Internal:Audit/Key tax information

Main issues

• Our Template:Tax deductibility says: "Tax Deductibility: Wikimedia District of Columbia is a public charity under Section 501(c)(3) of the Internal Revenue Code. Your donation is tax deductible to the extent allowed by law. Please reference tax ID number 45-2106571 when reporting your donation."
• There are several types of 501(c)(3) nonprofits. WikiDC is a public charity, not a private foundations nor a trust. To remain a public charity, which is desirable, WikiDC must generally get a third of its money or more from grants and contracts and small donations, not a single large donor. It's okay if in SOME years the percentage is lower than a third. We've checked and thru 2020 at least we satisfy the "public charity" requirement.
• Several web sites show which organizations are public charities, e.g. https://www.causeiq.com/search/organizations/?view=list where our entry is here: https://www.causeiq.com/organizations/wiki-society-of-washington-dc,452106571/
• For more on compliance for such organizations, see IRS publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities (2018)
• Our taxes include the same basic package every year: 990-EZ, Schedule A (the public charity assertion), Schedule B (the large sources of revenue, which is not made public), Schedule O (supplemental/extended text and financial info, something of a mess). I think we've always filed that collection of forms and that the same package is appropriate for later years when we receive less grant money and start to have business income/contracts.

Issues on a 990-EZ affecting us

• Lines 10-16 are for expenses; let's document and plan our categories for this, which can perhaps match in Quickbooks and Podio and so forth. I think our PO box and election mailing expenses go with printing and postage (line 15).
• The 990-EZ form needs you to know whether your org has filed Form 5768. We DID, and we "made the election", meaning that our lobbying activities are judged strictly by expenses, which are generally zero per year. James and John said so, and Peter found the digital form, filled out but not yet signed. See w:501(h) election. (Fun fact: John S wrote that article, for us, by us!)
• Form 990 expects that you know if the organization (WikiDC) is a "supporting organization" or a "supported organization" or neither. We are neither. The categories are discussed here. The key determining fact is that Wiki DC doesn't have loans from, loans to, or interlocking management or interlocking directorships with WMF or any other partner organization. Knowing this, we can skip some of the Form 990 questions.
• When the individual "responsible" for WikiDC changes, we must file a Form 8822-B. That individual was KL, now it's PBM, who filed this form circa March 2022. We don't see whether the IRS has recognized and recorded it yet, but we can share the form with banks etc. It has private info and can't be in public online.
• We always qualify to file the 990-EZ not the full 990 because our annual revenues are under $200K. The 990-EZ is preferable for our purposes.
• In 990-EZ part IV we are expected to put hours/week devoted to the position. The money numbers can be zero. We do not need to list any "key employee"; this category is for high-paid employees.
• In EZ part III we can generally draw our "program service accomplishments" from our Annual Reports on this web site. Include estimates of expenses, including labor cost. "Grants" in this section refer to grants our chapter GAVE out.
• The tax year, the year listed, e.g. 2017 990-EZ, is for the FIRST year in cases where the fiscal year bridges two years. I found this confusing, since the document generally could not be completed until the full fiscal year was over, and one usually refers to the fiscal year by the later calendar year. But analogously, an individual files the 2020 Form 1040 only in 2021.

Schedule A

• We can check box 7 and leave the rest of the page blank the rest, as our peer orgs do. We are to check only one box, showing that we are a "public charity" not a "private foundation" in the tax law context. They're not looking for information.
• A.II (Part II): It appears we just put total revenues in column (e), and 100% in rows 14 and 15.
• Parts III and IV can be left blank, oddly. That's what our kinds of organizations do. We "qualify under Part II", meaning we have shown or stated that we are a "public charity" not a "private foundation," so Part III is irrelevant. Part IV is for "supporting organizations," meaning those more tightly integrated than we are into another parent organization. We aren't a "supporting organization"; there's no need to check that again. We don't share management or directors or officers with the WMF or any other organization. It is strange to leave several pages basically blank, but that's what we are to do. (Many organizations are leaving these blank, so by design it seems they should be on some other schedule not the main EZ form.)
• I think we should leave section A.V blank. The grammar is tricky but I think this section is for supporting organizations. ask

