Foundations focus on annual reporting not just for tax requirements but also for the purpose of community relations, transparency and accountability. Here are things all grantmakers should know about reporting and disclosure.
Internal Revenue Service
All private foundations, regardless of income or asset size, are required to annually file IRS Form 990-PF. Public charities, including community foundations, are generally required to file IRS Form 990 if their annual gross receipts are normally more than $25,000; however, some organizations may file the simpler Form 990-EZ. For tax year 2009, public charities with gross receipts of less than $500,000 and assets of less than $1.25 million are eligible to file Form 990-EZ. For subsequent tax years, the ceilings are reduced to $200,000 and $500,000, respectively.
Forms 990-PF, 990 and 990-EZ must be filed by the 15th day of the fifth month after the end of an organization's fiscal year. For example, a private foundation with a fiscal year ending Dec. 31 must file its Form 990-PF by May 15 of the following year. (Form 8868 may be used to request an automatic three-month extension.)
Public charities with gross receipts normally $25,000 or less must file an annual report with the IRS that provides basic information about the organization, such as its name, address, web address, principal officer and evidence of its continuing eligibility for exemption from Form 990 filing requirements.
State Corporate Filings
Foundations organized as nonprofit corporations generally must file annually with the Secretary of State in their state of incorporation and other states where they are qualified to do business. Minnesota nonprofit corporations are required to file a Nonprofit Corporation Renewal form with the Minnesota Secretary of State by Dec. 31 of each year. Failure to file the form results in dissolution of the corporation without further notice.
Charitable Solicitation Filings
Most states require charitable organizations that solicit funds to register with the appropriate state regulatory agency. For instance, charitable organizations that solicit contributions from the public in Minnesota must register and report annually to the Minnesota Attorney General's Office. The initial Charitable Organization Registration Statement for such organizations must be filed with the appropriate attachments and $25 fee within 30 days after the organization's total contributions exceed $25,000. In each subsequent year, soliciting organizations must file a Charitable Organization Annual Report with the appropriate attachments and $25 fee by the 15th day of the seventh month following the close of its fiscal year.
Certain charitable organizations are exempt from the state's registration and reporting requirements. For example, organizations are exempt if they receive less than $25,000 in annual contributions and do not use paid staff members or professional fundraisers.
Private foundations and other Minnesota charities that do not solicit contributions from the public (and have gross assets of $25,000 or more at any time during the year) must file with the Minnesota Attorney General's Office a Charitable Trust Registration Statement, with the appropriate attachments and $25 fee within three months after the organization receives assets. Such organizations are not required to submit annual reports; however, they must submit copies of their Forms 990, 990-EZ or 990-PF each year.
Disclosures Required by the IRS
Federal law requires public charities and private foundations to make available for public inspection, without charge, copies of their original and amended annual tax returns (Forms 990, 990-EZ or 990-PF) for the last three years. Public charities are not required to publicly disclose the portions of the returns that include the names and addresses of contributors to the organization, but private foundations are required to publicly disclose this information. In the past, Form 990-T, on which charities report unrelated business taxable income, must also be made available to the public.
Charities also must make available for public inspection, without charge, copies of their exemption applications, along with the accompanying attachments and amendments, and any documents issued by the IRS concerning the application. The organization may request that certain proprietary information, such as trade secrets, be withheld from public inspection.
Foundations and public charities must make their annual returns and exemption application materials available at their principal, regional and district offices during regular business hours. If the organization does not maintain a permanent office, it must make the information available for inspection at a reasonable location of its choice or mail the information. Requested copies must be made available on a same-day basis for walk-in requests, and within 30 days for mail-in requests. An organization may set reasonable costs for copying these materials, including staff time and actual costs.
A foundation or public charity is exempt from the requirement to provide copies of its tax returns and exemption materials if it makes them "widely available" by posting these materials on a website and directing requestors to the appropriate web page, provided that the online forms are exact images of the originals and can be downloaded free of charge.
GuideStar and the Foundation Center post the 990 and 990-PF forms for thousands of public charities and foundations in the easily downloadable PDF format. There is some disagreement among legal analysts as to whether posting a tax form on either site will satisfy a foundation's federal disclosure requirement, since both sites block out some or all signatures on the online forms due to privacy concerns. Some analysts have expressed concerns because the regulations require the posting of exact duplicates of returns on the websites and do not expressly permit the removal of signatures. But other analysts believe that a publicly available and otherwise unrevised return meets the spirit of the law.
Proactive Public Communications
Forms 990-PF and 990: Grantmakers have traditionally treated the 990-PF and 990 tax forms solely as vehicles for reporting their financial information to the IRS, but mandatory reporting and the greater accessibility of 990s through the Internet have made the 990 forms an important means of communication with a much broader audience. Anyone with a computer and Internet connection has easy access to the tax returns of most foundations free of charge.
This newfound transparency means that grantseekers, reporters, colleagues and researchers alike will look to a foundation's 990-PF or 990 as one more tool in researching and evaluating the organization. The foundation's accountant and CEO should not be the only people who pay much attention to the 990-PF or 990. The board, program and communications staff should also be familiar with the return and may be helpful in adding more detailed information that adds context to the form.
Annual Report: The annual report is another common vehicle grantmakers use to report their financial information and grantmaking accomplishments. Grantmakers are not required by law to produce an annual report, but the grantmaking field has encouraged funders to distribute annual reports as a way to improve the sector's openness and accountability.
Annual reports can include an organization's financial highlights, a complete list of grants for the previous year, and funding highlights and grantee accomplishments. Grantmakers can also consider including grant guidelines and application procedures in the report.
Traditionally, grantmakers' annual reports have been printed documents, but with the advent of the Internet, a growing number of grantmakers are making the information in their annual reports available on their website. This can limit printing and mailing costs, and makes the report accessible to people when and where they want it.
For a corporate grantmaker, the only legal reporting requirements are for the portion of giving from the company's foundation (if it has a foundation), and it must follow the same reporting requirements as any other 501(c)(3) organization. However, many companies issue annual reports on their full contributions program, including contributions made directly by the company, which is a proactive approach that helps build community relations and can help minimize calls for greater reporting and oversight.
Other Reporting Options: Aside from 990s and annual reports, other common reporting vehicles for grantmakers include grant application and guidelines brochures, newsletters and general websites.
The Minnesota Council on Foundations also provides several communications vehicles that can help members be open and accountable about their giving:
To learn more about linking from your website to your 990-PF image on GuideStar, contact email@example.com.