Guidelines, Information &

Requirements

A Handbook for CalRTA Division & Foundation

Treasurers

(Revised 7/19/17)

Rev. 07/19/17 2

Table of Contents

Table of Contents

The First Things You Should Know ................................................................................................................ 3

Useful Terminology ....................................................................................................................................... 4

Job Description .............................................................................................................................................. 5

Please do not abandon your new Treasurer!! .............................................................................................. 6

Basic Definition of the Non Profit, Tax Exempt Organization ....................................................................... 7

CalRTA Fiscal Planning Calendar ................................................................................................................... 9

CalRTA Fiscal Planning Calendar ................................................................................................................. 10

Reporting Requirements throughout the Fiscal Year ................................................................................. 11

Required Business Filings for CalRTA Divisions/Foundations ..................................................................... 12

Required Business Filings for CalRTA Divisions/Foundations, Cont’d ......................................................... 13

Your Unique Identity Numbers ................................................................................................................... 14

Filing Due Dates: ......................................................................................................................................... 15

Filing Assistance .......................................................................................................................................... 16

What If I Don’t File Reports/Returns? ......................................................................................................... 17

IMPORTANT POINTS About ID Numbers & Filing Requirements: ............................................................... 18

Nonprofit Insurance .................................................................................................................................... 19

Nonprofit Insurance Providers .................................................................................................................... 21

Non Profit Postage Permits ......................................................................................................................... 22

Setting Up A 501C3 Scholarship Foundation .............................................................................................. 23

Using Raffles for Fundraising…What a GREAT idea! ................................................................................... 25

Division & Foundation Expenses ................................................................................................................. 26

Records Retention Guidelines ..................................................................................................................... 27

Records Retention Policy ............................................................................................................................ 28

Records Retention Policy, Cont’d ................................................................................................................ 29

Assistance from the CalRTA Business Office: .............................................................................................. 30

Agencies, phone numbers, websites and form links: ................................................................................. 30

Agencies, phone numbers, websites and form links, cont’d ...................................................................... 31

Rev. 07/19/17 3

The First Things You Should Know

1) Being the treasurer of a CalRTA division does not require any high level knowledge of accounting or taxation.

i) the ability to organize data and work with a calendar of events/due dates is most important to being a good treasurer

2) Managing the accounting for a CalRTA division is virtually no different than

managing your personal check registers for checking & savings accounts 3) CalRTA and the CalRTA Divisions are California Non Profit Tax Exempt

Corporations, also considered charitable trusts by the CA State Attorney General

4) There are basic rules/laws that govern our Association and its divisions (i.e.

“chapters”) that are, basically, easy to learn and understand; if you follow the “rules” you will almost always remain free of trouble

5) There are simple filing requirements of all CalRTA divisions & foundations – ALL

DIVISIONS AND ALL FOUNDATIONS MUST FILE AT LEAST 2 RETURNS EACH YEAR (990N & 199N EPostcards)! NO EXCEPTIONS. A few Divisions and most/all of the Foundations also need to file SI-100 and RRF-1, and possibly raffle reports

6) Failure to comply with the laws that govern nonprofit tax exempt entities and

their activities and the reporting of those activities will result in time consuming labor, loss of nonprofit status, corporate taxes levied, plus penalties and interest. Note: in some cases, penalties are deemed the individual Board members’ responsibility, and payment from the foundation disallowed

7) If you have a problem you cannot resolve the CalRTA Admin Office will be

happy to assist you or guide you to assistance 8) Links to forms and various reporting agencies and nonprofit insurance

providers are provided at the end of this document

Rev. 07/19/17 4

Useful Terminology Accounting methods, just as the adoption of a fiscal year, are usually stated at the time of application for recognition as a new entity. Once you adopt an accounting method, Cash or Accrual, you are required to use that method unless you request permission to change it with the IRS.

Fiscal Year – A “Fiscal” year is any 12 months defined as your annual accounting period. A fiscal accounting period is usually not in sync with the calendar year, 1/1 – 12/31. In CalRTA the fiscal accounting period is the 12 months between July 1st – June 30th. Your “Fiscal” year end is June 30th. You report on those 12 months of activity. NOTE: Some foundations use the calendar year as their fiscal year – reporting deadlines are based on fiscal year end.

Cash Accounting – Almost all of CalRTA’s Divisions and their foundations are using the cash accounting method. This means that income is recognized when it is deposited and expense is recognized when it is paid, regardless of when it was earned or incurred. This is the simplest accounting method and most appropriate for smaller uncomplicated accounting. It is very appropriate for CalRTA divisions and foundations.

Accrual Accounting - This means you recognize income and expense in the period in which it is earned or incurred despite when the money is received or paid. You should not adopt this method of accounting unless you know enough about accrual accounting to be able to use it consistently in everything you do. It is not advisable in the Divisions because you would have to ensure the next Treasurer maintained the same method.

