Disclosure
Requirements for Charities
Lisa
Nachmias Davis
Davis O'Sullivan & Priest LLC
Phone
Fax
davis@sharinglaw.net
Section
6104 of the Internal Revenue Code requires tax-exempt
organizations to disclose their annual informational returns (990 or
990PF) and
(in most cases) exemption applications to the public upon request and
to
provide copies of them if asked, or otherwise make them available for
public
inspection. Final regulations, issued in
1999, impose penalties for failure to comply with this obligation. The regulations are published at Title 26 of
the Code of Federal Regulations, Section
(1) Documents
required to be disclosed:
$
Application
for recognition of tax
exemption and supporting documents. This includes any letter
or other document issued by the
Internal Revenue Service concerning the application (such as a
favorable
determination letter or a list of questions from the Internal Revenue
Service
about the application). If
no form of application is required, the "application" means the
letter to the
$
Exemption: (1) pending applications; (2) any application
for tax exemption filed before
$
Three
years of annual information
returns with all
supporting documents and schedules, including
amendments. Returns covered are Forms
990, 990PF, 990-EZ, 990-BL, Form 1065. A
central or parent organization with a group exemption may be required
to
produce documents related to subordinate or satellites; those offices
are also
subject to less stringent disclosure requirements.
$ Exemptions: (1) for parts of the return that identify names and addresses of contributors to the organization, but this exemption does not apply to Form 990PF, the return filed by private foundations; (2) Form 990-T; (3) K-1 of religious or apostolic organizations described in section 501(d)
(2) Where
Must
Documents Be "Publicly Available"
$
Must be
made available at
organization's principal office and at certain regional or district
offices.
$
Exception
for "service
providers": if not the
organization's
principal office, documents are not required to be available at offices
"where the only services provided further exempt purposes (such as day
care, health care or scientific or medical research)."
(3) Requirement
to Provide Copies.
$
Copying
Charges Permitted.
Organizations must comply with requests, made either in person
or in
writing, for copies of this information, which must be fulfilled
without
charge, other than a reasonable fee for reproduction and postage.
"Reasonable fee" is defined by regulation to mean the amount the
$
Time Limits. If the request for
copies is made in person, the
organization generally must provide the requested copies immediately. In unusual
circumstances, the organization may delay until the next business day
following
day the unusual circumstances "cease to exist," but in no
event more than five days. (Presumably,
an example would be that the photocopier is broken or the office is
locked.) If the
request for copies is
made in writing, the organization must provide the copies within 30
days.
$
Harassment
Campaign Exemption.
Section
6104(d) exempts organizations from disclosure if the
disclosure requests are part of a "campaign of harassment." The regulations require an organization to
file an application for a "harassment determination" within 10 days
after suspending compliance with the regulations. However,
no application is needed to reject
requests for information of more than two per month or four per year by
a
single individual or from a single address.
(4)
Internet Publication Exception.
$
Copying
and disclosure are excused if
the organization has made the requested documents "widely available"
through publication on the Internet, which currently means, in PDF
format. The
$
Currently,
the website www.guidestar.org publishes all 990 returns filed with the
(5) Enforcement
and penalties.
$
How Much: The penalty for failure to make disclosure of
annual returns is $20 for each day during which such failure continues,
with a
maximum penalty (for failures with respect to any 1 return) not to
exceed
$10,000. The penalty for
failure to make disclosure of exemption applications is
$20 for each day -- with no ceiling. Exception:
if failure to disclose is shown to be due to reasonable
cause.
$ Who Pays: The penalty is paid by the responsible person, not the organization; defined as "any officer, director, trustee, employee, or other individual who is under a duty to perform the act in respect of which the violation occurs." However, Connecticut law requires that the organization must indemnify any director or officer in cases in which "(1) the individual conducted himself or herself in good faith; and (2) the individual reasonably believed (A) in the case of conduct in an official capacity with the corporation, that the conduct was in the corporation's best interests, and (B) in all other cases, that the conduct was at least not opposed to its best interests; and (3) in the case of a criminal proceeding, the individual had no reasonable cause to believe the conduct was unlawful." Conn. Gen. Stat. sections 33‑1117, 33-1122(1).
$
How
Imposed: If the person who is
denied copies or access provides to the
(6) Rules
for Corporate Documents.
·
For the
Public? The
$
For Members.
$
In General. Connecticut law also requires that corporate
records be maintained at the "principal office": (1)
certificate of incorporation or restated
certificate of incorporation and all amendments to it currently in
effect; (2)
its bylaws or restated bylaws and all amendments to them currently in
effect;
(3) the minutes of all members' meetings, if any, and records of all
action
taken by members, if any, without a meeting for the past three years;
(4) the
financial statements prepared for the past three years; (5) a list of
the names
and business addresses of its current directors and officers; and (6)
its most
recent annual report delivered to the Secretary of the State.
For
further information, contact
Lisa
Nachmias
Davis - Attorney at Law
fax
davis@sharinglaw.net
www.sharinglaw.net