• Schedule C seems unnecessary for us in principle but we should fill it out. It's not difficult. Expenses are normally 0. The reasons numbers appear on the form is that there's a cap, computed as 20% of our expenses. (That confused me for a while; the figure seems like it came from some real expense, but it's just an imagined ceiling.)
• Our program expenses listed on 990-EZ Part III SHOULD include activities for which we were the fiscal sponsor. It is not necessary to go into great detail about them.
• Accounting periods and methods: Our fiscal year ends Sept 30 each year, and I think it always did back to our founding in 2011. The relevant tax form is the for the year with the Oct-Dec quarter; the 2021 form is for the Oct2021-Sep2022 year. We use the "accrual" method, not the "cash" method, and always have; this seems to be more compatible with state forms. To change these methods or periods we would need to file Forms to do it; see e.g. Pub 538 and Forms 1128 and 3115.
• 990-T is for "unrelated business income"; not relevant to us, at least until the time we start to take on contracts; Schedule B is not public for us, but it would be for some orgs (political 527 orgs). There are a spectrum of 501c orgs, listed in appendix A. see p.2: 501(c)(3) de facto includes some of the 501e/f/etc orgs.
• we need to look for Form 1023 documents of any age that we've filed
• p 5 notes on accounting periods and methods. We've always used "accrual method" and Oct-Sept fiscal year. See Pub 538 and forms 1128 and 3115 for more on this
• p5 indicates late filing fees can get up to 5% of the org's revenues; unless "reasonable cause"; we might note that IRS mailings don't often seem to get to us; it may be that we've never convinced them to write to the PO Box
• round to nearest dollar on form, with exception if summing two numbers (include the cents then sum and round) (p6)
• To explain or supplement answers, add to Schedule O (p6)
• page numbers here refer to the 2017 instructions for 990-EZ
• Heading of 990-EZ item B (p7): note we could check the "address change" box to get them to update their address for us
• Also on item B: we may want to put Application pending until we have been reinstated? (p8)
• Item C: let's put "Wiki Society of Washington DC Inc., aka Wikimedia DC". todo
• do not check item H; we are required to include a Schedule B
• The official rhetoric around the "public support test" or "33 1/3% support test" is difficult but substantively: We can show we receive more than 34% of our revenues from the "public" in any long period, therefore we are a public charity. We MEET the public support test, aka the "33 1/3% support test"
• heading item J: I think we should continue to check 501c3 despite loss of this status; that IS the kind of form we are filing; maybe ask BL
• Item K: We are a "corporation", not a "trust" or "unincorporated association"
• Line 1, revenues: There is some issue about how to report a grant which will be paid in future years; basically one reports the amount of money here. Almost all our revenue goes here: membership donations and grants
• Line 2: "Program service revenue": We have nonzero levels of this; it seems to include grants/hire. It would be good to see this term defined. It may mean "contracts" and it would also include anything we sold, but basically we don't sell anything. The is line shows the total of income from contracts or grants that are "payments for services."
• Line 3: Our "Membership dues and assessments" is, oddly, ZERO. Line 1 is where our membership revenues go. Line 3 would be nonzero if the amounts were matched by "membership benefits." Our membership benefits are de jure zero. If they had a "fair market value" (FMV in these documents) the membership dues to pay for them would go here.
• Line 4: "Investment income" -- zero, until we have an endowment. Possibly if our bank account paid interest, that amount would go here.
