support related to the crisis (see Foundations Address the Impact of the Economic Crisis at foundationcenter.org). To date the Foundation Center has tracked nearly $60 million in grants and program-related investments from community foundations that specifically addressed the economic crisis (see foundationcenter.org/focus/economy)."


Read the full report at 2010 Foundation Growth and Giving Estimates (The Foundation Center)

Website Best Practices for Nonprofits

It's always good to go back over the basics when it comes to website design and functionality.  Antoine Dubeauclard points out some basics we all should be thinking about.  I particularly like the idea of thinking about functionality.  Can I get the information I need easily and quickly?  How many times have I been to websites that "bury" content and then become frustrated trying to find what I want.  Also, if I want to donate money to your organization, will you make it easy for me?  Bunnie

Website Best Practices for Nonprofits
By Antoine Dubeauclard, President of Media Genesis

Keeping pertinent and updated resources readily available to people is what many nonprofit organization hope to achieve with their website, yet many still fall short.

Using Focus: Hope as an example, I would like to point out some best practices for nonprofit websites.

Focus: Hope is a Detroit civil and human rights organization that has constantly worked to bridge the racial divide in southeast Michigan. In March, the organization not only celebrated their 42nd anniversary, but also the launch of their new website. Below I have highlighted some features and functionality of Focus: Hope’s website that are key for any nonprofit.

Updated and well organized content

First, it’s important to deliver relevant content to the several and varied, audiences of non-profits. You want to give people a reason to come back. If your website has stale information and doesn’t engage the users – guess what – they won’t be returning. Creating a vibrate, easily updatable and engaging website was in the plan from the start – everything from the structure to design to functionality. Media Genesis built Focus: Hope’s site to have a custom content management system (CMS), so anyone within the organization can update the information. Now, content, videos, news and pictures can all be easily updated as often as needed– giving users something new to come back to. Having an organization of content is also very vital. Focus: Hope may have a lot of content, yet it is labeled and structured in a way that people don’t have to hunt for the information they are looking for.

Donations

A strong donation system is essential to keep any nonprofit up and running. Keeping this in mind, donors should not be left out when it comes to picking out your top audiences for your website. Remember, as a rule, don’t make people search. If you are actively seeking donations, make it easy for people. On Focus: Hope’s website a “Make a Donation” button is prominent on every page. We also customized their third party donation system so donors no longer have to leave the site to make a donation. This is key as it allows visitors to the site to make a donation, yet still browse and engage with the site content afterwards without ever leaving.

Social Media

Using social networks such as Facebook, YouTube and Twitter are great ways to share videos, start a discussion about an interesting fact, or spread the word about an event. It also portrays more transparency and lets people observe a more human aspect of the organization. Focus: Hope has links to their different social networks on every page, making it easy for users to peruse.

Correctly identifying your audiences, assessing the needs of your organization and finding ways to engage users should all be best practices when it comes to planning and developing any nonprofit website.

Contact Antoine Dubeauclard at Media Genesis