ROTARY CLUBS AND DISTRICTS AND THE IRS A Bulletin for Rotary Clubs and Districts in The USA, American Samoa, Guam, Puerto Rico, Northern Mariana Islands, and US Virgin Islands
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This information is not intended to give legal or tax advice. Please consult your professional advisors to determine the specific rules applicable to you or contact the IRS directly. (www.irs.gov or 1-800-829-5500)
On 13 May 1958, the Internal Revenue Service declared that Rotary International (RI) and its clubs and districts are entitled to exemption from federal income tax under Section 501(c)(4) of the Internal Revenue Code. While Rotary clubs and districts are exempt from paying federal income tax, the law does require Rotary clubs and districts to file an annual information return (Form 990, 990-EZ) or submit an annual electronic notice (990-N). The version a club files is dependent upon its gross receipts for the year.
This report is required annually. The law mandates that this information be submitted on or before the 15th day of the 5th month following the close of the annual accounting period (no later than 15 November). Failure to meet the annual filing requirement for three consecutive years will result in revocation of the tax-exempt status of the club or district in question. To learn more about this requirement, visit the US Treasury website at: www.irs.gov/eo, or call the toll-free number: (877) 829-5500.
Numbers: RI’s Group Exemption Number (referred to as “GEN” on Form 990), is 0573, which applies to RI as well as all USA, Puerto Rico and Virgin Islands clubs and districts. At the same time, every club and district in the USA, Puerto Rico and Virgin Islands is required to have its own Employer Identification Number (EIN). This 9-digit number is essentially a tax ID number, and has nothing to do with whether the club or district has any employees. As RI must report annually the EINs of all districts and clubs in the USA, Puerto Rico and Virgin Islands, the RI secretariat maintains a list of those EIN tax numbers for reference. New Rotary Clubs, however, must apply directly to the IRS for an EIN number to be assigned to the new Rotary club. Please contact your Club and District Support (CDS) representative at Rotary International headquarters if you have any questions about the EIN number for your club or district.
Tax Deductible Status: Contributions to clubs and districts are generally not tax deductible as charitable contributions. Clubs and districts that have gross annual receipts that normally exceed $100,000 generally must include a disclosure statement regarding the non-deductibility of contributions during fundraising solicitations (IRC Sec. 6113). Note that this includes invoices for payment of dues. See IRS Notice 88-120 for more details and acceptable disclosure language. Contributions to any club or district charitable fund that has obtained tax exemption under Section 501(c)(3) of the Internal Revenue Code may be tax deductible as charitable contributions. Membership dues may be deductible for some Rotarians as business expenses.
Other Taxes: Clubs or districts may be required to file IRS Form 990-T if they have “unrelated business income.” An unrelated trade or business is defined as any trade or business that is regularly carried on, and that is not substantially related to the organization’s exempt purpose or function. (IRC Sec. 513). Federal Social Security and withholding taxes, and local state income taxes may be required from a club or district that has one or more paid employees. Please contact the IRS or your tax consultant or attorney for guidance on this issue.
The laws of individual states vary in regard to state income tax, sales tax, other taxes and special licenses. The 501(c)(4) status applies only to federal income tax and does not necessarily have any bearing on state or local taxes. IRS interpretation of its Code also can vary slightly in different US Treasury districts.
EMPLOYER IDENTIFICATION NUMBER (EIN)
What is an Employer Identification Number (EIN) and does my club need to apply for one?
An Employer Identification Number (EIN) is a nine-digit number used by the IRS to identify an entity. All US Rotary clubs need to apply for an EIN when they charter. To find out more, visit How to Apply for an EIN and Instructions for Form SS-4 at www.irs.gov. Please note that RI’s Group Exemption Number (GEN) 0573 must be included on the form in order for your club to be tax-exempt under RI’s 501(c)(4) Group Exemption ruling.
What must my club do when we receive our EIN from the IRS?
The club is requested to immediately submit to their Club and District Support representative a copy of the notice from the IRS confirming its EIN. Find your CDS rep at www.rotary.org/cds.
Why is it important for my club to send its EIN to RI?
RI enters your club’s EIN into its database and annually confirms with the IRS all clubs included under RI’s 504(c)(4) Group Exemption ruling. There are many forms of tax ID numbers (both state and federal) that a club may have in its records. A copy of the official IRS letter will help ensure RI reports the correct nine-digit number to the IRS and the club is included under RI’s Group Exemption.
What is the official naming convention for Rotary clubs according to the IRS?
RI will report your club’s name as the Rotary Club of Community, State (ex: Rotary Club of Evanston, IL). To confirm your club’s name as registered with the IRS for bank account purposes or otherwise, please contact the IRS directly at 877-829-5500.
Can my club use RI’s EIN when applying for a bank account or for filing purposes?
