Updates from state agencies

2017 IN REVIEW / MUNICIPAL MATTERS

This month, I'm focusing on some practical updates from various state agencies -- the attorney general's office, secretary of state's office, and Franchise Tax Board -- that are likely to be of relevance to practitioners who work with nonprofits.

Revised Forms CT-1 & RRF-1

Most California charitable nonprofits and other entities holding charitable assets in California are required to register with the California attorney general's Registry of Charitable Trusts. Registration requires filing an Initial Registration Form (Form CT-1), as well as an Annual Registration Renewal (Form RRF-1). The attorney general's office recently released new versions of the Forms CT-1 and RRF-1, which should be used for any filings moving forward. There were no significant substantive changes to these Forms, but they were updated to reflect the new phone number for the Registry of Charitable Trusts.

It is separately expected that proposed substantive revisions to the Forms CT-1 and RRF-1, as well as to the corresponding instructions and Regulations, will be circulated for public review and comment shortly. It is anticipated that a new proposed Form CT-TR-1 will be circulated for public review and comment shortly, as well. The Form CT-1 currently is required to be accompanied by the Form 990, 990 EZ, or 990-PF filed by the reporting organization with the IRS for the respective year. However, organizations that file the Form 990-N (which is generally available to smaller exempt organizations with annual gross receipts that are normally $50,000 or less) do not report detailed financial information on those returns. The proposed Form CT-TR-1 will require such organizations to provide a reporting of certain financial data that does not appear on the 990-N and will be required to be filed along with the Form RRF-1.

Attorney General Online Renewal System

For many organizations subject to the attorney general's registration requirements, the Form RRF-1 may now be completed online through the Charity Registration Online Renewal System (available at http://rct.doj.ca.gov/eGov/Login.aspx). Unfortunately, the initial Form CT-1 still needs to be filed in hard copy paper format at this time, as do renewals for raffles and fundraising professionals. The online filing system may only be used by nonprofits in current status with the Registry of Charitable Trusts, and delinquent organizations must submit a Form RRF-1 in hard copy paper format.

Before using the Charity Registration Online Renewal System, an organization needs to request a Renewal ID. To acquire a Renewal ID, you must send an email to the Registry of Charitable Trusts (at RCT_Online_Renewals@doj.ca.gov) with the organization's name and at least one of the following: (a) State Charity Registration Number, (b) FEIN, and/or (c) a Secretary of State Corporate Number.

Updated Guide for Charities

In late November, the California attorney general's office released a revised version of the Guide for Charities: Best Practices for Nonprofits that Operate or Fundraise in California (available at https://oag.ca.gov/charities/publications). The guide had last been updated in 2005 and the attorney general's office, together with multiple volunteer practitioners (myself included), had been working on a revision since early 2016. The guide covers various topics of interest to California nonprofits and attorneys assisting them, including an overview of the charitable sector; the process for forming a nonprofit; the process of applying for tax-exemption; legal requirements relating to employment practices; fiscal management tips and requirements; reporting and registration requirements; director and officer obligations; membership rights; fundraising issues; the attorney general's oversight role; and major corporate actions.

Business Search Database

It's somewhat old news by now, but in December 2016, the secretary of state's office launched a new online business search tool (available at https://businesssearch.sos.ca.gov/). The new online database now provides free access to nearly 11 million records related to corporations, LLCs and limited partnerships formed in California or qualified to do business here. Noncertified copies of documents relating to business registrations, amendments to governing documents, terminations and the most recent Statements of Information for corporations and LLCs can be downloaded directly from the database.

Not all documents in the secretary of state's system are currently available for download, but the office is in the process of making additional documents available and is working backwards by date, so we expect to see additional documents become available online in the near future. The database now also helpfully lists when the Statement of Information for a particular organization is due by clearly stating the month of the entity's formation and whether the Statement of Information is due every even or odd numbered year, which can serve as a helpful reminder.

BizFile California

The secretary of state's office also recently implemented the new BizFile California portal (available at http://www.sos.ca.gov/business-programs/bizfile/), which helps businesses file, search and order business records online. For corporations, the initial Statement of Information and required periodic Statements of Information, which must be filed every two years, may currently be filed through the online portal. The secretary of state's office expects that, by summer of 2018, corporations will be able to file optional updated Statements of Information between filings periods online via the BizFile California portal, as well. For LLCs, all Statements of Information, including the initial Statement of Information, required periodic Statements of Information, and updated Statements of Information filed between filing periods, may currently be filed through the online portal. The secretary of state's Office expects that LLCs will also be able to file their articles of organization online via the BizFile California portal in the near future.

Form 3500A Available for 501(c)(19) Organizations

Effective as of Jan. 1, veterans' organizations that are recognized as exempt under IRC Section 501(c)(19) and have an exemption determination letter from the IRS are now also permitted to use the short Form 3500A for obtaining recognition of exemption from California state income taxes. The short Form 3500A exemption application had previously been available for use solely by organizations recognized as exempt under IRC Section 501(c)(3), but was extended in 2013 for use by 501(c)(4), (c)(5), (c)(6), and (c)(7) organizations, as well. Organizations without a federal determination letter or recognized as exempt under other 501(c) sections must still submit the longer Form 3500 to the Franchise Tax Board to apply for exemption from state income taxes.