Certain New York nonprofits must file an annual financial report, a funding disclosure report, and/or a financial disclosure report...
In the height of the COVID-19 pandemic, the State of New York quietly amended Sections 172-B, 172-E, and 172-F of the state’s Executive Law to establish heightened reporting requirements for charitable tax-exempt organizations. Effective January 1, 2021, certain New York nonprofits must file an annual financial report, a funding disclosure report, and/or a financial disclosure report.
Summary of New Disclosure Reports
To implement the amended laws, the Department of State issued a notice of proposed rulemaking on February 3, 2021. Below is a brief summary of the new disclosure obligations:
Annual Financial Report: Any charitable organization that is required to file an Annual Financial Report with the Office of the Attorney General under Executive Law Section 172-b, or that is required to file a Funding Disclosure Report and/or a Financial Disclosure Report with the Department of State for a reporting period during the applicable fiscal year is also required to file such Annual Financial Report, including all required forms and attachments, with the Department of State.
Funding Disclosure Report: Charitable organizations that have received tax exemption pursuant to Section 501(c)(3) of the Internal Revenue Code (IRC) are required to file funding disclosure reports with the Department of State. These reports identify the financial support an IRC Section 501(c)(3) tax-exempt organization has given to an IRC Section 501(c)(4) tax-exempt organization. Only those IRC Section 501(c)(3) tax-exempt organizations that have made an in-kind donation greater than $10,000 during a reporting period are required to file this report.
Financial Disclosure Report: Charitable organizations that have received tax exemption pursuant to IRC Section 501(c)(4) are required to file financial disclosure reports with the Department of State. These reports identify a 501(c)(4) organization’s issue-based advocacy spending (“covered communications”). Only those IRC Section 501(c)(4) organizations that have made expenditures on covered communications in an aggregate amount or fair market value exceeding ten thousand dollars in a calendar year are required to file a financial disclosure report with the Department. A “covered communication” is defined as one conveyed to 500 or more members of the general public, and “refers to and advocates for or against a clearly identified elected official, executive or administrative body or legislative body relating to the sponsorship, support, opposition, or outcome of any proposed legislation, pending legislation, rule, regulation, hearing or decision, or advocates for or against action by any elected official, executive or administrative body or legislative body.”
Mission Statement:When filing any of the above reports, entities must also file a statement of the filing entity’s mission that is consistent with what was or would be provided to the IRS with a filing entity’s application for recognition of exemption as a 501(c) organization, all charitable categories identified in such application, any narrative description of the filing entity’s activities provided with the application, and any supporting details to the narrative description provided with the application.
IRS Form 990: When a 501(c)(3) organization is required to file a Funding Disclosure Report, it must also submit a “complete” IRS Form 990 Schedule B, including the names and addresses of donors, with the Department regardless of whether Schedule B must be filed with the IRS.
Deadlines for New Disclosure Reports
The Annual Financial Report must be filed with the Department of State on or before the fifteenth day of the fifth calendar month after the close of the charitable organization’s fiscal year. So, if a covered entity’s fiscal year ends on August 31, that entity is required to file its Annual Financial Report on or before the following January 15. If the covered entity’s fiscal year ends on December 31, the entity is required to file its Annual Financial Report on or before the following May 15.
The Funding Disclosure Reports and Financial Disclosure Reports must be filed with the Department of State within 30 days of the close of a reporting period. “Reporting period” is defined as the six-month period within a calendar year starting January 1st and ending June 30 or the six-month period within a calendar year starting July 1 and ending December 31.
Filing New Disclosure Reports
Reports must be filed online through the Department of State’s Charitable Organization Financial Reporting System. The fee for filing a financial report with the Department of State is $25. Filers need a NY.Gov account to file a report through the Department’s Charitable Organization Financial Reporting System. A new NY.Gov account may be created at the following website: https://my.ny.gov.
Public Disclosure of Reports
If the funding or financial activity described in a covered entity’s Financial Disclosure Report is inconsistent with the charitable purposes of the entity, the report will be published on the Department of State’s website. The published materials will not include the names and addresses of individual donors to covered entities, or the covered entity’s IRS Form 990 Schedule B. The published report may not be made public pursuant to Executive Law Section 172-f if, based upon a review of the relevant facts presented by the covered entity, such disclosure may cause harm, threats, harassment, or reprisals to the source of the donation or to individuals or property affiliated with the source of the donation. The covered entity may appeal the Department’s determination.
Executive Law Section 93-a provides that whenever the Secretary of State, in consultation with the Department of Taxation and Finance or the Department of Law, determines that the nature and extent of a covered entity’s in-kind support to other entities or the nature and extent of a covered entity’s spending on covered communications is inconsistent with the charitable purposes of such covered entity, the Secretary must publish the financial reports, including Annual Financial Reports, on the Department of State’s website. However, any published materials may not include the names and addresses of individual donors to covered entities or covered entity’s IRS Form 990 Schedule B.
If you have questions, please contact us
If you have questions or if you would like to discuss the matter further, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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Is Your New York Nonprofit Ready for the State’s New Disclosure Reporting Requirements?