No. Each EIN is specifically assigned to a single entity or club. Your club must use its own EIN when applying for a bank account or filing your annual tax return.
Do Rotaract and Interact clubs need to apply for an EIN?
If your Rotaract or Interact club would like to open its own bank account, it must obtain its own EIN. To find out more, visit How to Apply for an EIN at www.irs.gov. Please note that RI’s Group Exemption Number (GEN) 0573 must be included on the form in order for your club to be tax-exempt under RI’s Group Exemption.
501(C)(3) AND 501(C)(4) INFORMATION
What do the terms 501(c)(3) and 501(c)(4) mean?
501(c)(3) and 501(c)(4) are federal tax classifications for organizations that meet the requirements of Internal Revenue Code section 501(a). Charitable organizations are exempt under section 501(c)(3) and social welfare organizations under 501(c)(4) of the Internal Revenue Code. Under RI’s Group Exemption ruling, Rotary, Rotaract and Interact clubs are entitled to 501(c)(4) tax-exempt status. For more information about these tax classifications, please visit Life Cycle of an Exempt Organization at www.irs.gov.
Are contributions to my club considered charitable contributions for individuals?
Contributions to clubs are generally not tax deductible as charitable contributions. Clubs with gross annual receipts that normally exceed $100,000 usually must include a disclosure statement regarding the non-deductibility of contributions during fundraising solicitations (IRC Sec. 6113). Note that this includes invoices for payment of dues. See IRS Notice 88-120 for more details and acceptable disclosure language. Contributions to any club charitable fund that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code may be tax-deductible as charitable contributions. Membership dues may be deductible for some Rotarians as business expenses.
Can my club or club foundation use The Rotary Foundation’s EIN to receive charitable contributions?
No. Each EIN is assigned to a specific entity. The club or club foundation itself must meet the requirements of the Internal Revenue Code in order to receive charitable contributions.
Can my club or club foundation obtain 501(c)(3) tax-exempt status under The Rotary Foundation?
No. The Rotary Foundation does not currently have a group exemption ruling under which clubs or club foundations can obtain 501(c)(3) tax-exempt status. Clubs must work directly with the IRS to apply for this exemption on their own. For more information, see Exemption Requirements – Section 501(c)(3) Organizations at www.irs.gov.
My club obtained 501(c)(3) tax-exempt status. Do we need to report this to RI?
Yes. Your club should submit to their CDS rep a copy of the notice from the IRS confirming its tax-exempt status. RI will then remove your club and EIN from our group exemption ruling.
ANNUAL TAX RETURN FILING REQUIREMENTS FOR CLUBS UNDER RI’S GROUP EXEMPTION
Does my club need to file an annual tax return with the IRS?
Yes. While Rotary clubs and districts are exempt from paying federal income tax, the law requires all Rotary clubs in the U.S. and it’s territories to file an annual information return (Form 990, 990-EZ) or submit an annual electronic notice (990-N). The version a club files is dependent upon its gross receipts for the year. For more information about this requirement and to find out which form to file, please see Form 990 Series – Which Forms Do Exempt Organizations File? at www.irs.gov.
What is the due date to file annual returns (Forms 990, 990-EZ, or 990-N) to the IRS?
An annual return is due every year by 15 November (the 15th day of the 5th month after the close of RI’s tax year, 30 June).
What information does my club need in order to file Form 990-N (e-Postcard)?
Please refer to Annual Electronic Filing Requirement for Small Exempt Organizations — Form 990-N (e-Postcard) at www.irs.gov.
How will my club know if our Form 990-N (e-Postcard) has been successfully filed with the IRS?
Your club should receive an e-mail indicating whether your e-Postcard was accepted or rejected by the IRS. If rejected, the e-mail will tell you who to contact to help resolve the problem. Once your club has submitted the e- postcard to the IRS, please see the Exempt Organizations Select Check at www.irs.gov to view and print an image of the e-Postcard for your records.
How do I find out if my club has filed in the past?
The Exempt Organizations Select Check at www.irs.gov provides the most recent information about your club’s filing record and tax-exempt status. Here, you may also find additional information such as your club’s EIN, as well as the name, mailing address and principal officer on file with the IRS. You may also contact the IRS directly at 877-829- 5500.
My club received notice from the IRS that our tax-exempt status was automatically revoked for failure to file for three consecutive years. What does this mean and what do we do?
According to IRS regulations, an organization whose tax-exempt status has been automatically revoked must apply to have its tax-exempt status reinstated, even if it was not originally required to file an application for exemption. To check your club’s tax-exempt status, visit Exempt Organizations Select Check at www.irs.gov. For more information about the consequences of revocation and how to apply for reinstatement, please see Automatic Exemption Revocation for Non-Filing: Frequently Asked Questions and Notice 2011-43 at www.irs.gov. For any further questions, please contact the IRS directly at 877-829-5500.