Some Cities, States Require Not-For-Profits to File Tax Return

Most people assume not-for-profit organizations are exempt from income tax reporting. However, along with the recent addition of the IRS 990 report, some organizations are finding they must file an income tax return in cities where they earn income.

If your not-for-profit group earns unrelated business income from such activities as charitable gaming events or profits from gifted interest in an unrelated business, your organization may be required to submit a tax return and pay taxes in the city and or state where the income was earned. The City of Columbus is one such city with this requirement.

In addition, if an organization solicits funds in other states or has received a gift of interest in an unrelated business in another state, the organization may be required to file an income tax report in the state in which the income was earned. This activity is normally handled by the state Attorney General.

Because the policies can vary by state, be sure to check with your tax advisor regarding your responsibility to file an income tax report when completing your organization’s required annual report or 990 form. Email Rea & Associates to learn more or for assistance.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.