Income – income is any NEW money that you receive during your fiscal year and includes dues, interest and dividends payments, luncheon receipts and donations. It also includes increases to the fair market value of investments like mutual funds (unrecognized gain). Transfers of money from one account to another are NEVER income-that is a repositioning of an asset, cash, from one place to another. Example: Do you claim income for money that you take out of your savings account and put into your checking account? No. It is the same thing.

Gross Receipts – this is another term for income but is used to specifically denote that no adjustments are to be made to the income before declaring its value, just like on your personal 1040 returns. So regardless of where money went AFTER you received it (like luncheon receipts) you must declare the fact that you HAVE received it.

Expense – Expenses are what you pay in the course of doing business, such as travel expense, meeting expense, luncheon expense, membership recruitment, membership support/maintenance, bank fees, decrease in value of investments like mutual funds (unrecognized loss) office supplies, postage, insurance, etc., etc.

Rev. 07/19/17 5

Job Description

The Treasurer is a member of the governing Board of Directors of the Association Division. As such, regular attendance at Board meetings to report on the financial status year to date of the Division is very important.

1. Manage/supervise all cash transactions, utilizing authority granted by Board, and Standing Rules:

a. Write Checks b. Make Timely Deposits c. Oversee Investments - CDs, equity funds, bond funds, mutual funds

etc. d. Reconcile bank statements, monthly

2. Report to the Division Board at every Board meeting and to the membership as required by the Board/Bylaws.

3. Report to the State CalRTA, IRS, FTB, CA-SOS and CA-AG as required a. Part of the responsibility of reporting to different agencies is

keeping a permanent record of the unique identifiers required to file different forms, such as your IRS Taxpayer ID number, your CA Corporate number(C…) or FTB(8 or 9…) number and your CA Att’y General Charitable Trust number (CT…) plus any login information for online filing. This information is passed on to the next Treasurer with explanation of responsibilities.

4. Assist with Annual Budget Plan preparation, and…

Rev. 07/19/17 6

Please do not abandon your new Treasurer!!

5. Before you can “retire” from your duties as the Treasurer, you must fulfill the following final requirements of the job:

• YOU are responsible for all reporting for all activities under YOUR term!

• YOU are responsible for the final audit of your bookkeeping

• YOU are responsible for training and orienting your successor to the job!

*There are very few treasurers following through on these

3 critical requirements! The transition from the old to the new treasurer is an opportunity to train a successor on how the work has been done, organized and stored, to familiarize them with the different organizations we report to and the unique identifying numbers that are used to report, and allow them to witness a year end audit of your books. Your successor can “shadow” you as you close out your final year and submit all required filings. What a GREAT beginning!

Rev. 07/19/17 7

Basic Definition of the Non Profit, Tax Exempt Organization

• CalRTA and its divisions are tax exempt, nonprofit entities.

• We have been granted our status by the IRS and it was ratified by the

FTB. CalRTA Divisions are considered subordinates under the parent company (CalRTA) and are part of a Group Exemption. The CalRTA Office can provide the documentation of proof of nonprofit tax exempt status upon request.

• Our exemption determination, as defined by the IRS, is 501C4. The “C4”

is an indication that an entity has political activity, but limited. This is true for CalRTA because we lobby for/against legislation that affects the retirement benefit, and public education. We do not support candidates or political parties; we are limited.

• Because of our lobbying activities, dues and donations to our

organization are NOT tax deductible. • The deductibility of contributions is what has led CalRTA Divisions and

the CalRTA Laura E. Settle to seek separate identities for scholarship programs with a 501C3 determination which allows deductible contributions, up to 100%.

• We must be good stewards of the money we receive and use the money

as we have promised our members and donors: dues for member related issues, member support, recruitment & leadership/administration expense and scholarship money for scholarship gifts, fundraising and ALL scholarship related expenses.

• All nonprofit tax exempt organizations are under the watchful eyes of the

IRS, FTB, SOS and AG offices.

• There are annual (at least) filing requirements which must be met or risk losing the exemption status. Fund raising activities, i.e. raffles, must be conducted under an annual permit and reported on after each event.

• Financial records should be audited or reviewed annually.

(i) Create a “buddy” audit/review system with a nearby division wherein you audit each other’s books periodically

• Your Board should adopt policies such as the conflict of interest policy,

and investment policy, audit/review policy etc. These policies indicate your Board understands and respects its fiduciary responsibility and has tools in place to help them govern well.

Rev. 07/19/17 8

• Your Board will be insured against directors and officers liability under one umbrella policy of the CalRTA Chapters Only. You will automatically be enrolled and covered under this policy, it is required, to protect you as individuals serving on a nonprofit board, and to protect the Association state wide. The premium for this insurance will be paid in full by the CalRTA State Office, and then billed back to the divisions on a per member basis. An invoice will be provided for your records, and payment for the coverage will be automatically deducted from the July 1st dues payment.

• Your division is covered for general liability (aka “Slip & Fall” insurance) under the parent CalRTA insurance umbrella for your meetings.

