Cal. Code Regs. Tit. 18, § 23772 - Information Returns and Statements

Exempt Organizations.

(a) For income years ending December 31, 1971, and subsequent years, all exempt organizations or trusts and nonexempt trusts treated as a private foundation because of Internal Revenue Code section 4947(a)(1) must file a Form 199 (Exempt Organization Annual Information Return).

(1) A completed Form 199 is required from any organization, except:

(A) A church, an interchurch organization of local units of a church, a convention or association of churches, or an integrated auxiliary of a church such as a men's or women's organization, religious school, mission society, or youth group;

(B) An exclusively religious activity of any religious order;

(C) An organization (other than a private foundation) the gross receipts of which in each taxable year are normally not more than $25,000 (as described in subsection (i));

(D) A mission society sponsored by or affiliated with one or more churches or church denominations, more than one-half of the activities of which society are conducted in, or directed at persons in, foreign countries;

(E) Nonprofit exempt quasi-governmental organizations formed to carry out a function of the State or a public body, that are carrying out that function and are controlled by the State or a public body. Such an organization must have been formed to support a function of the State, county, city or other political body, it must be operating for this purpose and the majority of the directors must be under the control of the State or appropriate political body. Upon dissolution, the assets must be turned over to the State, county, city, or other political body.

NOTE: A stock bonus, pension or profit-sharing trust exempt under Revenue and Taxation Code section 17631 is not required to file Form 199. However, unrelated business income of $1,000 or more requires the filing of Form 109. (See Revenue and Taxation Code section 18506.)

(2)

(A) The information required to be furnished by each organization required to file Form 199 is:

1. Its gross sales and receipts from all sources during the year, except dues and contributions set out in clauses 2. and 3. below. For this purpose, gross receipts includes tax exempt income. The cost of goods sold and the cost or other basis and sales expenses of assets will be shown and subtracted from the above to arrive at gross income.

2. Gross dues and assessments from members and affiliates for the year. Social or recreational clubs must furnish additional information on source of receipts.

3. The total of the contributions, gifts, grants and similar amounts received during the taxable year.

4. Gross receipts for filing requirements.

5. Its expenses incurred within the year attributable to gross income.

6. Its disbursements (including prior years' accumulations) made within the year for the purposes for which it is exempt.

7. Increase or decrease in net worth.

8. The total assets and liabilities at the beginning and end of the year.

9. Information on legislative and political activities.

10. Other information that may be found necessary to insure that the organization is operating in an exempt manner.

11. For additional information required to be furnished by private foundations, see subparagraphs (B) and (C) below.

(B) Alternative detailed reporting requirements.

1. Any organization, including a private foundation, that is required to complete Part II of Form 199 can comply fully with its reporting requirements by completing page 1 of the Form 199 and paying $10.00 filing fee, if required, and:

(I) Attaching a completed copy of the current Registry of Charitable Trusts Report CT-2; or

(II) Attaching a completed copy of Federal Form 990 which includes Part I, II, and any required schedules. In the case of private foundations with assets of $5,000 or more, at any time during its accounting period, must furnish a copy of the annual report of private foundation (Federal Form 990A-R or substitute report) filed with the Internal Revenue Services; or

(III) In case of a labor organization, a copy of Labor Department Form LM-3 may be attached.

(C) Special rules for organizations which are required to complete Part II of Form 199 but which do not use alternative detailed reporting requirements permitted in subparagraph (B) above.

1. An itemized schedule must be attached to Form 199 if money, securities or other property of $5,000 or more is received as a contribution gift or grant directly or indirectly from one person during the year showing name, address, date received and total amount received from such person. In the case of a private foundation (as defined in Internal Revenue Code Section 509(a)), the names and addresses of all persons who became substantial contributors (as defined in Internal Revenue Code section 507(d)(2)) during the taxable year shall be furnished.

