Is your Garden Club taking full advantage of all the benefits of being a non-profit tax exempt organization?  If the IRS recognizes your Club as a 501 (c)(3):

• Your club does not pay Federal income tax. (you must file a tax form every year, however)
• Your club does not pay Connecticut State income tax.
• Your club may purchase supplies and services for club use without paying Connecticut sales tax.
• Your club may accept tax-deductible donations, encouraging donors to support your club activities.
• Your club is allowed to hold 5 fund raisers per year where you may sell items without charging Connecticut sales tax
• If your club has a paid employee, you are exempt from paying State and Federal unemployment tax.
• If your club benefits from a windfall estate, you are exempt from paying hefty State inheritance tax.

For more information about the Fund Raiser statutes in Connecticut refer to the Connecticut Department of Revenue Services Bulletin SN 98(11) by clicking here.

Do you know if your Garden Club is a tax exempt non-profit organization?  And if it is, how does your Club Treasurer prove that to potential donors or to a business when you wish to make a tax exempt purchase?

The proof that any organization is a 501 (c)(3) tax exempt non-profit organization is a “Determination Letter” from the IRS.

The Federation is a 501 (c)(3) tax exempt non-profit organization as determined by the IRS in 1967 and we have a copy of that original “Determination Letter” on file.   The Federation is a “parent organization” and the IRS allows us to include individual member clubs on our “Group Exemption List.”  Most Connecticut clubs are on that list and are covered by our Determination Letter. They, therefore, enjoy the same tax benefits as The Federation.

If your club is on that IRS Group Exemption List, you need two documents to prove to potential donors or vendors that you are a Tax-Exempt Organization:

•  A copy of The Federation’s Determination Letter
• A letter from the Federation stating that you are on our Exemption list and covered by our Determination Letter.

Your treasurer should have these letters on file, but if not, contact the Assistant Treasurer of The Federation to obtain them. You will be sent the letters once your status has been verified,  Make copies and always keep copies in your club’s files.

IMPORTANT: Continue to file your IRS 990 tax return every year and your Club stays on that list.  Failure to file and your club could be “revoked” by the IRS and removed from that list.  It can be expensive and a lengthy process to regain tax-exempt status. The Federation cannot simply put you back on the list if your club has been revoked.

NOTE: Some Federated Garden Clubs are not on our “Group Exemption” list and may have their own tax exempt status.  Or your club may be part of another “parent organization” such as a Woman’s Club.

If you need help investigating this or other issues related to your club’s tax status, the Federation’s Treasurer and Assistant Treasurer will try to be of help.

Is your Garden Club a 501 (c)(3) tax exempt non-profit?  If so, the IRS allows your Club to purchase supplies and services without paying Connecticut State sales tax if the purchases are made exclusively for the use of the Club.

What paperwork does my club need?

Complete Form CERT-119 for each purchase, attach determination letters and pay by club check or a card in your club’s name http://www.ct.gov/drs/lib/drs/forms/2004forms/certificates/cert-119.pdf

Here’s the detail: Fill in the “Purchaser” information and most importantly your club’s Federal Employer ID Number (EIN).  Fill in the name of the seller, and they will complete that line with their own tax ID numbers.  You can choose to give the vendor a “Blanket Certificate” if you will be making additional purchases from the same seller, but don’t count on them keeping your form on file for you.  It’s easier to check “for one purchase only.”  Check if you are purchasing tangible property such as plants or office supplies or taxable services such as computer services. Describe your purchase on the next line, such as “various office supplies.”

Your Treasurer or President must sign and date the form.  A copy of the FGCCT Determination Letter and our FGCCT cover letter stating that your club is covered under our letter (See How to prove you are a Tax-Exempt Organization for more detail) should be attached, although many small local organizations don’t ask for them.

Payment must be made by check drawn from your Club’s bank account or by credit or debit card in your Club’s name.  Cash purchases are only allowed if under $10.  You may not use your personal credit card or check and expect to make a tax exempt purchase.