• Tax exempt means we do not (ordinarily) pay INCOME tax; it does NOT

exempt us from paying sales tax. A sales tax exemption is a separate ruling made by the State Board of Equalization (BOE) and does not apply to CalRTA.

Rev. 07/19/17 9

CalRTA Fiscal Planning Calendar One of the most important tools at your disposal is the CalRTA Fiscal Planning Calendar As they say, “Knowing is half the battle won!” If you are aware of what is required, and when it is due, it is easier to follow through on expectations/requirements and thus avoid a lot of messy work and possible penalties, interest and fines. The CalRTA Fiscal Planning Calendar on the next page can be a useful tool into which you can incorporate into your division’s timeline for a complete planning calendar.

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CalRTA Fiscal Planning Calendar

July 1. New Fiscal Year Begins 2. New Budget Plan in place 3. D&O Chapters Only Renewal Payment 4. Annual Financial Reconciliation & Audit 5. You may file 990, 990-EZ, 990-N EPostcard,

199 or 199N EPostcard anytime between July 1 and Nov 15th for the prior fiscal year (on-time)

August 1. 8/31 Annual Financial Report Due-CalRTA Sac’to - this is A MANDATORY FILING 2. Raffle Registration is Due 9/1 (Form CT-NRP-1)

to the Attorney General 3. SI-100 (Statement of Information – Sec’y of

State) and RRF-1 (Registration Renewal Form – Att’y General) should be filed by 8/31

September 1. Non-Profit Raffle Registration (CT-NRP-1 Form, CA

Atty General) Due for permit to hold raffles in the upcoming period of 9/1 and 8/31

2. Non-Profit Raffle Report (CT-NRP-2) must be filed for all raffles held in the prior 9/1 – 8/31 period

October If your fiscal year ended on June 30th, You are nearing the deadline (11/15) for filing your 990 (IRS) and 199 (FTB), and RRF-1 (AG – IF you have a CT#), and SI-100 (SOS – IF you have a CA Corp # “C…..”)

You can file Epostcards for 990 and 199 provided your gross receipts do not exceed $50K, usually. Use 3 year average (current + 2 prior years) to determine this eligibility when the limit is exceeded.

November Due no later than 11/15 for fiscal year end 06/30: 1. For Gross Receipts > $50K: IRS Form 990EZ &

FTB Form 199 2. For Gross Receipts < $50K: IRS Form 990-N and

FTB 199-N EPostcards 3. Private Foundations always file the 990PF and FTB 199 on paper returns, plus SI-100 & RRF-1 4. If necessary, have you filed your SI-100 or RRF-

1? See August.

December 1. Gather your information for 1099-MISC! A 1099- MISC

must be provided to recipient by 1/31 and filed with the IRS by 2/28 with a 1096 transmittal form. The CalRTA business office can file this for you electronically. Please provide recipient data (name, address, SS) and amount paid between 1/1-12/31 no later than 1/15 to meet deadlines! Elaine@calrta.org or 916-923-2200

January 1. IRS Form 1099-MISC to payee by 1/31

(individual paid $600+ 1/1 – 12/31) PLEASE CONTACT THE BUSINESS OFFICE

REGARDING 1099-MISC. 2. If your fiscal year ends 12/31 you may file 990,

990-EZ, 990-N ePostcard, FTB 199N ePostcard, etc. anytime between Jan 1 and no later than May 15th (on time) for the prior fiscal year

February 1. Form 1099-Misc reports due to IRS by 2/28

(requires a 1096 transmittal form) 2. If you have not done so for the current calendar

year, file the DE542 to report independent contractors you have or will pay $600+ this calendar year 1/1 – 12/31. Search for form on CA EDD website – can be faxed or mailed.

March 1. Annual Division Survey-CalRTA State

Communications Committee 2. CalRTA State Budget planning and Board

Meeting 3. Divisions should begin budget planning for next

fiscal year so the plan is approved and in place July 1.

4. State CalRTA Budget Plan to Div Presidents

April 1. Have you registered for Convention? 2. Have you submitted your delegate list?

May 1. If your fiscal year ended 12/31 your information

reporting is due by 5/15 – See November for a complete list of requirements

2. Private Foundations always file the 990PF and FTB 199 on paper returns, plus SI-100 & RRF-1 3. Annual CalRTA Convention

June 1. Fiscal Year End

a. Reconcile your books for close b. Arrange a “Buddy” audit exchange

2. Annual Financial Report due by 8/31 to the CalRTA Business Office. Blank form available on CalRTA website.

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Reporting Requirements Throughout the Fiscal Year It is important, first, to define the term “fiscal year”. The calendar year is Jan 1 – Dec 31. A “fiscal” year is a 12 month accounting period, or “fiscal” period, between Month X and Month Y, wherein X and Y are months of your design*. CalRTA and its divisions primarily operate their fiscal year between July 1 – June 30. It is exceptional, but actual, that a couple of divisions, and more often scholarship foundations, were set up to operate their fiscal year on the calendar year.

