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February 16, 2009 -- Below is a discussion of the New Forms Introduced by the Attorney General's Charitable Trust Section for charitable solicitation licenses, charitable trust registration and verification of exemption from either or both of those requirements.


January 27, 2009 -- Below is a discussion of the "Charitable Solicitation License New, Increased Audit Thresholds" that apply to those charities applying to the Michigan Attorney General's Charitable Trust Section for a charitable solicitation license.

 

December 16, 2008 -- Below is a discussion and relevant links to find out more about the "IRS extension of the deadline for Completion of Written Plans for 403(b) Retirement Plans." Many nonprofits offer these tax sheltered plans to their employees.

 

October 6, 2008 -- New item below discusses the "IRS Elimination of the Advance Ruling Period and Elimination of Filing Form 8734."

 

July 22, 2008 -- two new items below "New Requirements for Nonprofit and Nonprofit Charitable Purpose Corporations"

 


Charities PagePublic CharityState Laws


New item January 27, 2009

Charitable Solicitation License New, Increased Audit Thresholds 

 Public Act 424 of 2008 that was signed into law by Governor Granholm January 5, 2009, means that, effective immediately, fewer charities will be required to submit audits or reviews by independent auditors with their application for a charitable solicitation license.

Change in audit requirement: Prior to the new law, charities were required to submit to the attorney general an audit by an independent auditor with their application for a charitable solicitation license if they had received more than $250,000 in contributions (not including government grants or restricted grants from foundations). PA 424 increased that threshold to $500,000 in contributions. Because the law took effect immediately, now charities do not need to submit an audit unless they have received over $500,000 in contributions (not including government grants). It is important to note that the new threshold does include restricted grants from foundations.

Change in review requirement: Prior to the new law, charities that received over $100,000 in contributions, but not more than $250,000 (not including government grants or restricted grants from foundations) were required to submit a review by an independent auditor along with the application for a charitable solicitation license. PA 424 increased the threshold for a review to $250,000 in contributions (not including government grants). The new threshold does include restricted grants from foundations. 

Future threshold changes: In addition to the increased thresholds that went into effect this month, the new law also provides for future increases in the thresholds to account for inflationary changes. January 1, 2015, each of the thresholds will increase by another $5,000. The thresholds will rise another $5,000 January 1, 2020 and every five years thereafter.

New Application for License to Solicit Donations: The Charitable Trust Section of the Department of Attorney General has changed its forms to reflect the increased audit and review thresholds. You can locate and download the form from the attorney general’s website by going to www.mi.gov/ag and clicking on “Charities” on the right side of the page. You can then locate the Application for License to Solicit Donations in the list of Forms.

 

 

 

New item December 16, 2008

IRS extension of the deadline for Completion of Written Plans for 403(b) Retirement Plans

On December 11, 2008, the IRS issued a notice extending the deadline for 403(b) written plans to December 31, 2009.

Many nonprofits were having problems meeting the original December 31, 2008, deadline, prompting the IRS to provide some relief. However, it is important to note that nonprofits are still under an obligation to operate the plans according to the new rules during the 2009 calendar year. Also, by the end of 2009, organizations must take steps to retroactively correct areas where their plan does not meet the new IRS standards. It is only the “written plan” requirement that has been extended until the end of 2009. For more information go to the IRS website.

 

New item October 6, 2008

IRS Elimination of the Advance Ruling Period and Elimination of Filing Form 8734

On September 9, 2008, the IRS issued temporary Income Tax Regulations eliminating the advance ruling period for charities and eliminating the requirement to file IRS Form 8734 after the first five years of operation. Under the new regulations, a new organization applying for tax exempt status under Section 501(c)(3) will be classified as a publicly supported charity if it can show at the time of application that it can reasonably expect to be supported by the public and not operating as a private foundation. Private foundations are subject to possible excise taxes and increased scrutiny.

 

In the past charities applying for tax exempt status were presumed to be private foundations unless they represented on the Form 1023 application for tax exempt status that their funding would primarily be from public sources. They would then receive an advanced ruling for their first five tax years, following which they were required to submit Form 8734 to the IRS to document their sources of funding and to justify retention of the public charity ruling. The new procedure replaces the old 2-step, five-year process and instead grants immediate public charity status if the organization can show on its application that it can reasonably expect to receive funding primarily from public sources. The charity keeps that status for five years, regardless of funding sources. Following the five year period, the IRS will review responses to questions on the revised Form 990 to screen for those organizations that must be reclassified as private foundations.

 

For more information go to the IRS website.

 

 

 

New Item July 2008!

New Requirements for Nonprofit and Nonprofit Charitable Purpose Corporations

On July 15, 2008, Governor Granholm signed House Bill 5681 into law (Public Act 22 of 2008) making 3 significant amendments to Michigan's Nonprofit Corporation Act. The new law, which is effective immediately, includes the following changes:

 

  • The board of directors of a nonprofit corporation must have at least three directors. Prior to the amendment, the Act required "one or more" directors. Under the new law, an existing corporation would need to have at least three directors beginning 180 days after the bill's effective date. In other words, corporations are not required to make the change prior to filing the Annual Information Update for 2008, which is due October 1, 2008.
  • A corporation that is a "charitable purpose corporation," as defined by the amendments, is prohibited from making a loan to, or guaranteeing an obligation of, an officer or director of the corporation or a subsidiary, unless the officer or director is also a client of the corporation and the loan or guaranty is necessary to carry out the corporation's charitable purposes.
  • A charitable purpose corporation that is automatically dissolved must provide notice of the dissolution to the attorney general within 60 days after the date of dissolution; the corporation is prohibited from disposing of any of its assets without written approval of the attorney general. Automatic dissolution of a corporation occurs when the required annual filings are delinquent for more than two years.

 

 

Electronic Communication

On February 29, 2008, Governor Granholm signed Senate Bill 123 into law (Public Act 9 of 2008). This new law enables nonprofit organizations to use forms of electronic communication to conduct meetings, provide notice of meetings and vote on issues. For more information go to the most recent Public Policy Update on MNA's website.

 

 

 

New Item July 2008

New Guidance on Lobbying Disclosure Act

The Secretary of the United States Senate and the Clerk of the United States House of Representatives this month issued updated guidance concerning compliance with the Lobbying Disclosure Act and amendments enacted in September 2007 through the Honest Leadership and Open Government Act of 2007. For more information go to the Lobbying Disclosure portion of the website of the Clerk of the House of Representatives or the Public Disclosure page for the United States Senate.

 

 

 

New IRS Filing for Small charities

The new filing form, the e-Postcard, for small charities is now available through a website provided by Urban Institute. Organizations with a fiscal year that ended December 31, 2007, or any date after that are required to file the e-Postcard if their gross receipts are less than $25,000 during the fiscal year. For more information, go to the IRS website.

 

Electronic Filing

The IRS now has electronic filing available for Form 990, 990-EZ and 990-PF. Some larger charities that have a large number of employees are now required to file electronically. Also Form 8868, Application for Extension of Time to File an Exempt Organization Return, may be filed electronically. To read more and find out about the e-filing process, go to the IRS website.

 

 

 

Electronic Filing

The Charitable Trust Section now has electronic filing for the following forms:

  • Application for License to Solicit Donations (both initial filing and renewals)

  • IRS Form 990 and 990-EZ

  • Initial Charitable Trust / Charitable Solicitation Questionnaire

  • Charitable Trust Registration Statement and Inventory forms (with Initial Charitable Trust / Charitable Solicitation Questionnaire only)

To find out more about the procedures for electronic filing go to the Charities page of the Attorney General's website.