What if your club has a Connecticut State Exemption Permit, or E-Permit? What is it?

Prior to 1995, the State of CT issued an Exemption Permit called an “E-permit”.  All you had to do was show your “E-permit” to make a tax-exempt purchase. The E-permit is still valid, but many vendors are not familiar with the 20 year old form, and many Clubs have lost their original certificate.  If you have such a permit (E plus 4 digits) fill it in on the CT-119 where indicated.

What if my club has its own determination letter?

Attach it instead of the two letters supplied by The Federation.

What is the Connecticut Tax Registration Number?  Do I need one?

If you purchase goods for resale on more days than the five permitted by your organization without collecting state tax, you must collect tax and pay it to the state of Connecticut.  In that case you need to apply for a CT Tax Registration Number.  This is not generally the case for most Connecticut Clubs, so you may leave that space blank on the CT-119,

Did you know there are compliance regulations if your Garden Club is a 501 (c)(3) non-profit tax exempt organization?  While enjoying the benefits of your tax exempt status, your organization must also be aware of activities that could jeopardize that status.

• Failure to file yearly IRS tax return, 990N or 990EZ.

This is the main reason that Garden Clubs lose their tax exempt status.  Your Club’s Treasurer is responsible for the yearly filing within 5 ½ months after the end of each fiscal year.  The Club President should also be aware of the due date.  This task which should be on the Club’s activity calendar and reported to the Membership when completed.  Assistance is available from FGCCT  Assistant Treasurer.

• Participating in any political campaign either for or against a candidate for public office.

Your Club cannot publicly endorse a candidate or contribute funds but may participate in voter education activities such as non-partisan public forums, or get-out-the-vote drives.

• Engaging in substantial lobbying by attempting to influence the public support of specific legislation.

“Substantial” is the operative word and Clubs should not be discouraged from educating their members about pending legislation that affects the purposes of their organization.

• Providing unreasonable compensation or benefit to individuals.

This is intended to prevent the distribution of net profits to those who exert influence over the organization. Club expenses should be mainly used for goods and services that meet its mission and  objective as a non-profit organization.

• Not operating in accord with the purposes stated in original application for exemption.

The tax exempt status of The Federation and Member Clubs is based on the purpose of “charitable and educational” endeavors.  If a Garden Club ceases to have programs that further these goals and becomes more or less just a “social club” it risks losing tax exempt status.

• Failure to maintain records that prove compliance.

IRS requires tax exempt organizations to be able to substantiate source of income and expenditures as reported on the yearly return.

For additional information about the these issues consult the IRS publication 4221-PC “Compliance Guide for 501 (c)(3) Public Charities” available online or in print from the IRS website. Click here.

Does your Garden Club receive tax-deductible donations? You should! One of the benefits of Federal recognition as an educational and charitable 501 (c)(3) is the opportunity to receive donations from individuals, corporations, and other organizations which can help finance the important work our clubs do. We are clubs of volunteers. While we generously donate our time and talents to our clubs, we shouldn’t expect our members to provide all the income needed to support our club programs. Where does your club’s income come from? Many are tempted to say donations, but that is most likely not accurate. For one thing, the dues your members pay may only be considered a donation to the extent such payment exceeds the monetary value of the benefits of membership.

When you sell plants and treasures at your May Plant Sale, those receipts are not donations. What you sell may have been donated, but the purchaser receives something in exchange for the money they pay to your club. That is considered a sale. Now if someone, club member or community member, writes a check to your club to support your plant sale but receives no goods, that is a true donation. Ah, see the difference?

How does your club handle donations? The IRS requires that non-profit organizations acknowledge any monetary donation of $250 or more with a written letter which may be used as a receipt for tax purposes. This letter must contain:

• A statement declaring the nonprofit’s tax exempt status as a 501 (C)(3) including your club’s Federal EIN#;
• The name and address of the donor;
• The date the gift was received and the amount;
• A statement that no goods or services were received in exchange for the gift.

