INTERNAL
REVENUE SERVICE DEPARTMENT
OF THE TREASURY
P.
O.
DLN:
17053228041040
Contact
Person:
VICTORIA
LAHEY ID # 31304
Contact Telephone
Number: (877) 829-5500
Accounting Period
Ending: December 31
Foundation
Status Classification: 509 (a) (1)
Advance
Ruling Period Begins: June 14, 2000
Advance Ruling Period Ends: December 31, 2004
Addendum
Applies: No
Date:
SEP 07 2000
HOUSE
OF HUNGARY INC
2159
Dear Applicant:
Based
on information you supplied, and assuming your operations will be as stated in
your application for recognition of exemption, we have determined you are
exempt from federal income tax under section 501(a) of the Internal Revenue
Code as an organization described in section 501(c)(3).
Because
you are a newly created organization, we are not now making a final
determination of your foundation status under section 509(a) of the Code.
However, we have determined that you can reasonably expect to be a publicly
supported organization described in sections 509(a)(1)
and 170(b)(1)(A)(vi).
Accordingly,
during an advance ruling period you will be treated as a publicly supported
organization, and not as a private foundation. This advance-ruling period
begins and ends on the dates shown above.
Within
90 days after the end of your advance-ruling period, you must send us the
information needed to determine whether you have met the requirements of the
applicable support test during the advance-ruling period. If you establish that
you have been a publicly supported organization, we will classify you as a
section 509(a)(1) or 509(a)(2) organization as long as
you continue to meet the requirements of the applicable support test. If you do
not meet the public support requirements during the advance-ruling period, we
will classify you as a private foundation for future periods. Also, if we
classify you as a private foundation, we will treat you as a private foundation
from your beginning date for purposes of section 507(d) and 4940.
Grantors
and contributors may rely on our determination that you are not a private
foundation until 90 days after the end of your advance ruling period. If you
send us the required information within the 90 days, grantors and contributors
may continue to rely on the advance determination until we make a final
determination of your foundation status.
If
we publish a notice in the Internal Revenue Bulletin stating that we will no
longer treat you as a publicly supported organization, grantors and
contributors may not rely on this determination after the date we publish the
notice. In addition, if you lose your status as a publicly supported
organization, and a grantor or contributor was responsible for, or was aware
of, the act or failure to act, that resulted in your loss of such status, that
person may not rely on this determination from the date of the act or failure
to act. Also, if a grantor or contributor learned that we had given notice that
you would be removed from classification as a publicly supported organization,
then that person may not rely on this determination as of the date he or she
acquired such knowledge.
Letter 1045 (DO/CG)
2
HOUSE OF HUNGARY INC
If
you change your sources of support, your purposes, character, or method of operation
please let us know so we can consider the effect of the change on your exempt
status and foundation status. If you amend your organizational document or
bylaws, please send us a copy of the amended document or bylaws. Also, let us
know all changes in your name or address.
As
of January l, 1984, you are liable for social security taxes under the Federal
Insurance Contributions Act on amounts of $100 or more you pay to each of your
employees during a calendar year. You are not liable for the tax imposed under
the Federal Unemployment Tax Act (FUTA).
Organizations
that are not private foundations are not subject to the pri-
vate foundation excise taxes under Chapter 42 of the
Internal Revenue Code. However, you are not automatically exempt from other
federal excise taxes. If you have any
questions about excise, employment, or other federal taxes, please let us know.
Donors
may deduct contributions to you as provided in section 170 of the Internal
Revenue Code. Bequests, legacies, devises, transfers, or gifts to you or for
your use are deductible for Federal estate and gift tax purposes if they meet
the applicable provisions of sections 2055, 2106, and 2522 of the Code.
