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TAX EXEMPT ISSUES FOR UK COOPERATIVE
EXTENSION
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What Changed
Federal Laws Changed (2007)All tax exempt organizations required
to begin filing annual IRS tax forms4-H National HQ decided to cease
providing group exemption for clubs and affiliates (councils)
Increased need for financial transparency and accountability for all Extension funds
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Guiding Principles for Solution
Provide financial accountability and transparency
Be minimally disruptive, yet provide accountability
Establish a tax exempt basis for UK CES
Provide options rather than dictate actions
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Possible Exemption Paths
Governmental ExemptionCounty Extension is tax exempt
because Extension Districts are considered a governmental subdivision of the Commonwealth (KRS 164.620)
501(c)3 statusNeeded to accept certain grants or to
conduct numerous gaming or raffle fund raisers (see KY regulations on Gaming)
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Four Options for Handling Funds(All Organizations)
Option A: Governmental, multi-checkbookGroups keep checkbooks
Option B: Governmental, single checkbook per program council
Option C: Governmental, District Board holds the checkbook
Option D: Seek 501(c)3 Status
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All Options Must Provide:
Financial Accountability Budget Transparency Group Oversight Adherence to UK money handling
and financial procedures Electronic Recordkeeping with the
goal of standardizing categories to facilitate aggregation of records
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Option A – Governmental Multiple Checkbooks
The county program councils and their related sub-groups will maintain control and have autonomy over their own funds and individual bank account with general oversight by the County Program Council
The appropriate agent will be responsible for adherence to procedures
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Option B – GovernmentalSingle Checkbook (per Program
Council) Funds related to a program area in the county
will be handled centrally by the appropriate county program council, with separate sub-accounts established in a Quicken, Quickbooks or similar electronic bookkeeping system for each related entity’s (club/group/etc.) funds.
The appropriate agent will be responsible for adherence to procedures
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Option C – Governmental- District Board Checkbook
County Program Council funds will be handled centrally by the County Extension District Board with a separate sub-account established for each County Program Council in a Quicken, Quickbooks or similar electronic bookkeeping system.
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Option D: 501(c)3
Apply for own 501(c)3 exempt status Needs Memorandum of Understanding
between the Director of the Cooperative Extension Service and each 501(c)3 entity which will accomplish: Financial Accountability to District Board Programmatic Accountability to Program
Council and County Extension Council
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Note for 4-H only:
If 501(c)3 status is needed for grants, KY 4-H Foundation is willing to handle funds to meet requirements of being a 501(c)3 entity. Subject to Service Fee (currently 5%)
Multi-county/District entities:Link to the KY 4-H Foundation ORLink to a county 4-H program for
government exemption and follow their guidelines
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4-H Decision Needed
By March 15 EACH 4-H club/council or entity with an EIN/Checkbook must decide the option chosen. (Option A, B, C, or D)
State 4-H Office will be surveying each county to verify which plan is chosen which will then be reported to National 4-H HQ
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Extension Homemakers
Can be included in the Governmental Exemption, but may have to decide before all of the details are known
Can form own 501(c)3 organization.
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FAQs
To be developed.