Page 96 - Washington Nonprofit Handbook 2018 Edition

y Line 10

If the answer to line 10 is “yes,” the organization should own the intellectual

property. If the organization will not own intellectual property that it produces, this
may raise a yellow flag for the IRS. Consult with an attorney.

y Line 11

If the answer is “yes,” seek advice from an attorney.

y Line 13a

If the answer is “yes,” the IRS will require appropriate safeguards to ensure
that the funds granted to other organizations will be used only in furtherance of
501(c)(3) purposes. If grants are made only to other 501(c)(3) organizations, the IRS
will not require the same safeguards (e.g., applications, grant agreements and
detailed record-keeping) that it expects of grants to non-501(c)(3) organizations. If
the organization is a private foundation, grants to non-501(c)(3) organizations will
be taxable expenditures that trigger excise tax penalties under section 4945 unless
you comply with certain additional administrative requirements (e.g., expenditure
responsibility or equivalency determination procedures). Thus, if the organization
is a private foundation that intends to make grants to non-501(c)(3) organizations,
seek advice from an attorney.

y Line 14a

If the answer to line 14a is “yes,” the answer to line 14c should be “no” and
the answers to lines 14d through 14f should be “yes”. See Chapters 37-44 for a
discussion regarding international grantmaking.

Part IX. Financial Data

y A. Statement of Revenues and Expenses.

The IRS usually requires both actual financial information to date and a two-
year projected budget. It is difficult to predict what the financial future holds;
however, the IRS requires a projected budget even if it is difficult to prepare. A
good-faith estimate of future revenues and expenses is sufficient.

Some organizations find that it works best to start with the goals the group
wants to accomplish, estimating, goal by goal, what the planned activities will cost,
and then creating a strategy to come up with the necessary income. For other

WASHINGTON NONPROFIT HANDBOOK -85- 2018