Many organizations set a lower limit. For example, The Federation acknowledges any tax-deductible donation of $100 or more with a formal acknowledgement letter, but also acknowledges other donations, regardless of amount, with either a computer generated receipt or a hand-written note from the appropriate Committee Chair. Regardless of IRS requirements, your donation acknowledgements should also express sincere thanks and a mention of how the funds may be used. It’s a good opportunity to tell the donor some information about all the good work your club does in the community!
I welcome comments and questions about DONATIONS.

Shirley Hall, FGCCT Treasurer
treasurer@ctgardenclubs.org

When you filed your personal income taxes for 2020, your fiscal year was the same as the calendar year, January to December, and your taxes were due by April 15th.  Everyone remembers this date.  But the majority of our Garden Club have a fiscal year that is different than the calendar year.  How did that happen and why? The Federation applied and paid for 501(c)(3) non-profit “parent” organization status with the IRS way back in 1967. FGCCT Garden Clubs were granted non-profit status as “subordinate” members of The Federation. Subordinates are listed with the IRS as “Federated Garden Clubs of CT” with their individual EIN identifying each specific club on our IRS Group Exemption. The fiscal year of a Garden Club was determined at the time they became listed on this group exemption. Each club has their own EIN, the Employer Identification Number, even though your club does not have employees. Your club’s EIN identifies your club the same way your social security number identifies individuals when you file and pay taxes.

You may not even be aware of your club’s IRS fiscal year dates, because it does not necessarily correspond with your current program year or even your budget year, which is OK. There are many things our non-profit Garden Clubs must take into consideration to comply with IRS regulations. Perhaps the most significant compliance issue is that all non-profit Garden Clubs must file yearly with the IRS on or before 5 1/2 months after the end of their fiscal year. So knowing when your fiscal year ends is significant.

Most clubs qualify to file the 990-N form quickly and easily online. Filing on time with the IRS is the responsibility of individual clubs, it is not the responsibility of The Federation. We may endeavor to educate and remind, but ultimately it is the responsibility of each club.

The IRS does not inform The Federation when you file or if your club didn’t file. So what happens when your club does not file for three consecutive years? The IRS automatically deletes your club’s name and EIN from The Federated’s Group Exemption – your non-profit status is REVOKED. No warnings are issued to your club and no notice to The Federation. The IRS assumes that after three years of no filings that your club no longer exists.

If your club has its non-profit status revoked, it is a major headache and a complicated procedure to gain that status again. I do not wish to ever have that happen to another club. Trust me, just ask a club who has dealt with this issue or is still dealing with it. The Federation is not allowed to just add your club back to our Group Exemption. It is entirely up to the club and the IRS to deal with reinstatement. I have called the IRS on behalf of clubs and spent hours on hold and hours talking to IRS representatives getting promises, with little or no results. There is no guarantee that a club will be successful, either. We’ve had member clubs that needed to disband because they could no longer operate without tax exempt non-profit status.

Just make sure your club files every year and don’t get REVOKED in the first place!

A club cannot file their 990-N until their fiscal year has been completed. A few of our member clubs file a written form 990-EZ or 990 long form, rather than the short, easy to file on-line 990-N.

The following clubs are due to file a 990-N now:

Garden Club of Old Greenwich fiscal year is May 1 to April 30, and is due now, but before September 15

The following Clubs’ fiscal year is June 1 to May 31 and are due to file now, but before October 15:

Durham Garden Club
Gardeners of Simsbury
Knollwood Garden Club
Middletown Garden Club
Milford Garden Club
New Britain Garden Club
Spring Glen Garden Club
Suffield Garden Club
Wallingford Garden Club
West Hartford Garden Club

It is possible some of these may have already filed; let me know if you have. I have filed for my Wallingford Garden Club already. If you do not agree with this list or you have questions, PLEASE email me!

