LOVELOCK - New legislation passed earlier this year may affect the way local nonprofit organizations do business.
Nevada Gov. Brian Sandoval signed Assembly Bill 60 into law on May 28. The law requires nonprofit organizations that solicit donations to make prospective donors aware of whether or not their donation is tax deductible.
"Only entities that are registered as a Nevada state nonprofit and a 501(c3) organization can claim that donations made to them may be tax deductible," said Nevada Chief Deputy Secretary of State Nicole Lamboley.
Members of the public may not be aware of this and think that donations they make to any nonprofit organizations are tax deductible.
These misconceptions, coupled with complaints to the Nevada attorney general and secretary of state about organizations soliciting donations, have brought the two state offices together in a collaborative effort to educate the public and gather more information on organizations claiming nonprofit status in Nevada.
"Nonprofit organizations or entities are creations of the state. Charitable organizations or tax deductible organizations are designated by the IRS. There is confusion oftentimes among perspective donors of the difference," Lamboley said.
In Nevada, organizations can file under NRS chapter 82 as a nonprofit organization.
"This does not guarantee to anyone that (the organization) has the IRS status of the 501(c3). Oftentimes there are people who solicit funds from Nevadans then the donor comes to find out that they donated to a Nevada nonprofit but their donation does not qualify as a tax deductible contribution because the non-profit entity did not have a 501(c3)," Lamboley said.
Currently, nonprofit organizations that are not 501(c3) should be making good faith disclosure to their perspective donors that their donation is not deductible under federal law. The new legislation, however, will require this disclosure in all written, verbal or electronic request for funds, services or tangible items.
The new law will take effect January 2014. The Secretary of State will also require additional information from Nevada nonprofits when they file their annual listings of officers with the state. The AB 60 legislation proposes to add a question to the Articles of Incorporation asking if the nonprofit entity intends to solicit tax deductible donations. If the answer is no, the entity will proceed with the filing requirements as they are presently.
If the answer is yes the entity will be required to provide additional information, along with their federal tax identification number and its 501(c3) status. It must also file an annual financial statement, among other requirements.
Jeff Munk, director of the Frontier Community Coalition, said he sat in on an informational training webinar conducted by the Alliance of Nevada Non-Profits (ANN) to find out what the FCC may be up against. The FCC is a 501(c3) organization.
"It doesn't look like it will be that big of a deal. We now have to make a financial report to the state as well as to the IRS," Munk said.
Nonprofit organizations that do not have 501(c3) status must also file a financial statement with the Secretary of State when filing their annual list of officers.
ANN Executive Director Phil Johncock advised non-501(c3) nonprofit organizations not to wait until the law is enacted in January to understand their financial status.
"Some smaller nonprofits are not required to file a 990 form with the IRS. Now that the financial statement is a requirement, I would say to all those, they need to figure out their organization's finances now so they are not scrambling at the last minute," Johncock said. "I say file a 990 form anyway, even if you are small and not required to. It adds to the transparency of your organization and shows you what you need to do to grow your organization."
Johncock suggested that non-profits should take advantage of the ANN webinar QuickBooks 101 for Small Nonprofit Finance & Reporting on Aug. 14.
A working draft of the implementation of the new regulations is posted on the ANN website www.alliancefornevadanonprofits.org/ab60. Comments about the draft, proposed changes in wording and questions can be made on the website. The comment session will end July 31, at which time Johncock will compile the comments and share them with Lamboley.
"We can't change the law. It's there, but you can give feedback on the regulatory process to help the Secretary of State's office clarify the new requirements. If we don't give our feedback then the Secretary of State will implement the new law however they see fit," Johncock said.
Lamboley said campaigns to inform the public of the new requirements will start in the coming months.
"Prospective donors can check our website to find out if an organization is registered with the state as a nonprofit. When the AB60 law takes effect in January, they will be able to find out if that nonprofit is also a 501(c3) organization and know if their donation may be tax deductible," Lamboley said.
The Nevada Secretary of State's website is www.nvsos.gov. Lamboley clarified the wordage she used of "may be tax deductible."
"A charitable organization can not tell a donor their donation 'is' tax deductible. They do not know the donor's financial situation with the IRS. The suggested wordage in the AB60 is 'may,'" she said.
Organizations that do not heed the upcoming changes may face fines of up to $1,000 and suspension or revocation of their nonprofit status with the state.
Deputy Secretary of State for Commercial Recording Scott Anderson said that an organization who has not filed their annual listing of officers will be notified and given ample opportunity to come into compliance.
"If the organization continues to solicit and operate their nonprofit after they have been given a cease and desist order we will turn it over to the attorney general's office and they could face stiff penalties and lose the right to be a Nevada nonprofit," Anderson said.
Contact the Nevada Secretary of State'S office for more information about the AB60 law on their website or by calling (775) 684-5708.
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