(I) An organization described in Revenue and Taxation Code section 23701d which meets the 33 1/3 percent-of-support test of the regulations under Internal Revenue Code section 170(b)(1)(A)(vi) (without regard to whether such organization otherwise qualifies as an organization described in Internal Revenue Code section 170(b)(1)(A) I.R.C.) is required to provide the name and address of a person who contributed, bequeathed or devised $5,000 or more during the year only if this amount is in excess of 2 percent of the total contributions, bequests and devises received by the organization during the year.

(II) An organization other than a private foundation is required to report only the names and addresses of contributors of whom it has actual knowledge. For instance, an organization need not require an employer who withholds contributions from the compensation of employees and pays over to the organization periodically the total amounts withheld, to specify the amounts paid over with respect to a particular employee. In such case, unless the organization has actual knowledge that a particular employee gave more than $5,000 (and in excess of 2 percent if 1. of this subdivision is applicable), the organization need report only the name and address of the employer, and the total amount paid over by him.

(III) Separate and independent gifts made by one person in a particular year need be aggregated to determine if his contributions and bequests exceed $5,000 (and in excess of 2 percent if 1. of this subsection is applicable), only if such gifts are of $1,000 or more.

(IV) Organizations described in Revenue and Taxation Code sections 23701b or 23701l and organizations described in Revenue and Taxation Code section 23701g that receive contributions or bequests to be used exclusively for purposes described in Revenue and Taxation Code section 17214(d) must attach a schedule with respect to all gifts which aggregate more than $1,000 from any one person, showing the name of the donor, the amount of the contribution or bequest, the specific purpose for which such amount was received, and the specific use to which such amount was put. In the case of an amount set aside for such purposes, the organization shall indicate the manner in which such amount is held (for instance, whether such amount is commingled with amounts held for other purposes). If the contribution or bequest was transferred to another organization, the schedule must include the name of the transferee organization, a description of the nature of such organization, and a description of the relationship between the transferee and transferor organizations. Such organizations must also attach a statement showing the total dollar amount of contributions and bequests which are $1,000 or less received for such purposes.

2. Attach a schedule detailing the gross amount received from the sale of assets, including inventory items.

3. Attach a schedule itemizing other income, except contributions, gifts and grants.

4. Attach a schedule showing amount of:

(I) Death, sickness, hospitalization or disability benefits;

(II) Unemployment compensation benefits; and

(III) Other benefits (state nature) paid out.

5. Attach schedule for officers, directors, trustees or individuals having similar responsibilities, showing name, address, social security number, compensation and time devoted to position, and in the case of a private foundation, all persons who are foundation managers, within the meaning of Internal Revenue Code section 4946(b)(1). Organizations described in Revenue and Taxation Code section 23701d must also attach a schedule showing the names and addresses of the five employees (if any) who received the greatest amount of annual compensation in excess of $30,000 and amounts received; the total number of other employees who received annual compensation in excess of $30,000; the names and addresses of the five independent contractors (if any) who performed personal services of a professional nature for the organization (such as attorneys, accountants, and doctors, whether such services are performed by such persons in their individual capacity or as employees of a professional service corporation) and who received in excess of $30,000, from the organization for the year for the performance of such services; and the total number of other such independent contractors who received in excess of $30,000 for the year for the performance of such services.

6. Attach schedules to explain depreciation (or depletion), other expenses, and to explain items on balance sheet where requested in Part II of Form 199.

(b) Accounting Period for Filing Return or Statement. A return on Form 199 shall be filed on the basis of the established annual accounting period of the organization. If the organization has no established accounting period, the return shall be filed on the basis of the calendar year.

(c) Returns When Exempt Status not Established. Where an organization has a reasonable claim for exemption and submits an exemption application prior to the time a taxable return is due, if it does not appear that the exemption will be denied, an exempt return may be submitted within ten days of the due date even if the Franchise Tax Board has not yet issued an exempt determination letter. If the exemption should be denied at a later time, the above action should be reasonable grounds for filing a late taxable return. In other cases, a taxable return should be submitted on or before the due date with a payment for any tax that is due.

(d) Group Returns.