Shirley Hall, FGCCT Treasurer
treasurer@ctgardenclubs.org

A club or organization cannot just declare themselves to be a non-profit. An organization applies to the IRS to gain the Federal status of a non-profit. There are dozens of different types of non-profits, based on the purpose of the organization. Specifically, Garden Clubs can be determined by the IRS to be non-profit if the stated purpose of the club is to be charitable and educational for the public good. The Federation was granted this designation and also granted status as a “parent” organization and the right to extend the Federal non-profit designation to our club members. Each individual club does not have pay a fee and apply to the IRS. In return, our Garden Clubs must comply with current Federal laws and regulations to maintain their non-profit status.

Does your Garden Club include the words “educational and charitable” in your stated purpose? It should! Does your club call itself a “social club?” It shouldn’t! The IRS could revoke your non-profit status if you are nothing more than a club that meets for social purposes. How much of your budget is spent on educational and charitable endeavors?

The term “non-profit” is often misunderstood. It does not mean that garden clubs are prohibited from making a profit. It merely means that the profits are not taxed by the Federal government. Should garden clubs strive not to make a profit? Absolutely not! Any organization that isn’t making more money than it is spending doesn’t have much of a future. Is there a limit as to how much income, profit, or savings a garden club can have? Not really!

Then why do so many garden clubs plan a budget that has equal income and expenses each year? Why aren’t we planning to make a profit? How do we manage to pay our expenses and also be “educational and charitable” if we don’t have profit?

More in next issue about Garden Club budgets.

Shirley Hall, FGCCT Treasurer
treasurer@ctgardenclubs.org

Budgets are a vital tool for planning and evaluation. On the income side, you should have an account for Membership Fees which would have a sub account for Dues and accounts for member payments for projects or events you are planning to hold, such as workshops, club luncheons and field trips. The next account should be Ways and Means/Non-taxed which is income from selling goods and/or services at up to five one-day events you expect to hold. It is a good idea to list each event as a separate sub-account with the amount of gross income you expect each event to produce. The expenses for each event should not be mixed with the income, but listed separately in the expense portion of your budget. Very often I hear a club made, for example, $3,000 on their plant sale, but they neglect to add that they had expenses of $800, netting only $2,200. Fund raisers are rarely ALL profit! If you plan more than five “selling” days, you will need an additional account labeled Ways and Means/Taxable. The next income account is for Donations Received which is generally budgeted as zero, and lastly, the Interest you expect to receive on any savings you may have.
And a reminder, Dues is not a donation. A donation appeal, a campaign to request donations from the community or even from your own members, is NOT counted as one of the five allowed fundraisers IF it is strictly an appeal for money to help finance your educational and charitable programs and no goods or services are received by the donor.

On the expense side, there are three major types of expenses: Administrative, Fundraising, and Program Expense. Administrative expenses relate to the daily running of the club and include rent, insurance, FGCCT dues, professional fees, incorporation fees, etc and are usually easy to budget because they remain quite consistent from year to year. Under Fund-Raising Expenses, you should list each planned event in a sub account and set a budget for all costs anticipated with each event. The largest portion of your expense budget should be for the Programs that support your club’s statement of purpose and are in accordance with your IRS Determination as a non-profit, which is for charitable and educational purposes. Under Programs, each Committee should be listed with an estimate of all expenses related to the committee’s program for the coming year including speaker fees. Another Program expense is Donations Given – does your club support local charities on a yearly basis, and donate a portion of your fund raisers to worthy causes? And last, an Education account, to list your clubs’ planned donations to both the FGCCT Scholarship Fund and hopefully your own scholarship program. Also included under education could be a sub account for reimbursements for members who attend NGC Schools, if your club encourages participation in the four schools in that way.

How much of your club’s expenses are for programs that support the purposes of your club?