*Fiscal periods are stated at the time of application to the IRS for recognition as an entity. You cannot decide to change your fiscal reporting period without first applying for and receiving authorization to do so from the IRS.

While individual income is reported annually based on the calendar year, businesses report based on their fiscal accounting year (which may correspond to the calendar year) with most filing requirements due 4 months and 15 days after the close of their fiscal year. For example, a business whose fiscal year ends on June 30 can expect a due date for IRS and FTB business filings to be November 15th.

A notable exception to filing deadlines for CalRTA, and other businesses not using the calendar year as their fiscal year, is the 1099-MISC. If you pay an individual, or a sole proprietor business, to perform some task for your division, i.e. produce your newsletter, and you pay that person $600 OR MORE between Jan 1st and Dec 31st of the calendar year you MUST provide that person with a 1099-MISC, and file a copy with the IRS. 1099-MISC is reported on the calendar year because the person you paid must include that income in their personal tax return. CalRTA Admin Office can file this for you – provide info by 1/15.

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Required Business Filings for CalRTA Divisions/Foundations The following form filings are due on or before 4 months and 15 days after the close of your fiscal year (direct links and what you will need to file are at the end of this handbook):

• 990‐N EPostcard – Any nonprofit entity with, ordinarily, less than $50,000 in

gross receipts for their fiscal year can file the 990-N EPostcard with the IRS. This filing can only be done online; there are no paper returns. It is simple and requires your division taxpayer ID number to file. You must leave the IRS site to file the return; a third party organization, Urban Institute, handles the online filing.

• 199‐N EPostcard – Any nonprofit entity with less than $50,000 in gross receipts, ordinarily, for their fiscal year can file the 199-N EPostcard with the CA FTB. This filing can only be done online; there are no paper returns. It is simple and requires your divisions CA Corp or FTB # to file.

• IRS Form 990EZ – Any nonprofit whose gross receipts exceed $50,000 for the current fiscal year AND your gross receipts averaged over three years exceed $50,000 per year you must file the paper return Form 990EZ. It is recommended that you hire a tax preparer to complete this return on your behalf.

• FTB Form 199 – If you are required to file the 990EZ you are also required to file the paper return 199 with the CA FTB. There is a $10 filing fee.

• FTB Form 190 “Unrelated Business Income” – Only one division, for certain, of CalRTA has ever had an unrelated business income event. The State CalRTA usually has a small amount of unrelated business income. In the highly unlikely event that you have Unrelated Business Income in excess of $1,000, you are required to file FTB form 190, a paper return.

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Required Business Filings for CalRTA Divisions/Foundations, Cont’d

• IRS 990PF - If your Foundation has been designated, or re-designated, as a “Private Foundation” by the IRS, you cannot file the 990N EPostcard – you must file the 990PF Return of a Private Foundation, a paper return, each and every year. Private foundations fail to meet the requirements of a “publicly funded” foundation (which can file the EPostcard returns) when their annual donations come from a single source, or limited source. If you disagree with that ruling, you must take the matter up with the IRS directly – and it is recommended you hire the services of a CPA to assist you in obtaining a new ruling.

• CA Secretary of State Form SI‐100 – IF you possess a CA Corporation Number (“Cxxxxxxx) you need to file this annually when you file the IRS and FTB returns. There is a $20 filing fee. The SI-100 is a Statement of Information and provides the Secretary of State with current information about the leadership of your organization.

NOTE: Leave boxes 9‐13 BLANK for “Common Interest Development”; this section does not apply – once checked it can be difficult to undo!

• CA State Attorney General RRF‐1 Form – If you have a CT#, you need to file the

RRF-1 form each year. The RRF- 1 is the Registration Renewal Form and must be filed each year to renew your registration as a CA non-profit entity. The form asks for basic financial information and current business address, contact. There is a sliding scale for filing fees (see form RRF-1) – most will pay nothing.

• IRS Form 1099‐MISC – If you paid and individual/sole proprietor $600 or more during the CALENDAR YEAR 1/1 – 12/31, you are required to file a 1099-MISC to report the income you paid to that individual, accompanied by a 1096 transmittal form. This can be filed on your behalf by the CalRTA Admin. Office. You must request this service, and you must provide information for the 1099-MISC.

• EDD Form DE542 – It is the requirement of the CA EDD that all independent contractors paid, or contracted to be paid, $600 or more in the calendar year are to be reported on this form annually. If you have someone to whom you will provide a 1099-MISC then you must also submit a DE542 regarding that person as well.

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Your Unique Identity Numbers All of CalRTA divisions and scholarship foundations have separate, and unique, identifying numbers issued by various government bodies, as follows:

IRS – 12‐3456789 a 9 digit number separated as illustrated and issued by the IRS. You need this number to file all tax returns FTB 199, and IRS 990 and some other information returns to the Attorney General, etc. Secretary of State (SOS) – Usually when a non-profit entity is created it is approved through the office of the Secretary of State and at that time the SOS issues a California Corporation Number. It looks like this: C1234567 ‐ a “C” followed by 7 digits. It is required to file all state information returns to the FTB, SOS and AG offices.