(1) A group return may be filed by a central organization (for the purposes of this subsection, this includes a parent, state, district, or similar type organization) for its subordinate organizations (for the purposes of this subsection, this includes a branch, local or similar organization) none of which are private foundations, provided the subordinate organizations:

(A) are affiliated with the central organization at the close of the central organization's annual accounting period;

(B) are subject to the general supervision and control of the central organization; and

(C) do not have unrelated trade or business income in excess of $1,000.

1. The group return shall consist of the following:

(I) a completed annual return or statement for the central organization;

(II) a list of names, current addresses and corporate or association numbers of the qualified subordinates which are to be included in the group return; and

(III) any additional information which may be required by the Franchise Tax Board.

2. After the initial group return is filed, Item 1.(II) above may be replaced by a list to include only:

(I) subordinates that were added;

(II) subordinates deleted; or

(III) a statement of no change from the previous year's report.

3. If the central organization has not been issued a group exemption letter, it must secure a group exemption determination from the Franchise Tax Board to cover its subordinates before a group return may be filed. The Franchise Tax Board may determine the requirements for a group exemption.

4. If the central organization has previously been issued a group exemption letter, all new subordinate organizations formed during the year must be identified on the roster.

5. A group return may be submitted by central church associations for subordinate churches or church associated groups that are permitted to file the exempt organization annual information statement. Schedules required in 1.(II) above must be attached to the information statement submitted by the parent church. Any subordinate having more than $1,000 of unrelated trade or business may not be included in the group report.

(e) Time and Place for Filing. The annual return on Form 199 shall be filed on or before the 15th day of the fifth month (4 1/2 months) following the close of the annual accounting period for which the return is required to be filed. The annual return on Form 565 required to be filed by a religious or apostolic association or corporation shall be attached to Form 199. Each such return shall be filed in accordance with the instructions applicable thereto.

(f) Payment of Filing Fee. All organizations required to file Form 199 (including group returns), except those described below, must pay a $10.00 filing fee with Form 199. If payment is not made on or before the due date (or extended due date), the fee is $25.00 unless there is reasonable cause for late payment. Organizations required to file Form 199 but not required to pay the filing fee should check the appropriate box on Form 199. Organizations exempt under Revenue and Taxation Code section 23701d which are not required to pay a filing fee are described as follows:

(1) Exclusively religious organizations.

(2) An exclusively educational organization exempt under Revenue and Taxation Code section 23701d, if the organization normally maintains a regular faculty and curriculum and normally has a regularly organized body of pupils or students in attendance at the place where its educational activities are regularly carried on.

(3) An exclusively charitable organization, or an organization for the prevention of cruelty to children or animals, exempt as provided under Revenue and Taxation Code section 23701d, if the organization is supported, in whole or in part, by funds contributed by the United States or any state or political subdivision thereof, or is primarily supported by contributions of the general public.

(4) An organization exempt under Revenue and Taxation Code section 23701d, if the organization is operated, supervised, or controlled by or in connection with a religious organization.

(g) Penalties for Failure to File a Return. If an organization or trust required to file a Form 199 fails to file the return on or before the due date, it will have to pay $5.00 for each month, or part thereof, after the due date, not to exceed $40.00, until the form is filed, unless it can be shown that the failure was due to reasonable cause. In the case of a private foundation, the Franchise Tax Board may make written demand that such delinquent return or foundation report be filed within a reasonable time after notice of mailing such demand. The person failing to file (unless it can be shown to be due to reasonable cause) will have to pay $5.00 for each month, or part thereof, (not to exceed $25.00) after the period expires.

(h) Records, Statements, and Other Returns of Tax-Exempt Organizations. Every organization which is exempt from tax, whether or not it is required to file an annual information return or statement shall submit such additional information as may be required by the Franchise Tax Board for the purpose of inquiring into its exempt status and administering the provisions of Chapter 4 of the Corporation Tax Law. (See Revenue and Taxation Code section 23701 and the regulations thereunder with respect to the authority of the Franchise Tax Board to require such additional information, and with respect to the books of account or records to be kept by such organizations.)

