(Updated May 2008)
The following information is provided to help ASMC chapters meet tax requirements imposed by the Internal Revenue Service (IRS) and state tax agencies. All official information about federal taxes must come from the IRS. ASMC chapters may also be subject to state tax rules and should check with their state tax web sites for information.
All ASMC chapters should seek tax exempt status.
If they have not already done so, all ASMC chapters should apply for federal tax exempt status as 501c organizations. Chapters can seek tax exempt status by filing Form 1023 with the IRS. To obtain the form and instructions, go to www.irs.gov/charities and click on “more topics” and then on “EO forms and publications”. Because ASMC National Headquarters does not have financial control over its chapters, the headquarters cannot seek blanket tax exempt status for all chapters. Each chapter must file its own Form 1023 to seek exempt status.
After filing, you will probably receive confirmation from the IRS within a few weeks that your form has been received. You may also get questions from the IRS about information on the form. However, this process is generally not adversarial and, given ASMC’s mission, your chapter can expect to be granted tax exempt status.
New ASMC chapters should file a Form 1023 within a year or so (tax exempt status can be retroactive for up to 27 months). If your chapter has been in existence for some time, and you are just now filing your Form 1023, we suggest that you answer all the questions accurately (including when the chapter came into being) and wait and see if the IRS raises questions. If they do, just be honest and say that you are a small organization with frequent changes in leadership and then follow the guidance from the IRS.
Chapters that have been granted tax exempt status must maintain that status. To maintain your tax exempt status, your chapter must continue in its professional mission and you should file regular tax returns (see below for requirements).
If you are not sure whether or not your chapter has tax exempt status, you can go to www.irs.gov/charities and click on “search for charities”. That will bring you information about using Publication 78 to determine if you have an exemption. The IRS also has a help number for tax exempt organizations (877 829-5500) that may be able to assist you.
Chapters should also access their state tax web sites to determine any state requirements regarding tax exempt status. Most states simply require a copy of the federal Form 1023. However, some states (for example, New York) require a separate form.
Most ASMC Chapters Should File Form 990-N Each Year.
ASMC chapters with tax-exempt status and revenues that are generally less than $25,000 a year must file a Form 990-N each year. (The IRS looks at revenues over the past three years to determine if this status applies. Thus if your chapter’s revenues have been less than $25,000 for the past three years, you can file the Form 990-N. If you have had revenue in excess of $25,000 in the last three years, you should file Form 990 or 990-EZ – see next section.) Form 990-N is very short and must be filed electronically. You can get information about how to file the form by going to www.irs.gov/charities and searching on Form 990N.
Chapters required to file a Form 990-N must do so by the 15th day of the fifth month after the end of their tax year. Thus if your chapter’s tax year ends on December 31, your chapter must file its Form 990-N by the following May 15.
There is no financial penalty for failure to file a Form 990-N. However, failure to file the required form for three consecutive years can result in termination of a chapter’s tax exempt status.
Larger Chapters Should File Form 990 or 990EZ Each Year
Larger chapters with revenues generally in excess of $25,000 must file a Form 990 each year. If a chapter has revenue of less than $100,000 in a year (and assets less than $250,000), it can file the simpler Form 990EZ.
Instructions for filing Form 990 or 990EZ, and the form itself, can be obtained by going to www.irs.gov/charities and following instructions above under Form 1023. Generally tax exempt chapters should not owe any taxes. However, there are certain types of income (for example, advertising revenues from a journal) that constitute unrelated business income and may be taxable. Large ASMC chapters, and especially those that may have unrelated business expenses, should consider hiring a tax professional to file appropriate forms.
Form 990 is generally due on the 15th day of the fifth month after the end of the chapter’s tax year (but you can apply using Form 8868 for as many as two three-month extensions).
There are financial penalties for failure to file Form 990 returns, and the IRS is “cracking down” on organizations that do not file. If you not filed in the past, but should have, we suggest that you just file the forms that are currently required. If the IRS does ask why you have not filed in the past, you might want to indicate that there are extenuating circumstances. Indicating that you are a small organization with frequent changes of volunteers may, on a one-time basis, be sufficient to achieve a waiver or reduction of any penalties.
State tax returns
Chapters should access the appropriate web sites and check with their state tax agencies about any state requirements for tax filing.
Incorporating Your Chapter
Chapters must decide whether or not to incorporate. If a chapter is not incorporated, its members or organizing individuals may be held personally liable for torts and contractual obligations of the organization. However, a smaller chapter made up of volunteers may decide that the work and formality required to incorporate outweighs the benefits.
Incorporation is a matter of state law. Each state requires the filing of a certificate or articles of incorporation with some officially designated body. Chapters wishing to incorporate should check with legal counsel or investigate the procedure on state web sites.