FTB – If you file a 199 paper return and you do not have a California Corporation Number the FTB automatically issues an Entity Number, a 7 digit number usually beginning with 8 or 9. CalRTA Divisions have either a CA Corp. Number or and FTB Entity Number. Either of these numbers is used to file the 199 paper or EPostcard return. It is also used on the RRF-1 and SI-100 reports.

Attorney General’s Registry of Charitable Trusts – Some of the CalRTA divisions, and all of the foundations, have a Charitable Trust number assigned to them by the office of the AG. It appears like this: CT123456, and more recently, CT1234567. CT followed by 6 or 7 digits. This number is required to file the RRF-1. Foundations MUST FILE the RRF‐1 each year. Any Division with a CT number MUST FILE the RRF‐1 each year.

Your numbers are UNIQUE to the entity to which they were issued. If you use your division identity numbers to report for your foundation you will have created a mess from which it will likely take a long time to extradite yourself. It is no different than using another person’s SS number to report YOUR income, or vice-versa. Be VERY careful with your unique identifying numbers!! They are permanent records! Important Note: All of CalRTA divisions have either a CA Corp. number or and FTB Entity number – this number, and all unique identifying numbers for your division, can be found in one place – the CalRTA Annual Division Financial Report. It is in your best interest to complete this form first after the close of your fiscal year because the data on that sheet can easily be transferred to your 990N & 199N Epostcard, your RRF-1 and more importantly, when you send that data to the CalRTA Admin Office a digital file of each year’s reports is created and becomes a permanent record that will never be lost. When/if you have need of prior year information, it is available.

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Filing Due Dates: • IRS Form 1099‐MISC – DUE JANUARY 31st! The 1099-MISC reports personal

earnings to the IRS of an individual to whom you paid $600 or more between Jan 1st and Dec 31st who was NOT an employee. This would apply in scenarios such as someone you paid to produce your division newsletter, for example.

• EDD Form DE‐542 – If you have a 1099-MISC recipient you must also file the EDD form DE-542 at the beginning of the calendar year, or at which time you have PAID $600 or more to the recipient. The form can be mailed or faxed.

• CalRTA Annual Division Financial Report – The CalRTA Business Office is required by the IRS to report on its divisions annually and to do so we must request reporting from each division to fulfill that requirement. It is a fairly simple income statement of your annual activities asking for categorized detail of your income and expenses. A personalized form is emailed, or mailed, to the division or scholarship treasurer who conducted those duties for the fiscal year to be reported. A blank form is available on the CalRTA website (you must be logged in to access) under:

Calrta.org/Login/Division Resources/Forms, Templates & Supplies/ Financial Report

and it is due by Aug 31st every year.

• D&O Insurance - It is highly recommended that you purchase Directors and Officers Liability Insurance (aka D&O Liability Insurance)

• General Liability Insurance – CalRTA divisions are covered under the umbrella of general liability insurance carried by the state CalRTA. The division foundations, however, are not covered under this umbrella because those entities fall outside of the “Association” and are separate entities.

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Filing Assistance The CalRTA Business Office can assist you by filing on your behalf the following forms/returns if you require assistance:

- IRS 1099-MISC - IRS 990N EPostcard - FTB 199N Epostcard

It is your responsibility to request the assistance of the CalRTA Business Office each year that you require assistance, in time to file before the due date and you must provide all necessary data for the filing including an annual financial report.

This assistance is offered and provided when necessary; it is not possible for one staff person to assist 86 divisions plus 60 foundations with annual EPostcard filing requirements every year. Please make an effort to complete the filing requirements without assistance – but know that assistance is here for you in the event you need it, for whatever reason! There is no “option” to NOT FILE! EVERY division of CalRTA has a minimum of 3 filing requirments: 1) Annual Financial Report (mandatory!) 2) IRS 990N EPostcard (mandatory!), and 3) FTB 199N EPostcard (mandatory!). You may have other requirements IF you have a CT number, or a CA Corporation number. Again, there is NO OPTION to NOT FILE. Help has been offered – please accept it. FAILURE TO FILE WILL RESULT IN AUTOMATIC REVOCATION OF YOUR NONPROFIT EXEMPTION – REINSTATEMENT IS TIME CONSUMING, AND CAN BE COSTLY.