(i) Definitions. For the purposes of this regulation, the following definitions are applicable:

(1) Gross receipts of an organization are normally not more than $25,000 if--

(A) In the case of an organization which has been in existence for 1 year or less, the organization has received, or donors have pledged to give, gross receipts of $37,500 or less during the first taxable year of the organization,

(B) In the case of an organization which has been in existence for more than one but less than 3 years, the average of the gross receipts received by the organization in its first 2 taxable years is $30,000 or less, and

(C) In the case of an organization which has been in existence for 3 years or more, the average of the gross receipts received by the organization in the immediately preceding 3 taxable years, including the year for which the return would be required to be filed, is $25,000 or less.

(2) "Gross Receipts" means the gross amount received by the organization during its annual accounting period from all sources, without reduction for any costs or expenses. Gross receipts include, for example, cost of goods or assets sold, cost of operations, and expenses of earning, raising, or collecting such amounts. Thus "gross receipts" includes but is not limited to:

(A) the gross amount received as contributions, gifts, grants, and similar amounts without reduction for the expenses of raising and collecting such amounts,

(B) the gross amount received as dues or assessments from members or affiliated organizations without reduction for expenses attributable to the receipt of such amounts,

(C) gross sales or receipts from business activities (including business activities unrelated to the purpose for which the organization qualified for exemption), the net income or less from which may be required to be reported on Form 109,

(D) the gross amount received from the sale of assets without reduction for cost or other basis and expenses of sale, and

(E) the gross amount received as investment income, such as interest, dividends, rents, and royalties.

NOTE: Gross receipts of local lodges do not include funds collected for insurance premiums of members by local lodges and thereafter remitted to the home or parent office in connection with benefit contracts issued by the home office.

(j) Unrelated Business Income Tax Returns. In addition to the foregoing requirements of this section, most organizations otherwise exempt from tax under Revenue and Taxation Code section 23701 are subject to tax on unrelated business taxable income and also required to file returns on Form 109 if they receive such income. (See Revenue and Taxation Code section 23731 and regulations thereunder.)

(k) This regulation shall be applied to income years beginning on or after January 1, 1986, except that paragraph (1) of subsection (i) and subparagraph (C) of paragraph (1) of subsection (a) shall be applied to income years beginning on or after January 1, 1982; subsection (f) and clause (i) of subparagraph (B) of paragraph (3) of subsection (a) shall be applied with respect to fees imposed on or after July 1, 1983; and subparagraph

(A) of paragraph (1) of subsection (a) shall be applicable to filings made on or after January 1, 1984.

Notes

Cal. Code Regs. Tit. 18, § 23772

1. Amendment of subsection (d) filed 12-20-74 as an emergency; effective upon filing (Register 74, No. 51).
2. Certificate of Compliance filed 2-21-75 (Register 75, No. 8).
3. Renumbering and amendment of Section 23772-23774 to Section 23772 filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).
4. Amendment filed 6-9-86; effective thirtieth day thereafter (Register 86, No. 26).
5. Amendment filed 8-25-88; operative 9-24-88 (Register 88, No. 36).
6. Change without regulatory effect amending subsection (a)(1)(E) and amending NOTE filed 7-28-97 pursuant to section 100, title 1, California Code of Regulations (Register 97, No. 31).
7. Amendment filed 3-19-2009; operative 4-18-2009 (Register 2009, No. 12).

Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 23772, Revenue and Taxation Code.

1. Amendment of subsection (d) filed 12-20-74 as an emergency; effective upon filing (Register 74, No. 51).
2. Certificate of Compliance filed 2-21-75 (Register 75, No. 8).
3. Renumbering and amendment of Section 23772-23774 to Section 23772 filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).
4. Amendment filed 6-9-86; effective thirtieth day thereafter (Register 86, No. 26).
5. Amendment filed 8-25-88; operative 9-24-88 (Register 88, No. 36).
6. Change without regulatory effect amending subsection (a)(1)(E) and amending Note filed 7-28-97 pursuant to section 100, title 1, California Code of Regulations (Register 97, No. 31).
7. Amendment filed 3-19-2009; operative 4-18-2009 (Register 2009, No. 12).