Author: Dan Brecher
Certain New York nonprofits must file an annual financial report, a funding disclosure report, and/or a financial disclosure report...
In the height of the COVID-19 pandemic, the State of New York quietly amended Sections 172-B, 172-E, and 172-F of the state’s Executive Law to establish heightened reporting requirements for charitable tax-exempt organizations. Effective January 1, 2021, certain New York nonprofits must file an annual financial report, a funding disclosure report, and/or a financial disclosure report.
Summary of New Disclosure Reports
To implement the amended laws, the Department of State issued a notice of proposed rulemaking on February 3, 2021. Below is a brief summary of the new disclosure obligations:
Annual Financial Report: Any charitable organization that is required to file an Annual Financial Report with the Office of the Attorney General under Executive Law Section 172-b, or that is required to file a Funding Disclosure Report and/or a Financial Disclosure Report with the Department of State for a reporting period during the applicable fiscal year is also required to file such Annual Financial Report, including all required forms and attachments, with the Department of State.
Funding Disclosure Report: Charitable organizations that have received tax exemption pursuant to Section 501(c)(3) of the Internal Revenue Code (IRC) are required to file funding disclosure reports with the Department of State. These reports identify the financial support an IRC Section 501(c)(3) tax-exempt organization has given to an IRC Section 501(c)(4) tax-exempt organization. Only those IRC Section 501(c)(3) tax-exempt organizations that have made an in-kind donation greater than $10,000 during a reporting period are required to file this report.
Financial Disclosure Report: Charitable organizations that have received tax exemption pursuant to IRC Section 501(c)(4) are required to file financial disclosure reports with the Department of State. These reports identify a 501(c)(4) organization’s issue-based advocacy spending (“covered communications”). Only those IRC Section 501(c)(4) organizations that have made expenditures on covered communications in an aggregate amount or fair market value exceeding ten thousand dollars in a calendar year are required to file a financial disclosure report with the Department. A “covered communication” is defined as one conveyed to 500 or more members of the general public, and “refers to and advocates for or against a clearly identified elected official, executive or administrative body or legislative body relating to the sponsorship, support, opposition, or outcome of any proposed legislation, pending legislation, rule, regulation, hearing or decision, or advocates for or against action by any elected official, executive or administrative body or legislative body.”
Mission Statement:When filing any of the above reports, entities must also file a statement of the filing entity’s mission that is consistent with what was or would be provided to the IRS with a filing entity’s application for recognition of exemption as a 501(c) organization, all charitable categories identified in such application, any narrative description of the filing entity’s activities provided with the application, and any supporting details to the narrative description provided with the application.
IRS Form 990: When a 501(c)(3) organization is required to file a Funding Disclosure Report, it must also submit a “complete” IRS Form 990 Schedule B, including the names and addresses of donors, with the Department regardless of whether Schedule B must be filed with the IRS.
Deadlines for New Disclosure Reports
The Annual Financial Report must be filed with the Department of State on or before the fifteenth day of the fifth calendar month after the close of the charitable organization’s fiscal year. So, if a covered entity’s fiscal year ends on August 31, that entity is required to file its Annual Financial Report on or before the following January 15. If the covered entity’s fiscal year ends on December 31, the entity is required to file its Annual Financial Report on or before the following May 15.
The Funding Disclosure Reports and Financial Disclosure Reports must be filed with the Department of State within 30 days of the close of a reporting period. “Reporting period” is defined as the six-month period within a calendar year starting January 1st and ending June 30 or the six-month period within a calendar year starting July 1 and ending December 31.
Filing New Disclosure Reports
Reports must be filed online through the Department of State’s Charitable Organization Financial Reporting System. The fee for filing a financial report with the Department of State is $25. Filers need a NY.Gov account to file a report through the Department’s Charitable Organization Financial Reporting System. A new NY.Gov account may be created at the following website: https://my.ny.gov.
Public Disclosure of Reports
If the funding or financial activity described in a covered entity’s Financial Disclosure Report is inconsistent with the charitable purposes of the entity, the report will be published on the Department of State’s website. The published materials will not include the names and addresses of individual donors to covered entities, or the covered entity’s IRS Form 990 Schedule B. The published report may not be made public pursuant to Executive Law Section 172-f if, based upon a review of the relevant facts presented by the covered entity, such disclosure may cause harm, threats, harassment, or reprisals to the source of the donation or to individuals or property affiliated with the source of the donation. The covered entity may appeal the Department’s determination.
Executive Law Section 93-a provides that whenever the Secretary of State, in consultation with the Department of Taxation and Finance or the Department of Law, determines that the nature and extent of a covered entity’s in-kind support to other entities or the nature and extent of a covered entity’s spending on covered communications is inconsistent with the charitable purposes of such covered entity, the Secretary must publish the financial reports, including Annual Financial Reports, on the Department of State’s website. However, any published materials may not include the names and addresses of individual donors to covered entities or covered entity’s IRS Form 990 Schedule B.
If you have questions, please contact us
If you have questions or if you would like to discuss the matter further, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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