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What If I Don’t File Reports/Returns? If you do not file required reports or returns with governing agencies, or you file late, or you combine entities under wrong numbers you risk: • The automatic loss/revocation of your nonprofit exemption (THIS IS REAL and

happening now!) • Taxes/fines/penalties/and interest plus possible professional CPA fees to

reinstate your nonprofit exemption & reduce penalties (This too is REAL) • Many hours of work to restore your division/foundation to good standing

(True…too true!) It is always easier to comply with the laws than to try to make amends afterward. It is costly and time consuming to reinstate an exemption. CalRTA leaders do not choose to ignore important requirements, but if we fail to heed legal requirements to file, or fail to properly orient/train our new Treasurers to their job and responsibilities we are more likely to set a path for a failure to file. In the event you realize that returns/reports were not filed that should have been, file all required returns/reports immediately. If you cannot file a past year 990N EPostcard, contact the IRS and ask for assistance/recommendation for the prior year that will be missing. If it is just one year missed they will ask you questions and then “excuse” the missing year and roll your “due date” up for the earliest available 990N EPostcard. At this time, there is no convenient way to determine what FTB 199N returns were filed. When you are unsure it is always best to contact the FTB by phone and ask them to look up your records so that you know what needs to be filed immediately. Unlike the IRS site, you can file past year 199N EPostcard returns with the FTB. Never ignore a notice from any government entity. If you are not the current treasurer but receive a notice from a government agency, please do not ignore or discard the notice, but deliver it to your Division Treasurer, or President – or at least email, fax or mail by USPS to the CalRTA business office in Sacramento. If notices are ignored (or you are nonresponsive), it goes worse for you in the end.

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IMPORTANT POINTS about ID Numbers & Filing Requirements: 1. In as much as you protect your own personal social security number, account

numbers, pin numbers, etc., you should protect the unique identifying numbers of your division or foundation. These numbers, and documents pertaining to them including annual reports and filings, are permanent records and must be kept forever. They may not be used to report income and expenses of any entity but that to which they were issued.

2. If your foundation has been created, or re-designated by the IRS, as a “Private Foundation” you cannot file the 990N or 199N EPostcards. You must file the IRS 990PF private foundation paper return, every year, and the CA FTB 199 paper return, every year. Failure to file will result in automatic revocation of your tax exemption.

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Nonprofit Insurance There are two (2) types of business insurance that are applicable to CalRTA & the CalRTA divisions: General Liability Insurance and D&O (Directors & Officers Liability Insurance).

General Liability – A Commercial General Liability Insurance policy is the first line of defense against many common claims. General Liability Insurance covers claims of bodily injury or other physical injury or property damage while conducting the business of CalRTA. General Liability insurance is commonly referred to as “Slip & Fall” insurance and this insurance also takes into account specific risk factors. CalRTA and its divisions are covered under the same umbrella of General Liability insurance because the activities are the same and for the overall purpose of the Association as a whole. Venues may request a “certificate of insurance” which verifies that CalRTA carries liability insurance, at a minimum specified, that will cover the event for any possible damage or injury. (Contact Elaine Retz elaine@calrta.org to request a certificate of insurance)

“Field Trips” or “Excursions” or “Tours” would not be covered under the usual business of CalRTA, therefore requiring “Special Event” insurance for that specific event at and additional cost, to be borne by the division who requires this coverage.

NOTE: Separately incorporated foundations (501C3) are not covered under the blanket of general liability policy of the Association and should secure their own policy.

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Directors and Officers Liability Insurance (often called D&O Insurance) is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event where legal action is brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well. Often civil and criminal actions are brought against directors/officers simultaneously. Directors and officers are held personally accountable for their actions; therefore, without D&O insurance as a first line of defense their personal assets are in jeopardy. More individuals are reluctant, if not refusing, to serve on a non-profit board without such insurance in place to protect them personally.

D&O Liability Insurance is tailored to the specific management risks of a board of directors, including total funds under management, types of activities and their inherent risks, (i.e. scholarship boards carry an added risk of discrimination in their selection process), and taking into account policies, such as nondiscrimination, conflict of interest, etc. This type of insurance cannot insure more than one board due to the very specific nature of the policy, its coverage, and specific risk factors for each Board entity.

NOTE: CalRTA Division boards require a separate policy from their scholarship foundation boards. They cannot share a policy – they are separate entities, despite overlap in Board members

Beginning May 2016 an umbrella policy for “Chapters ONLY” Directors & Officers liability insurance became available. Participation in the insurance policy and coverage is compulsory – all or none. The policy will be reviewed and renewed each year in May. The total premium will be paid by the CalRTA State Office and billed back to the divisions based on official membership count at 4/30. Divisions will receive an invoice for their records, but the payments for each division will be automatically deducted from the dues payment sent by ACH in July.

NOTE: Division owned/operated foundations are not, and cannot be, included in this policy arrangement. Please obtain a separate insurance policy for your foundation board – see following pages for some suggestions.