Officers of 501 (c )(3) Non Profits have an obligation to embrace the values of accountability and transparency, as a matter of ethical leadership as well as legal compliance. Wow – that’s a big sentence that I recently read online. Let’s look at what this statement implies, especially for our Garden Club Treasurers.
Accountability is the obligation to explain, justify, and take responsibility for one’s actions. As Treasurers we must know the rules and know why we have these rules and be prepared to enforce them, and, most importantly, we take responsibility for the integrity and accuracy of our club’s finances.
Transparency refers to conducting our actions and financial activities in an open and clear manner. Do we report income and expenses as a lump sum for the month and not itemize? Giving our members all the information about both income and expenses is preferable to not giving them enough. Your club members deserve to know how much money is in your treasury and investments – after all, it is THEIR money. Giving out specific financial information and account balances in a Treasurer’s Report is not always advisable at an open club meeting with speakers and non-member guests in attendance. Sometimes mentioning that we paid the speaker $400 for last month’s program, but the speaker sitting in the back of the room waiting to give their program for this month only requested $150. Well, you can see it sometimes can get awkward. But the information must always be made available to your members, perhaps in the meeting minutes that are distributed to your members. Financial information must always be available on request, both historic information and current conditions. That is Transparency.
Ethical leadership cultivates trust in the actions we take, especially regarding our club finances. Garden Club Members look to our officers to set the tone and character of the club, and our clubs look to the leaders of The Federation for that same ethical guidance. Do our leaders strive to do what is right, and not just what we are legally bound to do? If we have a club policy such as “no refunds” can we do the right thing occasionally if a special situation warrants? I’m not talking about breaking a law, but sometimes a policy needs to be revisited or examined, especially as it concerns people. Treasurers must be worthy of trust, which is to present facts as they are, play fair, and communicate honestly. As Treasurers, do we use the same set of rules and procedures for all members of our organization? Do we require receipts before we reimburse or do we occasionally “let it slide?” This can lead to dangerous territory and can imply that we “play favorites.”
Legal compliance is probably the concern of our Treasurers more than any other officer of our clubs. As Treasurer, you must endeavor to be aware of all Federal and State laws and regulations regarding your tax exempt status as well as the bylaws and standing rules of your own club. Knowing the laws certainly makes it easier to be in compliance! As Treasurer, do you know the dates of your fiscal year, thus the date your 990-N filing is due? I am amazed at how often a Treasurer uses the wrong dates. Do you know if your club is Incorporated or not? If yes, do you know which month your CT Secretary of State Annual Report filing is due? Do you know and adhere to the date your club dues is to be paid each year? If you are reading this and your club has not yet paid your 2022 dues to the Federation, then you are not in compliance and your club is delinquent.
Shirley Hall, FGCCT Treasurer
treasurer@ctgardenclubs.org

Many Club Treasurers I have talked to mention that they have their Club’s financial books audited each year. In  act, many club Bylaws refer to an annual audit. You should be aware that using the term “Audit” has certain connotations. The term audit should be reserved for a formal examination of your organizations accounts and financial situation performed by a Certified Public Accountant (CPA). But even if your club engages the professional services of a CPA, there are three different levels of financial statement services offered by CPA’s: Audits, Reviews, and Compilations. The more complex and complete the service, the higher the cost.

• An Audit provides the highest level of assurance of an organization’s financial statements. An audit provides assurance that the organizations financial statements are free of material misstatement and are fairly presented based upon the application of generally accepted accounting principles. An Audit includes:
•  Confirmation with outside parties
• Testing selected transactions by examining supporting documents
• Completing physical inspections and observations
• Considering and evaluating the internal control system of the organization

A CPA Review provides limited assurance of an organization’s financial statements. During a review, analytical procedures present a reasonable basis for expressing limited assurance that no material modifications to the financial statements are necessary and that they confirm with generally accepted accounting principles.

A CPA Compilation provides no assurance of an organization’s financial statements. The CPA take financial data provided by the organization and puts them in a financial statement format that complies with generally accepted accounting principles. There are no testing or analytical procedures performed during a compilation.