Donors
may deduct contributions to you only to the extent that their contributions are
gifts, with no consideration received. Ticket purchases and similar payments in
conjunction with fundraising events may not necessarily qualify as deductible
contributions, depending on the circumstances. Revenue Ruling 67-246, published
in Cumulative Bulletin 1967-2, on page 104, gives guidelines regarding when
taxpayers may deduct payments for admission to, or other participation in,
fundraising activities for charity.
You
are not required to file Form 990, Return of Organization Exempt From Income Tax, if your gross receipts each year are
normally $25,000 or less. If you receive a Form 990 package in the mail, simply
attach the label provided, check the box in the heading to indicate that your annual
gross receipts are normally $25,000 or less, and sign the return. Because you
will be treated as a public charity for return filing purposes during your
entire advance-ruling period, you should file Form 990 for each year in your
advance-ruling period that you exceed the $25,000 filing
threshold even if your sources of support do not satisfy the public support
test specified in the heading of this letter.
If
a return is required, it must be filed by the l5th day of the fifth month after
the end of your annual accounting period. A penalty of $20 a day is charged
when a return is filed late, unless there is reasonable cause for the delay.
However, the maximum penalty charged cannot exceed $10,000 or
5
percent of your gross receipts for the year, whichever is less.
For organizations with gross receipts exceeding $1,000,000 in any year, the
penalty is $100 per day per return, unless there is reasonable cause for the
delay. The maximum penalty for an organization with gross receipts exceeding
$1,000,000 shall not exceed $50,000. This penalty may also be charged if a
return is not complete. So, please be sure your return is complete before you
file it.
You
are not required to file federal income tax returns unless you are subject to
the tax on unrelated business income under section 511 of the Code. If you are
subject to this tax, you must file an income tax return on Form 990-T, Exempt
Organization Business Income Tax Return. In this letter we are not determining
whether any of your present or proposed activities are unrelated trade or
business as defined in section 513 of the Code.
You
are required to make your annual information return, Form 990 or Form 990-EZ,
available for public inspection for three years after the later of the due date
of the return or the date the return is filed. You are also required to make
available for public inspection your exemption application, any supporting
documents, and your exemption letter. Copies of these documents are also
required to be provided to any individual upon written or in person request
without charge other than reasonable fees for copying and postage. You may
fulfill this requirement by placing these documents on the Internet. Penalties
may be imposed for failure to comply with these requirements. Additional information
is available in Publication 557, tax-exempt Status for Your Organization, or
you may call our toll free number shown above.
Letter 1045 (DO/CG)
3
HOUSE OF
You
need an employer identification number even if you have no employees. If an employer
identification number was not entered on your application, we will assign a
number to you and advise you of it. Please use that number on all returns you
file and in all correspondence with the Internal Revenue Service.
This
determination is based on evidence that your funds are dedicated to the
purposes listed in section 501(c)(3) of the Code. To
assure your continued exemption, you should keep records to show that funds are
spent only for those purposes. If you distribute funds to other organizations,
your records should show whether they are exempt under section 501(c)(3). In cases where the recipient organization is not
exempt under section 501(c)(3), you must have evidence
that the funds will remain dedicated to the required purposes and that the
recipient will use the funds for those purposes.
If
we said in the heading of this letter that an addendum applies, the addendum
enclosed is an integral part of this letter.
Because
this letter could help us resolve any questions about your exempt status and
foundation status, you should keep it in your permanent records.
If
you have any questions, please contact the person whose name and telephone
number are shown in the heading of this letter.
Sincerely yours,
Steven T. Miller
Director, Exempt Organizations
Enclosure(s):
Form
872-C
Letter
7.045 (DO/CG)
Charitable
Contributions -
Substantiation
and Disclosure Requirements
UNDER THE NEW LAW,
CHARITlES WILL NEED TO PROVlDE NEW KINDS OF INFORMATION TO DONORS. Failure to
do so may result in denial of deductions to donors and the imposition of
penalties on charities.