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Nonprofit Insurance Providers

If you would like to obtain a quote for insurance coverage for your foundation, you may contact the CalRTA state office insurance broker: Matthew McGoldrick Whitaker Davis Insurance Services dba Wright & Kimbrough Lic# 0670151 916-751-7682 Office, ext. 188 916-417-4305 Cell 916-751-7690 Fax

mmcgoldrick@wkins.com Or, directly contact the following insurance companies who specialize in nonprofit insurance (click on the links for direct access on their website Or research your own options locally: For 501C3 (Scholarship Foundations, ONLY): NIAG (Nonprofit Insurance Alliance Group) https://www.insurancefornonprofits.org/ For 501C3 (Foundations) or 501C4 (Divisions): CNA Insurance PHONE: 1-800-CNA-2000 www.cna.com The Hartford Business Insurance Service Center 1-866-467-8730 Monday through Friday, 7am - 7pm CST http://www.thehartford.com/ CalNonprofits Insurance Services Monica Trevino monica@cal-insurance.org 888-427-5224 X1020 1500 41st Ave Ste280 Capitola, CA 95010

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Non Profit Postage Permits Some CalRTA divisions have applied for and received nonprofit bulk mail permits that allow them to send their newsletters and other large mailings at reduced postage. This is not a worthwhile effort for all CalRTA divisions as there is a breakpoint for postage cost reduction that only the larger CalRTA divisions can obtain. Permit fees are about $100/year, and more, so take that into consideration if you are contemplating applying for a permit. The permit must be renewed every year by payment of the annual fees, and a CAPS account will be set up by the USPS to automatically debit your checking account for any postage, and renewal of annual permit fees. If you wish to pursue this, contact your MAIN post office, Business Mail Entry Unit for assistance and applications. The CalRTA Business Office can supply your proof of nonprofit tax exemption. Elaine@calrta.org

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Setting Up A 501C3 Scholarship Foundation If your division conducts scholarship activities you may decide to create a 501C3 foundation for those activities to separate them from the division and be able to offer tax deductible contributions, particularly if you have a large sum of cash assets, or are the recipient of a large sum of inheritance (“bequest”) from a member’s estate – and the estate requires a 501C3 recipient for tax purposes. Setting up a foundation can be done without the use of an attorney or CPA but it takes great patience, great care and great organization. It is helpful, in fact essential, to read, first, the IRS Publication 557: Tax Exempt Status for Your Organization and “California Non-Profit Corporation Handbook” by Anthony Mancuso and published by Nolo Press, Berkeley, California can be ordered through nolopress.com). This handbook is updated frequently. Please use the most current edition available. Using these two publications will assist you in setting up your foundation step by step in the correct order. The IRS, Secretary of State and the Attorney General offices are helpful as well. It may be that the decision to use the services of a CPA or attorney to create your 501C3 foundation is the best approach for your situation, particularly if you are managing a large amount of funds or need to set it up quickly. Also, consider the following: You must be able to fill a Board of Directors (the Board can, and should, overlap the Division Board). You must be willing to conduct fundraising to the extent that your foundation can cover ALL of its own expenses and provide scholarships. You may not ask or require your Division to pay for the expenses of the Foundation. This is not legal. It is very highly recommended that the Foundation Board carry appropriate Directors & Officers Liability Insurance (aka “D&O” Insurance). Foundation Boards carry additional risks for lawsuits arising from real or perceived discrimination, or mismanagement of large funds, etc. You will require a separate D&O policy for your foundation board, and separate general

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liability insurance. These are necessary expenses of any scholarship foundation and should be planned for in your fundraising efforts. You will have all the filing requirements that have been outlined in this handbook and discussed, and possibly more, depending on the type of nonprofit exemption granted and activities in which you participate.

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Using Raffles for Fundraising…What a GREAT idea! • Raffles are an awesome way to raise funds and awareness of your

nonprofit concern. It is a great opportunity to bring your local merchants, growers, crafters, etc. into the spotlight as well by soliciting donations from them to use as raffle prizes.

• Gambling is illegal in the State of California, except by permit from the

CA State Attorney General. Anytime you PURCHASE a CHANCE TO WIN a prize you are gambling! In a raffle, you are purchasing a chance to win a prize and therefore you MUST have a permit. A door prize is not gambling since you do not have to purchase a ticket to win. Calling your fundraiser by another name does not change the legality of this issue. Really, it doesn’t.

• You MUST apply for a raffle permit, annually, that allows you to

conduct any number of raffles between 9/1 and 8/31 – the raffle permit year. You MUST file a raffle report for all raffles held during the annual raffle permit period. There is a $20 permit application fee but no fees for submitting the raffle report. Applications require a raffle permit number (issued when first applying), reports require a raffle permit number.

• The most important rule regarding raffles: 90% of the proceeds MUST

GO TO THE CAUSE. This eliminates 50/50 drawings, opportunities or whatever name you give this activity - it is still considered gambling. (AG WILL test this rule - guaranteed!)

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Division & Foundation Expenses

We seldom have a problem with a mixture of income between a Division and a Foundation, and it never happens that Division expenses are being borne by the Foundation, but there are a lot of Foundation expenses being paid through our CalRTA Divisions. This is not allowable, by law, and no more desirable than someone else’s expenses being taken out of YOUR bank account. CalRTA does NOT pay the expenses of the Laura E. Settle Scholarship Foundation – neither should our divisions be encumbered by the expenses of their foundations.