Most clubs merely have the books or even just the checkbook and/or bank statements looked at yearly by a club member or a committee of club members or by a spouse or relative of a club member. Some clubs do have a non-member look at the status of accounts, but very few, if any, clubs pay for a CPA to actually perform an AUDIT

In any case, clubs should be aware of accepted accounting principles and be aware of IRS compliance issues for non-profits. It is recommended that all club Treasurers visit the IRS website and search for information regarding non-profits. All clubs should have a copy of the IRS Publication “Compliance Guide for 501 (c)(3) Non-Profits” which can be found on the IRS website at this link:
Publication 4221-PC (Rev. 3-2018) (irs.gov)

The yearly filing of the IRS Form 990-N or “e-postcard” has always been the responsibility of individual clubs, usually completed by the Club Treasurer but ultimately it’s the responsibility of the Club President. Your FGCCT Treasurer and Assistant Treasurer have spent much time and effort to educate and assist. Yet we have had clubs fail to file and lose their tax-exempt non-profit status. We’ve always said the online registration process took longer than the actual filing of the Form, and now there’s a new wrinkle.

We just found out that, as of August 1st, the IRS “modernized the authentication platform.” This was done with no prior warning to us 990-N filers. To make matters worse, the new instructions, indicating that you could use the same sign in username and password you previously used, were misleading if not actually wrong.

The bottom line is that the IRS now requires that all filers create an account with an authentication website called ID.me. This is no simple procedure. We are quite sure many will find the process too time consuming and confusing, and the information required a bit over-the-top for a volunteer in a Garden Club.

The ID.me username and password are not transferable, so each time you change President or Treasurer someone new will have to sign up with ID.me. If you would like to view the ID.me website, the link is www.id.me. You will see they are also involved in filling prescriptions, discount merchandise sales, and access to Social Security accounts.

We are very concerned this new process will have an adverse effect on the number of clubs who successfully file, thus increasing the possibility of more clubs losing their non-profit status. We propose that the responsibility of filing the 990-N be assumed by the FGCCT Treasurer and Assistant Treasurer. There are some details to be worked out before we put this plan in action.

This affects only the clubs that normally file the online 990-N and who gain 501 (c)(3) status from The Federation. This would not affect clubs that currently file a longer form 990 or 990EZ or have their own non-profit status.

Any clubs that have attempted to file their 990-N, successfully or not, since August 1, 2022, are encouraged to contact FGCCT Assistant Treasurer John Davis at john.davis@ctgardenclubs.org or me at shirley.hall@ctgardenclubs.org (our new FGCCT email addresses). We will be in contact with individual clubs regarding the procedure.

Tax Time!
For Club Presidents and Treasurers – those of you whose club uses a calendar year fiscal year are
probably thinking about filing your club Tax Exempt Organization tax form. If you’re not – you should be! If your club enjoys its Tax Exempt Status under the FGCCT umbrella, AND files the 990 N for organizations with less than $50,000 in total annual receipts, we’ll do it for you! Please see the Finances and Taxes section of the Members Area at www.ctgardenclubs.org for more information.

990 N Filing Process for filings in 2023

If you’d like the Federation’s Assistant Treasurer to file the 990 N on your behalf please follow these steps:

First: Understand that the Assistant Treasurer is NOT a Certified Public Accountants or otherwise licensed in any professional capacity. He will perform this function as a favor among colleagues.

1. Download the “990 N Permission Form” from the members’ section of the FGCCT website.

2. Once you have completed the form (it’s a “fillable PDF” form) on your computer, save the completed form to your computer with your garden club name as part of the file name. For example: “2022 990N form for XYZ Garden Club.pdf”

3. Email the completed form to the Assistant Treasurer at John.Davis@CTGardenClubs.org.

4. John will then file the 990N on your club’s behalf and email you a screenshot of the online confirmation from the IRS website.

990N Permission FGCCT 2023

Click link above for form fillable pdf