Public Inspection of Annual Returns and Exemption Applications

A public charity must make the following documents available for public inspection and copying upon request and without charge (except for a reasonable charge for copying). The IRS makes these documents available for public inspection and copying.

Exemption Application -- A public charity must disclose its exemption application, Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, along with each of the following documents:

• all documents submitted with Form 1023;
• all documents the IRS requires the organization to submit in support of its application; and
• the exemption ruling letter issued by the IRS

Annual Information Return -- A public charity must disclose its annual information return (Form 990 series) with schedules, attachments, and supporting documents filed with the IRS. However, the organization does not have to disclose Schedule B of Form 990 and does not need to identify its contributors. Certain information may be withheld from public inspection. Returns need to be available for disclosure for only three years after the due date or filing date of the return.

Form 990-T -- For returns filed after August 17, 2006, a public charity must make its Form 990-T available for public inspection. NOTE: Form 990-T must be made available by the organization but not by the IRS.

A public charity may place reasonable restrictions on the time, place, and manner of in-person inspection and copying, and may charge a reasonable fee for providing copies. A tax-exempt organization does not have to comply with individual requests for copies if it makes the documents widely available. This can be done by posting the documents on a readily accessible Web site.

Sale of Free Government Information

If a public charity offers to sell goods or services that are available free from the federal government, the organization must disclose that fact in a conspicuous and easily recognized format. An organization that intentionally disregards this requirement is subject to a penalty.

Charitable Contributions -- Substantiation And Disclosure

A public charity should be aware of the substantiation and disclosure rules imposed on donors of charitable contributions and the disclosure rules imposed on charities that receive certain quid pro quo contributions.

Record keeping Rules

A donor cannot claim a tax deduction for any cash, check, or other monetary contribution made on or after January 1, 2007, unless the donor maintains a record of the contribution in the form of either a bank record (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution.

Substantiation Rules

A donor cannot claim a tax deduction for any single contribution of $250 or more unless the donor obtains a contemporaneous acknowledgment of the contribution from the recipient public charity. A public charity may assist the donor by providing a timely written statement including the name of the public charity, date and amount of the contribution and description of any non-cash contributions.

In addition, the acknowledgment should indicate whether any goods or services were provided in return for the contribution. If any goods or services were provided in return for a contribution, the organization should provide a good faith estimate of the value of goods or services provided in return for the contribution.

The public charity may either provide separate acknowledgments for each single contribution of $250 or more or one acknowledgment to substantiate several single contributions of $250 or more. Separate contributions are not aggregated for purposes of measuring the $250 threshold.

Disclosure Rules That Apply to Quid Pro Quo Contributions

Contributions are deductible only to the extent that they are gifts and no consideration is received in return. Depending on the circumstances, ticket purchases and similar payments made in conjunction with fundraising events may not qualify as charitable contributions in full. A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution. A donor may only take a charitable contribution deduction to the extent that the contribution exceeds the fair market value of the goods and services the donor receives in return for the contribution.

If a public charity conducts fundraising events such as benefit dinners, shows, and membership drives, where something of value is given to those in attendance, it must provide a written statement informing donors of the fair market value of the specific items or services it provided in exchange for contributions. Token items and services of intangible religious value need not be taken into account. A public charity should provide the written disclosure statement in advance of any event, determine the fair market value of any benefit received, and state this information in fundraising materials such as solicitations, tickets, and receipts. The disclosure statement should be made, at the latest, at the time payment is received. Subject to certain exceptions, the disclosure responsibility applies to any fundraising circumstance where each complete payment, including the contribution portion, exceeds $75.