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CCST 2007CCST 2007
The INs and OUTs of Filing The INs and OUTs of Filing
for for ExemptExempt Status Status
Presented byPresented by
Julie Fry, CPAJulie Fry, CPA
Solution to 90/10 ChallengesSolution to 90/10 Challenges
• Do you have nightmares about your 90/10 ratio?
• Are you consistently worried about passing the test?
• The solution to your problem may be just around the corner!!
Solution to 90/10 ChallengesSolution to 90/10 Challenges
• Current proposed legislation before Congress– Allowance of institutional scholarships in total
revenue calculation.
• What does this mean for your organization?– Set up 501(c)3 entity– Provide scholarships to worthy candidates– Add scholarship dollars when calculating total
revenue
Solution to 90/10 ChallengesSolution to 90/10 Challenges
Student loans $ 9,500Student cash 500 Ratio = 95%
Total revenue $10,000 Failed
Student loans $ 7,000Student cash 500 Ratio = 70%Scholarships 2,500 Passed Total revenue $10,000
• How would this actually work?
Non Profit’s - 101Non Profit’s - 101
• A brief history……– Private foundation vs. public charity– Unrelated business income – 1950’s– Intermediate Sanctions – mid 90’s
• IRC Section 4958– Annual filing/reporting requirements
• Form 990
Filing for Exempt StatusFiling for Exempt Status
• The Process– Incorporate• Articles of Incorporation• Bylaws• Filing with State• SS-4
Filing for Exempt StatusFiling for Exempt Status
• The Process– Form 1023• Mission/vision
statement• Scholarship program• Establish board of
directors• Financial
information/budgets
Filing for Exempt StatusFiling for Exempt Status
• The Process– Form 1023• Narrative
description of activities• Form 2848• Itinerary• Advanced ruling
period
Filing for Exempt StatusFiling for Exempt Status
• The Process– Form 1023• Relationship/common
control issues• Conflict of interest
policy• Fundraising• Political influence
Filing for Exempt StatusFiling for Exempt Status
• How should scholarships be awarded?
– Non discriminatory fashion
– Awarded upon need and/or merit
– Available to an “open-ended” group, rather than “pre-selected” individuals
– Well documented procedure
Filing for Exempt Status
• What are the costs involved in this process?
Attorney fees
Filing fees – State and Federal *
CPA fees *standard fixed fees
Filing for Exempt StatusFiling for Exempt Status
• In conclusion, what are the benefits to your school?
– Can improve 90/10 ratio
– Awards worthy students scholarships– Marketing tool when recruiting new students