New York State sets new Department of State filing requirements for nonprofits

While implementing other legislation for fiscal year 2020-2021, New York State discreetly amended Sections 172-B, 172-E, and 172-F of the Executive Law, which govern many reporting requirements for charitable tax-exempt organizations.

These new reporting requirements are alternative attempts at reporting requirements related to donor disclosure for groups involved in New York advocacy that were  deemed unconstitutional in 2019.

What are the requirements?

The Proposed Regulations (19 NYCRR, Chapter IV, Part 146, Charitable Organization Filings), issued in February 2021, have created the following new requirements for certain exempt organizations, which are effective Jan. 1, 2021:

Annual Financial Report 

In addition to the required annual financial report submitted to the Attorney General’s office (CHAR 500), organizations that are already registered with the Attorney General, solicit in the state, are registered under Article 7A, or are DUAL filers, and receive total revenue and support of over $250,000, will also be required to submit a financial report to the New York Department of State (DOS). 

Funding Disclosure Report 

Certain IRC Section 501(c)(3) organizations are required to file a Funding Disclosure Report with the DOS if they make certain in-kind donations over $10,000 (previously $2,500) within a six-month period to IRC Section 501(c)(4) social welfare organizations that engage in NYS-specific lobbying activities. The law defines “in-kind donations” as “donations of staff, staff time, personnel or any other human resources, offices or office supplies.” However, the definition excludes “an in-kind donation made by a person or entity in the course of an activity that is substantially related to accomplishing the covered entity's tax exempt purposes.”

Financial Disclosure Report

Any IRC Section 501(c)(4) organization that has issue-based advocacy spending (“covered communications”) in an aggregate amount or fair market value exceeding $10,000 in a calendar year are required to file a Financial Disclosure Report with the DOS.

Who do the requirements apply to?

Certain 501(c)(3) and 501(c)(4) organizations, dependent on facts and circumstances, as indicated above.

When are these reports due?

Each report deadline is outlined below:

Annual Financial Report 

The initial due date mimics the NYS Charities Bureau Annual Financial Reports (Form CHAR 500), which are due by the 15th day of the fifth month after the close of the filing organization's fiscal year. (For example, calendar year organizations will have a due date of May 15, 2021.) At this point in time it is unclear whether an extension will be granted. 

Funding Disclosure Report 

The report must be submitted within 30 days of the close of the reporting period depending on when the transaction occurred. The reporting periods are as follows:

  • Jan. 1 through June 30 (July 31 due date), or 
  • July 1 through Dec. 31 (Jan. 31 due date)

Financial Disclosure Report

The Funding Disclosure Report must be filed with the DOS within 30 days of the close of a reporting period (i.e., the two periods noted above, consistent with the Funding Disclosure Report).

Schedule B Requirements for IRC 501(c)(4) Filers

Note that whether or not a complete Schedule B was required with the Form 990 submitted to the IRS, if the aforementioned Funding Disclosure Report and/or Financial Disclosure Report is being submitted, the proposed regulations require the organization to submit a full Schedule B, with donor information, along with the Form 990.

How should the reports be filed, and how much are the fees?

All three reports must be filed by the taxpayer, via the DOS website, by creating or utilizing an existing NY.gov account. Currently, the online portal does not support electronic payment of each filing fee, and payment must be remitted via check to the DOS. The filing fees are as follows:

  • Annual Financial Report - $25
  • Funding Disclosure Report - $25
  • Financial Disclosure Report - $25

What are the penalties for failure to file?

The amended law and proposed regulations do not include penalties for failure to file. However, it is possible that the DOS will provide further guidance to establish potential penalties.

What does CohnReznick Think?

We believe that this will create an additional administrative burden on organizations. It is still unclear what type of coordination there may be between the Attorney General and the DOS to lessen the burden on taxpayers. Such coordination could help reduce the burden of these new requirements. 

Organizations impacted by the proposed regulations should take the necessary steps to create a NY.gov log-in.

The constitutionality of donor disclosure for charities is currently under question at the U.S. Supreme Court. The Court is hearing the challenge to the California Attorney General’s requirement that charities disclose their donors to the state. If the Supreme Court finds this unconstitutional, it could have similar ramifications to NYS and other states attempting to require similar disclosures.

Contact

Lori Rothe Yokobosky, CPA, Partner, Practice Leader, Exempt Organizations Tax Services

973.403.6940

Sima Wolfson, Manager, Exempt Organizations Tax Services

973.871.4082

Zach Segal, Senior Manager, Exempt Organizations Tax Services

516.417.5356

Subject matter expertise

  • Lori Yokobosky

    CPA, MST, Partner & Exempt Organizations Tax Services Leader

  • Close

    Contact

    Let’s start a conversation about your company’s strategic goals and vision for the future.

    Please fill all required fields*

    Please verify your information and check to see if all require fields have been filled in.

    Please select job function
    Please select job level
    Please select country
    Please select state
    Please select industry
    Please select topic

CohnReznick Tax: Alerts and Webinars

Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.