“To Each, his own” - Both the expenses and incomes of an entity must be accounted for within that entity. A Division cannot pay the expenses of a Foundation so that the Foundation doesn’t impede its ability to pay scholarships by using “that money” for expenses! It is legal, right and wholly appropriate that a Foundation HAVE expenses, including proper insurance coverage, luncheon costs/incomes, office supplies, postage, etc. If you feel that this is cutting into your scholarship awards, it is your responsibility to either raise more funds to cover both expenses and the awards, or reduce awards, or reduce expenses.

It is never appropriate for the CalRTA Division to assume the financial burden of a foundation entity. This is not allowed. You are placing yourselves in jeopardy, with the law and with your members who may find that practice offensive because it impedes the Division’s ability to meet the needs of the Association goals and member support. You are at risk for a lawsuit for fiscal mismanagement as well. Remember: You have entered into a PROMISE with our members; when you accept their dues you are promising to fulfill the goal and vision of CalRTA to protect and enhance their retirement benefit. Part of being able to fulfill that promise are all the intendant duties and expenses of maintaining and growing a membership base that supports the Association goals and visions – which is why members have joined in the first place.

Likewise, scholarship luncheons, hosted by the Foundation, should be managed 100% through the Foundation. All checks for luncheons should be deposited to Foundation bank accounts, all luncheon expenses should be paid from Foundation bank accounts. Divisions who process luncheon checks of this kind through their books are potentially pushing their gross income levels above those which allow a simple 990N EPostcard and into the full 990 paper return levels – and the income isn’t even supposed to be reported by the Division!

Foundations are not at all willing to pay for the division’s expenses, and very rightfully so, and likewise the Divisions should not be willing to pay Foundation expenses. It is right, just and legal.

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Records Retention Guidelines The IRS offers this advice on how long you should keep certain documentation:

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Records Retention Policy The following documents shall be kept for at least the minimum recommended time after which they will be securely destroyed.

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Records Retention Policy, Cont’d

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Assistance from the CalRTA Business Office: California Retired Teachers Association 1750 Howe Avenue Suite 630 Sacramento, CA 95825-3370 Email: info@calrta.org Tel: 916-923-2200 or 800-523-2782

Agencies, phone numbers, websites and form links: Internal Revenue Service Toll-Free, 1-877-829-5500 www.irs.gov Forms and Publications: http://www.irs.gov/Charities-&-Non-Profits

IRS 990‐N EPostcard Filing site: https://sa.www4.irs.gov/epostcard/

You will need: A username and password (this should be passed down to new treasurers to maintain history), TIN/EIN number and your gross receipts total.

IRS 1099‐MISC: Please contact the CalRTA Administration Office regarding this filing.

IRS “Stay Exempt” Video training/course: https://www.stayexempt.irs.gov/Existing-Organizations (This is pretty cool!)

CA Franchise Tax Board Toll-Free, 1-800-338-0505 Website address: www.ftb.ca.gov Forms and Publications: http://www.ftb.ca.gov/forms/search/index.aspx Charities and Nonprofits (Exempt Organizations) – Great info page! https://www.ftb.ca.gov/businesses/Exempt-organizations/index.shtml

FTB 199‐N EPostcard Filing Site: https://www.ftb.ca.gov/online/199N_ePostcard/index.asp

You will need: CA Corp number or FTB Entity number, TIN/EIN number, gross receipts total.

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Agencies, phone numbers, websites and form links, cont’d: CA Secretary of State 916-657-5448 Website Address: www.sos.ca.gov

Statement of Information (SI‐100) can be filed electronically online and you must have your CA Corporate number to file and filing fees are collected by credit card (Visa or MC only).

https://businessfilings.sos.ca.gov/

You will need: Your CA Corporation number (C XXXXXXX) CA State Attorney General (Registry of Charitable Trusts) 916-445-2021 Website Address: www.ag.ca.gov/charities/

Fillable online Registration Renewal Form - RRF‐1 Report: http://ag.ca.gov/charities/forms/charitable/rrf1_form.pdf Must be printed, signed and mailed, with applicable fee.

You will need: CT number (CTXXXXXX), TIN/EIN, CA Corp or FTB Entity number, gross receipts and fund balance (ending balance on your annual financial report form)

Raffle Registration, Raffle Reports, online filing: http://ag.ca.gov/charities/raffles.php

You will need: Raffle permit number (issued to 1st time applicants), TIN/EIN number, CA Corp or FTB Entity number, CT number, if applicable.

CA EDD 916- (916) 657-0529 Website Address: www.edd.ca.gov

http://www.edd.ca.gov/pdf_pub_ctr/de542.pdf Form DE542 – Report of Independent Contractor(s) is required when you pay, or plan to pay, an individual/self-employed/sole proprietor $600 or more in the calendar year. The form is simple, can handle multiple contractor reports on one page, and can be faxed. There is no filing fee.

You will need: Your Division TIN/EIN (Federal ID number), Independent contractors name, address & SS number, and amount paid, or contracted to pay, for the year.