• Line 10: The amount OUR organization paid out in grants. Often that will be zero. Includes things called scholarships or fellowships or research grants to individuals. Do not include administrative expenses of making such grants. For grants we give larger than $5K, the recipient should be listed on schedule O. Not sure we've ever given such a grant.
• Line 12: Gross pay to employees during the relevant tax year ; a later section looks for calendar year info but only for "highly compensated" employees and we don't need to answer that
• Line 14: Occupancy, rent, utilities, and maintenance. Should be zero? but not in tax year 2015 it seems. Let's think about why that is. check with john'
• Line 15: Printing, publications, postage, and shipping: probably PO box expenses + mailing expenses for the election
• Part III: This takes effort: A concise yet complete/clear description of our program service accomplishments for the "services" which COST the most in dollars.' So fiscal sponsorships hardly show up here. Editathons should lead. Describe the activity, give estimates, give objectives for the activity. (discussed on p17). pbm update that
• "Key employee" (Part IV, p17) We don't have one; these are for high paid people or those with the authority of officers/directors. So we should not list anyone.
• Compensation statement in part IV is by CALENDAR year, different from the earlier use of tax year. I think we don't need to show any compensation info here in Part IV..
• Line 33, p19: "Change in activities" -- at some point, not tax year 2017, we should mention that we start to take on contract work; aside from that I don't see any "significant change in activities". We didn't "discontinue" much, except maybe boot camps and fiscal sponsorships; we could mention that.
• Line 34, p19: Changes in organizing and governing docs: it is implied here that even a change in membership ("composition") of the audit cmte might count as a change. Let's see what other orgs do. In general we have not had "significant" changes in these documents, and I don't see why the IRS would be interested in the ones we have changed.
• Line 35, p19: We do have "unrelated business income", not from selling anything exactly, but from business contracts. Not in tax year 2017 but this will be relevant.
• Line 41 (p23) and appendix G (p40-41): List of States: we are supposed to know whether we are filing this tax form with DC or other states. Can we get advice from BL?
• Line 47 (p24): YES we "elected"; we "took the 501(h) election"; this is documented. It means only money matters here, and 0 is a good estimate of our lobbying expenses
• Signature block on 990-EZ (p36): De facto the president signs. Someday let's hand this off to the treasurer
• List of tax categories of [tax-] Exempt orgs, 501c3 etc. Worth rechecking someday and making clear in enwp perhaps; our own category is clear
• Appendix B (p28) is a bit garbled but we can ignore it; it's addressing whether an org can file 990-N instead of 990EZ or 990. We can't. Gross receipts has a different meaning here from in appendix C; the difference is not clear, but we don't need to use this one. Our revenues are always above 50k$/year; we must file 990-EZ
• Definitions, p30 and p43-44: A tax-exempt org is one in the categories of 501(a) and (501(c) or 501(d)), or a "trust" described in other sections. Let's build on these definitions and record the relevant ones on this page.
• Appendix H of 990EZ instrux: We have an obligation to record/report large donations, above $250, or maybe $250/year. see p42. Let's deal with this when the crisis is past.
• Schedule A: The key bit is that we have >33% on line 14 and we check the box on line 16a. This will always be true, and the rest seems to be just overworked polite gymnastics.

