By Howard Donkin, CPA, Jacobson Jarvis Tax Partner
The Charities Advisory Council was created in 2007 to advise the Washington Secretary of State (SOS) in determining training and educational needs of charitable organizations and model policies related to governance and administration of charitable organizations in accordance with fiduciary principles. The Council also assists the Secretary in identifying emerging issues and trends affecting charitable organizations, and advises the Secretary on other related issues at the request of the Secretary.
Council members are appointed by Secretary Kim Wyman and represent a broad range of charities by size, purpose, geographic region of the state, and general expertise in the management and leadership of charitable organizations. Current members of the council represent professions such as fundraisers, attorneys, C.P.A.s, consultants, educators, university faculty, board members, authors, executive directors, and philanthropists.
On June 11, 2018, the Council met to discuss a broad range of topics which included Training and Education, the Statewide Education program, an update on the Corporations and Charities Division’s online filing system, tiered financial reporting requirements, and an update from the Attorney General’s Office on consumer protection activity in the nonprofit community.
Training and Education
Janet Lavery, Washington State Department of Revenue (DOR) Tax Information Specialist, provided an update on the industry guide for nonprofit organizations available for free on their website. The DOR nonprofit guide provides an overview of registration requirements, tax exemptions, reseller permits for fundraising events, and taxability of various nonprofit activities. The guide contains links to related topics and more detailed resources. The guide is available at the Washington State Department of Revenue’s website.
Statewide Education Program
Some council members reported that they attended the May 15 Nonprofit Conference in Bellevue and that Nancy Bacon, Director of Learning at Washington Nonprofits, had a booth and provided information about free training for nonprofits in Washington. The Washington Secretary of State has contracted with Washington Nonprofits to provide education throughout the state of Washington, including remote areas where there may not be other nonprofit training available. Here is a link to their workshops and webinars which includes online training, live training, and self-paced courses – online and free.
Division’s Online Filing System
The Corporations and Charities Division’s online filing system had a soft launch in November 2017 and is in the middle of the warranty phase. There was no official launch, but nonprofits are successfully using it to renew their corporate and charities registration. All you need to do is login with your UBI number and select “renew”. The old postcard renewal reminders will now also have an option to receive an email reminder.
Update Regarding Tiered Financial Reporting Requirements
Rebecca Sherrell, SOS Charities Program Liaison, provided a summary of the Revised Code of Washington (RCW 19.09.541) that establishes a set of tiered financial reporting requirements for charitable organizations. The statute requires that charitable organizations with annual gross revenue over $1 million have a professionally prepared federal tax return and organizations over $3 million obtain an independent, third-party audit of their financial records. This audit report must be made available in paper form to the public upon request or accessible to the public on the internet.
Washington Administrative Code (WAC 434-120-107) clarified that organizations calculate their average gross revenue over three years and that an organization that has been in existence for less than three years calculate its average gross revenue based on the number of years the organization has been operating.
An exemption is available to organizations that receive most of their support from noncash donations. If an organization receives less than $500,000 cash, they can waive the audit requirement.
Update from the Attorney General’s Office
David Horn, Assistant Attorney General with the Attorney General’s Office provided an update on their work to support the nonprofit community. The AG’s Office has oversight regarding consumer protection, voluntary nonprofits dissolutions, charitable trusts, and other services. The AG’s Office is charged with investigating complaints about improper fundraising activities. The AG’s website has helpful information about what the laws says individuals soliciting a contribution must do and that they cannot make false, deceptive, or misleading statements.
The AG’s Office is in discussions with the Washington State Bar Association (WSBA) nonprofit committee regarding its draft rewrite of the Washington State Nonprofit Corporations Act. Once the Attorney General’s Office and the committee have reached agreement, the committee plans to get the proposed new statute out to the nonprofit community for review. Ultimately, the bill will need to be approved by the Bar Association before it is submitted to the Legislature.
The next meeting of the SOS Charity Advisory Council is in January 2019. We will provide you with an update of its progress on these activities in a future newsletter.
About the Author
Howard Donkin, CPA, Jacobson Jarvis Tax Partner, has more than 20 years’ experience in serving the not-for-profit community. Among his areas of expertise are complex tax issues, state and local tax issues, voluntary compliance issues, strategic planning, investment policies, and organizational tax planning.
Howard is the Chair of the Washington Secretary of State’s Charities Advisory Council and a member of the AICPA Exempt Organization Technical Resource Panel to study tax issues for not-for-profits. He is a past chair of the WSCPA’s Not-for-Profit Committee, a member of the Bellevue Botanical Garden Society’s Finance Committee, and a member of Bellevue Rotary Community Grants Committee. Howard volunteers his time as a speaker on not-for-profit tax issues for Washington Nonprofits and Wayfind; and the author of a free booklet on nonprofit tax.