IRS Publication 4221-PC (Rev. 3-2018)

Overview

This guide provides compliance information for 501(c)(3) public charities. It covers activities that could jeopardize tax-exempt status, federal filing requirements, recordkeeping, governance considerations, reporting changes, required disclosures, and available resources.

Key Topics

Activities Jeopardizing Tax-Exempt Status

• Private Benefit and Inurement: Organizations must avoid allowing more than insubstantial private benefits or inurement to insiders.
• Political Campaign Intervention: Prohibited from participating in political campaigns. Non-partisan voter education is allowed.
• Legislative Activities: Substantial lobbying activities can risk tax-exempt status. Measured by time, expenditure, or through the 501(h) election.

Federal Filing Requirements

• Forms 990, 990-EZ, and 990-N: Information returns based on gross receipts and assets.
• Form 990-T: Required if gross income from unrelated business is $1,000 or more.
• Employment Tax Returns: Required for any wages paid to employees.

Recordkeeping

• Importance: Essential for compliance, evaluating programs, budgeting, and financial statements.
• Types of Records: Must be tailored to activities, including records of gross receipts, purchases, expenses, employment taxes, assets, and liabilities.
• Retention Periods: Generally, records should be kept as long as they are needed for tax purposes, typically three years.

Governance Procedures

• Mission Statement: Encouraged to adopt and review regularly.
• Governing Body: Should have independent members to avoid insider transactions.
• Policies: Consider executive compensation, conflict of interest, and transparency.

Reporting Changes

• Report significant program changes and updates in organizational documents on annual information returns.
• Determination Letters: Request updates to reflect changes in name or address.

Required Disclosures

• Must make annual returns and exemption applications publicly available.
• Penalties: Failure to provide documents may result in penalties.

IRS Resources

• Online and Phone Assistance: Available through IRS website and specific phone numbers for exempt organizations.
• Publications and Forms: Various resources available to assist with compliance.

Conclusion

This publication serves as a compliance guide for public charities under 501(c)(3). For further information, consult IRS publications or a tax advisor.