Required Disclosures

Certain exempt organizations must disclose to the IRS or the public certain information about their activities. Generally, an organization discloses this information by entering it on the appropriate lines of its annual return. In addition, there are disclosure requirements for:

• Solicitation of nondeductible contributions,
• Sales of information or services that are available free from the government, and
• Dues paid to the organization that are not deductible because they are used for lobbying or political activities.

Solicitation of Nondeductible Contributions

Solicitations for contributions or other payments by certain exempt organizations (including lobbying groups and political action committees) must include a statement that payments to those organizations are not deductible as charitable contributions for federal income tax purposes. The statement must be included in the fundraising solicitation and be conspicuous and easily recognizable.

Organizations subject to requirements. An organization must follow these disclosure requirements if it is exempt under section 501(c), other than section 501(c)(1), or under section 501(d), unless the organization is eligible to receive tax deductible charitable contributions under section 170(c). These requirements must be followed by, among others:

1. Social welfare organizations (section 501(c)(4)),
2. Labor unions (section 501(c)(5)),
3. Trade associations (section 501(c)(6)),
4. Social clubs (section 501(c)(7)),
5. Fraternal organizations (section 501(c)(8) and 501 (c)(10)) (however, fraternal organizations described in section 170(c)(4) must follow these requirements only for solicitations for funds that are to be used for noncharitable purposes not described in section 170(c)(4)),
6. Any political organization described in section 527(e), including political campaign committees and political action committees, and
7. Any organization not eligible to receive tax-deductible contributions if the organization or a predecessor organization was, at any time during the 5-year period ending on the date of the fundraising solicitation, an organization of the type to which this disclosure requirement applies.

Fundraising solicitation. This disclosure requirement applies to a fundraising solicitation if all of the following are true.

1. The organization soliciting the funds normally has gross receipts over $100,000 per year.
2. The solicitation is part of a coordinated fundraising campaign that is soliciting more than 10 persons during the year.
3. The solicitation is made in written or printed form, by television or radio, or by telephone.

Penalties. Failure by an organization to make the required statement will result in a penalty of $1,000 for each day the failure occurred, up to a maximum penalty of $10,000 for a calendar year. No penalty will be imposed if it is shown that the failure was due to reasonable cause. If the failure was due to intentional disregard of the requirements, the penalty may be higher and is not subject to a maximum amount.

Sales of Information or Services Available Free From Government

Certain organizations that offer to sell to individuals (or solicit money for) information or routine services that could be readily obtained free (or for a nominal fee) from the federal government must include a statement that the information or service can be so obtained. The statement must be made in a conspicuous and easily recognized format when the organization makes an offer or solicitation to sell the information or service. Organizations affected are those exempt under section 501(c) or 501(d) and political organizations defined in section 527(e).

Penalty. A penalty is provided for failure to comply with this requirement if the failure is due to intentional disregard of the requirement. The penalty is the greater of $1,000 for each day the failure occurred, or 50% of the total cost of all offers and solicitations that were made by the organization the same day that it fails to meet the requirement.

Dues Used for Lobbying or Political Activities

Certain exempt organizations must notify anyone paying dues to the organization whether any part of the dues is not deductible because it is related to lobbying or political activities.

An organization must provide the notice if it is exempt from tax under section 501(a) and is one of the following.

1. A social welfare organization described in section 501(c)(4) that is not a veterans' organization.
2. An agricultural or horticultural organization described in section 501(c)(5).
3. A business league, chamber of commerce, real estate board, or other organization described in section 501(c)(6).

However, an organization described in (1), (2), or (3) does not have to provide the notice if it establishes that substantially all the dues paid to it are not deductible anyway or if certain other conditions are met. For more information, see Revenue Procedure 98-19 in Cumulative Bulletin 1998-1 or later update.

If the organization does not provide the required notice, it may have to pay a tax that is reported on Form 990-T. But the tax does not apply to any amount on which the section 527 tax has been paid on Form 1120-POL. See Political Organization Income Tax Return, earlier.

For more information about nondeductible dues, see Deduction not allowed for dues used for political or legislative activities on page 46.

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