Legislation signed
into law by the President on August 10, 1993, contains a number of significant
provisions affecting tax-exempt charitable organizations described in section
501 (cx3) of the Internal Revenue Code. These provisions include: (1) new
substantiation requirements for donors, and (2) new public disclosure
requirements for charities (with potential penalties for failing to comply).
Additionally, charities should note that donors could be penalized by loss of
the deduction if they fail to substantiate. THE SUBSTANTIATlON AND DISCLOSURE
PROVISIONS APPLY TO CONTRIBUTIONS MADE AFTER DECEMBER 31, 1993.
Charities need to
familiarize themselves with these tax law changes in' order to bring themselves
into compliance. This Publication alerts you to the new provisions affecting
tax-exempt charitable organizations. Set forth below are brief descriptions of
the new law's key provisions. The Internal Revenue Service plans to provide
further guidance in the near future.
Donor's Substantiation
Requirements
Documenting
Certain Charitable Contributions. -- Beginning January
1, 1994, no deduction will be allowed under section 170 of the Internal)
Revenue Code for any charitable contribution of $250 or more unless the donor
has contemporaneous written substantiation from the charity. In cases where the
charity has provided goods or services to the donor in exchange for making the
contribution, this contemporaneous written acknowledgement must include a good
faith estimate of the value of such goods or services. Thus, taxpayers may no
longer rely solely on a cancelled check to substantiate a cash contribution of
$250 or more.
'The substantiation
must be "contemporaneous." That is, it must be obtained by the donor
no later than the date the donor actually files a return for the tax year in
which the contribution was made. If the return is filed after
the due date or extended due date, then the substantiation must have been obtained
by the due date or extended due date.
The responsibility for
obtaining this substantiation lies with the donor, who must request it from the
charity. The charity is not required to record or report this information to
the IRS on behalf of donors.
The legislation
provides that substantiation will not be required if, in accordance with
regulations prescribed by the Secretary, the charity reports directly to the
IRS the information required to be provided in the written substantiation. At
present, there are no regulations establishing procedures for direct reporting
by charities to the IRS of charitable contributions made in 1994. Consequently,
charities and donors should be prepared to provide/obtain the described
substantiation for 1994 contributions of S250 or more.
There is no prescribed
format for the written acknowledgement. For example, letters, postcards or
computer-generated forms may be acceptable. The acknowledgement does not have
to include the donor's social security or tax idcntification number. It must,
however, provide sufficient information to substantiate the amount of thc deductible contribution The acknowledgement should note
the amount of any cash contribution However, if the donation is in the form of
property, then the acknowledgement must describe, but need not value, such
property. Valuation of the donated property is the responsibility of the donor.
The written
substantiation should also note whether the donee
organization provided any goods or services in consideration, in whole or in
part, for the contribution and, if so, must provide a description and
good-faith estimate of the value of the goods or services. ln
the new law these are referred to as "quid pro quo contributions."
Please note that there
is a new law requiring charities to furnish disclosure statement: to donors for
such quid pro quo donations in excess of $75. This is addressed in the next
section regarding Disclosure by Charity.
If the goods or
services consist entirely of intangible religious benefits, the statement
should indicate this, but the statement need not describe or provide an
estimate of the value of these benefits. "Intangible religious
benefits" are also discussed in the following section on Disclosure by
Charity. If, on the other hand, the donor received nothing in return for the
contribution, the written substantiation must so state.
The present law
remains in effect that, generally, if the value of an item or group of like
items exceeds $5,000, the donor must obtain a qualified appraisal and submit an
appraisal summary with the return claiming the deduction.
The organization may
either provide separate statements for each contribution of $250 or more from a
taxpayer, or furnish periodic statements substantiating contributions of $250
or more.
Separate payments are
regarded as independent contributions and are not aggregated for purposes of
measuring the $250 threshold. However, the Service is authorized to establish
anti-abuse rules to prevent avoidance of the substantiation requirement by
taxpayers writing separate smaller checks on the same date.
