Rotary District 5320

Actual resolution of legal issues depends upon many factors, including variations of facts and state laws.  This website is not intended to provide legal or advice on specific subjects, but rather to provide insight into general legal and tax principles and issues.  The reader should always consult with legal or tax counsel before taking action on the matters herein.

Federal Tax Filing Requirement for Rotary Clubs

Rotary clubs in the United States qualify as “tax-exempt” entities for federal tax purposes under Internal Revenue Code Section 501(c)(4).  This means that clubs do not have to pay income taxes on dues and fundraising revenue if the club is annually filing the required information return with the Internal Revenue Service.

If a Rotary club fails to file annual information returns with the IRS for three (3) consecutive years, the club may lose its tax-exempt status and may have to pay taxes on its revenue!  The IRS has released a list of entities that have lost their tax-exempt status because they have failed to file.  To see the list, click here:  Automatic Revocation of Exemption List.  For forms and information to reinstate a Rotary club after revocation of exempt status, see the documents section below.

An information return (sometimes as simple as a postcard) must be filed by November 15th each year.  For more information about the IRS requirements, visit their website here:  Tax Information for Charities & Other Non-Profits.

Rotary International Assistance for Rotary Clubs

Rotary clubs do not have to file separate applications to be recognized as tax-exempt but may be included in the “group exemption” filed by Rotary International.  To read Rotary International’s information sheet regarding federal taxes and the group exemption click here:  USA, PUERTO RICO and US VIRGIN ISLANDS ROTARY CLUBS AND DISTRICTS  AND THE IRS.

California State Tax Filing Requirements for Rotary Clubs

In addition to the annual IRS filing requirement, all Rotary clubs in our District should file an annual report with the Franchise Tax Board.  Rotary clubs that fail to file in California will lose tax-exempt status in this state.  If tax-exempt status is lost in California, the club may have to pay taxes to the state.

It also means that the Rotary club will not be able to conduct any raffles or other gaming fundraisers in California until the club’s tax-exempt status is restored.

For more information about California filing requirements click here:  New Filing Requirements for Small Tax-Exempt Organizations Begins 2011.

Annual reports to the state are due November 15th of each year, the same date as reports to the IRS.

No Tax Exemption, No Raffle

Only tax-exempt entities may lawfully conduct raffle and gaming activities in California.  Every Rotary club must first be recognized as tax-exempt by the Franchise Tax Board before conducting a raffle.  In addition, raffle and gaming activities must be registered with the California Attorney General.  For more about Rotary and Raffles, visit our webpage here:  Rotary and Raffles

Sales Tax Rules for Rotary Clubs

For some Rotary club fundraisers, your club may have to pay sales tax on items sold.  Sales tax must be paid for meals your club serves itself (instead of hiring a caterer or hotel) and on other “tangible” property you sell at a live or silent auction.  For more information about the sales tax (which is collected by the California State Board of Equalization), click here:  Does Sales Tax Apply to Events of a Non-Profit or Exempt Charitable Organization?

Documents for Revoked/Suspended Rotary Clubs

Form 1024 Package – Application for Tax Exemption under IRC Section 501(c)(4)

IRS Notice 2011-43 – Special Transitional Relief for Small Organizations

IRS Notice 2011-36 – Reduced application fee for Small Organizations

IRS Notice 2011-44 – Application for Retroactive Reinstatement (other than Small Organizations)