Reinstatement issues

• Key IRS statements on reinstatement: [1]
• I think a Form 1023 was filed to get our original approval as a 501c3. See File:Wikimedia DC Determination Letter.pdf for some of our documentation on this. It was filed Dec 22 2014, and the chapter became a 501(c)(3) retroactively to that date, approved in Feb 2015. Until and including 2014 it looks like we filed Form 990-N's e.g. [2], and not Form 990-EZ.
• Form 1023 and 1024 and variants on those numbers are also the formal requests for reinstatement. Sometimes there are fees for this. I am not aware that we paid any such fees for reinstatement.
• Form 911 is a request to speed up the evaluation of a reinstatement. We did file one. We think we filed a 1023 also.
• It is not clear why we haven't heard back -- but the IRS may simply not have gotten to ours yet. A more central issue is that we need to be sending the recent sequence of 990-EZs. We've started. They are similar to one another so we'll get better at it.
• We have filed for extensions, I think, but so far as I can tell never amended any return.
• According to the 990-Z instructions (2017, p5-6), failure to file and filing late are reasons for the IRS to charge a financial penalty, unless a "reasonable cause" is given for filing late. We don't have great rhetoric there but hopefully they treat our "cause" for being late as "reasonable", and if not we owe fees and penalties.

Background, comparisons, side issues not relevant to our tax filings

• How EINs are assigned
• Internal:Public_Policy/Taking positions on public policy and nonprofit-charity status
• Must "File an 1120" if have to pay taxes
• A 990-T form is for "business income", and required if we had more than $1000/yr of it; we don't have any such income
• After filing, we can expect our Schedule B (the list of major grantors and donors) to be private. For some other orgs it would be made public, or partly public, notably for a 527 (political) org. I didn't see where the line and nuances were drawn for other 501(c)s.
• There are a spectrum of categories of 501(c) organizations, which de facto includes some in IRS regs sections 501(d,e,f,j,k, and n). The list of categories is so extensive and detailed that it seems too long to even show here. We are a 501(c)(3) public charity with under $200K in revenue and no business income and near-zero lobbying expenses; if we get outside those limits we would have to learn more.
• We are a public charity, which means we aren't a 4947(a)(1) nonexempt charitable trust and we aren't a private foundation.
• An org may be required to file the completed Form 990-EZ with state governments; don't know if we are required to or if we ever did (ASK)
• A Form 990-N is filed if an org does not have to file a 990-EZ or other return. That never applies to us.
• WMNY has this EIN: 27-0520584 and has filed Form 990-Ns (per [3])
• Our chapter is NOT a controlling org, a controlled or, a supporting org, or a supported org. (section 509(a)(3)) Basically we aren't closely enough aligned or managed with other orgs for this to be even a close call. I am looking for an example to clarify what those categories are, but anyway we aren't in those categories.
• Dollar amounts should be rounded on the 990 forms. Round $.50 up to $1.00. Do sums with the pennies then round the totals. Don't report negative numbers; look for a way to say 0 instead unless instructions seem to allow a negative amount.
• Do answer with 0$ rather than leaving items blank unless the question was conditional and doesn't apply.
• It is okay and normal to explain answers on Schedule O if the filers think it's necessary.
• We don't have "joint ventures", legal "partnerships", "disregarded entities", "investments", or "passive investments" so far as I can tell.
• We are expected to file (we think): Form 990-EZ (showing main activities), Schedule A (establishing "public charity" status), Schedule B (listing contributors), Schedule C (political campaign/lobbying, but maybe not Parts I and II), and Schedule O (Supplemental info). It seems clear that we don't have to file any other form with the 990-EZ.
• Charity Navigator doesn't list us but does list the WMF
• ProPublica and Guidestar and EIN Tax Id have basic info from IRS filings about us.
• "The National Taxonomy of Exempt Entities (NTEE) system is used by the IRS and NCCS to classify nonprofit organizations" mainly by their activities, or services produced (that is, their "industry"). The NTEE maps into the standard North American industry classification, NAICS. Propublica shows WikiDC's industry/classification as "Educational Services and Schools - Other (Educational Institutions and Related Activities)" That suggests we are classified in NAICS 6116 or 6117.
• Info on WMNY is online: [4]; EIN is 27-0520584
• A small org CAN start an endowment. That's not relevant in the short run but it may in the long run allow us to invest our money to get a higher return.
• "Excess benefit transactions (Appendix E, p33-37) For certain we do not have any "excess benefit transactions", that is, transactions benefiting insiders to the degree that reporting them on tax forms might be required. (We don't have them by policy, and it is verifiable by routine inspection of our bank account and financial records.) We DO have "disqualified persons" (the phrasing needs clarification: it means disqualified regarding a particular transaction) but this doesn't matter. These are large donors, officers, and board members.
• Tax forms and publications relevant to public charities listed on pp 38-40; maybe worth review someday
• "Donor advised funds" (pp 23-24) -- presumably irrelevant, but let's find a definition if we can.
• 990EZ lines 43-46 -- we don't do these things, so far as one can tell
• 990EZ Line 49 (p24): Transfers to exempt noncharitable orgs?? Best guess at this moment is that we don't do this, although let's look at fiscal sponsorships in this light and determine it