Fluid Situation Regarding the New Filing Requirements for Certain Tax-Exempt Organizations with the New York Department of State - UPDATE

Legislation introduced in the New York Senate under Bill S4817, to eliminate the dual requirement for charitable 501(c)(3) organizations that currently file an annual financial statement with the New York Office of the Attorney General's Charities Bureau to file the same financial statement with the Department of State, has been approved by both the New York State Assembly and Senate and now awaits the Governor’s signature to become law.  In the addition, the Bill ensures that personal and private data such as names, addresses and telephone numbers of those who choose to contribute to 501(c)(3) not-for-profits are protected from unnecessary disclosure.

Previous to the introduction of New York Senate Bill S4817, and buried deep within New York Assembly Bill A9505B, specifically Part (UU), legislation was introduced that the Governor signed into law regarding a host of new reporting requirements for certain tax-exempt organizations, specifically those registered with New York as solicitors of contributions under Article 7-A or as a dual registrant under Article 7-A and EPTL, and who received revenue and support in excess of $250,000.

The new law was effective January 1, 2021 and contained provisions related to a new filing requirement (for those who meet the aforementioned definition) with the New York Department of State, coupled with additional New York State filing fees. 

Accordingly, organizations who fall within the defined category who previously only filed a form CHAR 500 with the New York State Office of the Attorney General Charities Bureau, would have an additional filing and administrative burden with the New York Department of State.

The changes in law affect Sections 172-b, 172-e, and 172-f of the New York State Executive Law.

New York State Executive Law Section 172-b, which sets forth the required filing thresholds for submitting an annual financial report and registration for those soliciting funds under Article 7-A (audited or otherwise) to the Attorney General’s Charities Bureau, now requires that any organization meeting the criteria for filing must also file the same annual financial report, including all required forms and attachments, with the New York Department of State (N.Y. Executive Law 172-B Paragraph 9) along with a $25 fee.  The new additional filing is due the 15th day of the 5th month after an organization’s year-end.  There is no formal process to request an extension with the New York State Department of State; however, there are currently no penalties for failure to file either.

New York State Executive Law Section 172-e states that 501(c)(3) organizations must also file a Funding Disclosure Report with the New York Department of State if they contribute in-kind amounts over $10,000 within a six-month period to a 501(c)(4) organization engaged in New York State lobbying activities that is required to file a Source of Funding Report with the Joint Commission on Public Ethics (JCOPE).^[1]

The Funding Disclosure Report includes information relating to those managing the 501(c)(3) organization making the contribution to the 501(c)(4), the 501(c)(4) organization receiving the in-kind contribution, the dates of contribution, and a description of the in-kind contribution with any related restrictions on the use of the contribution. The Funding Disclosure Report is to be filed within 30 days of the end of the reporting period (six-month period between January 1 and June 30 or July 1 and December 31) that the contribution is made. Not surprisingly, there is a $25 fee to the New York Department of State to submit this particular report, as well.

New York State Executive Law Section 172-f states that a 501(c)(4) organization must file a new Financial Disclosure Report with the Department of State if they spend over $10,000 in a calendar year on covered communications.^[2] If a 501(c)(4) only makes expenditures for covered communications that are reported on the organization’s state lobbying or campaign finance reports, then no Financial Disclosure Report will be required. The Financial Disclosure Report is to be filed within 30 days of the end of the reporting period (six-month period between January 1 and June 30 or July 1 and December 31) that the expenditures are made, and must include the names and addresses of any donors whose donation was received by the 501(c)(4) in whole or in part for the support of the covered communication. Again, there is another $25 fee to the New York Department of State to submit this report too.

Other attachments that would be submitted to the New York Department of State:

Mission statement requirement – when filing either the Funding Disclosure Report or the Financial Disclosure Report with the Department of State (if required to do so), an organization must also provide a mission statement to the New York Department of State that reflects, in a manner, that which would also be provided to the Internal Revenue Service in the organization’s application for tax-exempt status.

Form 990, Schedule B – when filing either the Funding Disclosure Report or the Financial Disclosure Report with the Department of State, a 501(c)(3) or (4) organizations must also submit a fully completed Form 990, including a Schedule B, regardless of whether the organization is required to attach Schedule B to their IRS filing.  With the recent outcome of a California court case with respect to providing donor information, it is possible this requirement may soon come under scrutiny in a New York court.

Organizations that are required to submit financial and other information to the New York Department of State under the current law must create a NY.GOV account (NY.gov Online Services) and file using the New York Department of State’s Charitable Organization Financial Reporting System.  This particular filing system does not allow third-party users to assist organizations in completing their required filings within the Department of State filing system, thereby placing an additional burden on an organization’s management. The filing fees must also be sent by check, as payment by credit card (or other means) is not currently available.

We look forward to providing an update once there is a change to the status of Senate Bill S4817.

[1] Under the lobbying disclosure law, source of funding reports are only required of organizations registered to lobby on their own behalf that have spent over $15,000 on lobbying either during the calendar year or a 12-month period prior to the due date of the lobbying report and at least 3% of the organization’s total expenditures during that period were devoted to lobbying in New York. Assuming those thresholds are met, the lobbying organization must only disclose sources of funding that provided over $2,500 (cash or in-kind) to the organization—excluding membership dues or assessments—which funds were used to fund the reported lobbying activities (N.Y. Legis. Law §§ 1-h(c)(4); 1-j(c)(4))

[2] A communication by a covered entity, not otherwise reported by such covered entity pursuant to article one-A of the legislative law or article fourteen of the election law, by a covered entity conveyed to five hundred or more members of a general public audience in the form of: (i) an audio or video communication via broadcast, cable or satellite; (ii) a written communication via advertisements, pamphlets, circulars, flyers, brochures, letterheads; or (iii) other published statement which: refers to and advocates for or against a clearly identified elected official, executive or administrative body or legislative body relating to the sponsorship, support, opposition, or outcome of any proposed legislation, pending legislation, rule, regulation, hearing or decision, or advocates for or against action by any elected official, executive or administrative body or legislative body.