A California Nonprofit Public Benefit Corporation is required to file several forms each year to remain in good standing as a nonprofit corporation and maintain 501(c)(3) status. This blog summarizes the main annual filing forms, which forms to file, due dates, and potential ramifications for failure to comply.
Why These Forms Are Crucial
The IRS and the applicable California state agencies require regular reporting to assist in their duties to monitor nonprofits and enforce applicable legal requirements. These annual filing requirements must be met to avoid penalties, suspension of the nonprofit’s right to conduct business in the state (including raising and spending funds), and even revocation of its federal or state tax-exempt status.
What Annual Filings are Required for a Tax-Exempt California Public Benefit Corporation?
- Internal Revenue Service (“IRS”) Form 990 series, which includes 990, 990-EZ, 990-N, or 990-PF;
- IRS Form 990-T (only if the nonprofit has more than $1,000 in unrelated business taxable income);
- California Franchise Tax Board (“FTB”) Form 199 or 199-N;
- California Registry of Charitable Trusts (“RCT”) Form RRF-1; and
- Every other year, the California Secretary of State’s Statement of Information (“SOS Form SI-100”).
Breakdown of the Forms
a. Form 990 and Its Variations: Which to File?
A nonprofit must file an annual information return or notice with the IRS unless an exception applies (e.g., for churches). The Form 990 series is the IRS’s primary tool for gathering information about tax-exempt organizations, educating organizations about tax law requirements, and promoting compliance. Organizations also use Form 990 to share information with the public about their programs. Additionally, most states rely on Form 990 to perform charitable and other regulatory oversight and to satisfy state income tax filing requirements for organizations claiming exemption from state income tax.
- Form 990: Public charities with gross receipts of $200,000 or more or gross assets of $500,000 or must file Form 990 (although any public charity may choose to file the full Form 990).
- Form 990-EZ: Public charities with gross receipts of less than $200,000 and assets less than $500,000 in a given year are eligible to file the streamlined Form 990-EZ.
- Form 990-N: The simple e-postcard filing is available to public charities (other than supporting organizations) with gross receipts normally $50,000 or less. Normally means a three-year average; however, Form 990-N may be filed in the organization’s first year if gross receipts are $75,000 or less and in the second year if average gross receipts are $60,000 or less.
- Form 990-PF: Required for all private foundations.
- Form 990-T: Must be filed by all exempt organizations with unrelated business income in excess of $1,000 (regardless of the variation of Form 990 they file).
b. FTB Form (California Franchise Tax Board)
Nonprofits must apply with the FTB to obtain tax-exempt status in California separately from the IRS application. Similar to the Form 990, the organization’s size and type will determine which form to file:
- Form 199: All organizations, both public charities and private foundations, may file the full Form 199.
- Form 199-N: Organizations with gross receipts that normally do not exceed $50,000 are eligible to file the simplified Form 199-N.
- FTB Form 109: Must be filed by all California-exempt organizations with unrelated business income in excess of $1,000.
c. RRF-1 Form and Inclusions
California’s RCT uses the information collected on the RRF-1 form to administer and enforce the Supervision of Trustees and Fundraisers for Charitable Purposes Act. In addition to routine monitoring of charities, the Attorney General may use the information gathered on the RRF-1 to conduct investigations and law enforcement actions.
Forms a nonprofit must include when filing the RRF-1 are:
- Normally, a copy of the organization’s Form 990, 990-EZ or 990-PF;
- Form 990-N filers must include a copy of RCT Form CT-TR-1 with their RRF-1 in lieu of a variation of Form 990;
- In addition, RCT Form CT-694 is required by each organization that collected more than 50% of its annual income and more than $1 million in charitable contributions from donors in California and spent more than 25% of its annual income on non-program activities.
d. SOS Form SI-100
Every nonprofit corporation operating in California must file with the Secretary of State a statement of information – SOS Form SI-100 –that identifies each of its top officers and its agent for service of process (i.e., summons and notice of lawsuits). This for form is filed for the first time within 90 days after the filing of the initial Articles of Incorporation, and then every two years thereafter during the applicable filing period.
- The IRS, FTB, and RCT forms are due on the fifteenth day of the fifth month after the corporation’s fiscal year ends.
- A one-time, automatic six-month extension may be requested by the initial due date using IRS Form 8868 (which may be filed online). A timely filed IRS extension request will extend the due date of RCT Form RRF-1 without the need for further action.
- The due date for FTB Form 199 is automatically extended for six months if the organization is not suspended on the original due date and the required return is filed on or before the extended due date.
- SOS Form SI-100 is due on the last day of the month of incorporation every other year beginning on the 2nd anniversary of the corporation’s incorporation date.
Potential Penalties for Insufficient Annual Filing
In addition to financial penalties for late filings, failure to maintain the required state filings can result in involuntary dissolution of the nonprofit corporation, suspension of the nonprofit’s right to do business, suspension of the charity’s right raise funds, and revocation of state tax exemption. Further, if a nonprofit does not meet IRS requirements for three consecutive years, it automatically loses its tax-exempt status.
Other Mandatory Annual Filings
Other annual filing that may be required include:
- Organizational Clearance Certificate (“OCC”) and welfare exemption renewals (these are exemptions from local property taxes where the property is used to further the nonprofit’s charitable purpose);
- Local charitable solicitation annual reports (check with either the appropriate city or county office for these requirements);
- Raffle and gaming registrations;
- Local business license renewals (most local governments require a business license or business tax registration);
- Filings that may be required in other states in which the nonprofit operates; and
- Filings that may be required based on the nonprofit’s business lines or activity.
It is critical to ensure that your nonprofit files the required forms in an accurate, timely, and complete manner. The IRS regularly conducts compliance checks, looking for appropriate recordkeeping, information reporting, payment of any tax liabilities owed (e.g., employment taxes, unrelated business income tax), and activities that are consistent with a nonprofit’s tax-exempt purpose. At the state level, the California Attorney General’s Office conducts oversight to ensure that nonprofits comply with applicable laws. Many donors also carefully review these filings.
Accordingly, you must be proactive in ensuring your nonprofit is up to date on its annual filing obligations. The Law Firm for Non-Profits is here to help you navigate the requirements applicable to your organization or bring your organization back into good standing in the event of a delinquency or revocation.