If donations are made
through payroll deductions, the deduction from each paycheck is regarded as a
separate payment.
A charity that
knowingly provides false written substantiation to a donor may be subject to
the penalties for aiding and abetting an understatement of tax liability under
section 6701 of the Code.
Disclosure
by Charity of Receopt of Quid Pro Quo Contribution.
Beginning January 1,
1994, under new section 6115 of the Internal Revenue Code, a charitable
organization must provide a written disclosure statement to donors who make a
payment, described as a "quid pro quo contribution," in excess of
$75. This requirement is separate from the written substantiation required for
deductibility purposes as discussed above. While, in certain circumstances, an
organization may be able to meet both requirements with the same written
document, an organization must be careful to satisfy the section 6115 written
disclosure statement requirement in a timely manner because of the penalties
involved.
A quid pro quo
contribution is a payment made partly as a contribution and partly for goods or
services provided to the donor by the charity. An example of a quid pro quo
contribution is where the donor gives a charity $100 in consideration for a
concert ticket valued at $40. ln
this example, $60 would be deductible. Because the donor's payment (quid pro
quo contribution) exceeds $75, the disclosure statement must be furnished, even
though the deductible amount does not exceed $75.
Separate payments of $75
or less made at different times of the year for separate fund-raising events
will not be aggregated for purposes of the $75 threshold. However, the Service
is authorized to develop anti-abuse rules to prevent avoidance of this
disclosure requirement in situations such as the writing of multiple checks for
the same transaction.
The
required written disclosure statement must
(
1 ) inform the donor that the amount of
the contribution that is deductible for federal income tax purposes is limited to the excess of any
money (and the value of any property other than money) contributed by the donor
over the value of goods or services provided by the charity, and
(2)
provide the donor with a good-faith estimate of Ihe
value of the goods or services that the donor received.
Thc
charity must furnish the statement in connection with ether the solicitation or
the receipt of the quid pro quo contribution. If the disclosure statement is
furnished in connection with a particular solicitation, it is not necessary for
the organization to provide another statement when the associated contribution
is actually received.
The disclosure must be
in writing and must be made in a manner that is reasonably likely to come to
the attention of the donor. For example, a disclosure in small print within a
larger document might not meet this requirement.
In the following three
circumstances, the disclosure statement is not required.
( 1 ) Where the only goods or services given to a
donor meet the standards for "insubstantial value" set out in section 3.01,
paragraph 2 of Rev. Rroc. 90-12, 1990-1 C.B. 471, as
amplified by section 2.01 of Rev. Proc. 92-49, 1992-1 C.B. 987 (or any updates
or revisions thereof);
(2) Where there is no donative
element involved in a particular transaction with a charity, such as in a
typical museum gift shop sale.
(3)
Where there is only an intangible religious benefit provided to the
donor. The intangible religious benefit must be provided to the donor by an
organization organized exclusively for religious purposes, and must be of a
type that generally is not sold in a commercial transaction outside the donative context. An example of en intangible religious
benefit would be admission to a religious ceremony. The exception also
generally applies to de minimis tangible benefits,
such as wine, provided in connection with a religious ceremony. The intangible
religious benefit exception, however, does not apply to such items as payments
for tuition for education leading to a recognized degree, or for travel
services, or consumer goods.
A penalty is imposed
on charities that do not meet the disclosure requirements. For failure to make
the required disclosure in connection with a quid pro quo contribution of more
than $75, there is a penalty of $10 per contribution,
not to exceed $5,000 per fundraising event or mailing. The charity may avoid
the penalty if it can show that the failure was due to reasonable cause.
Please note that the
prevailing basic rule allowing donor deductions only to the extent that the
payment exceeds the fair market value of the goods or services received in
return still applies generally to all quid pro quo contributions. The $75
threshold pertains only to the obligation to disclose and the imposition of the
$10 per contribution penalty, not the rule on deductibility of the payment.
Internal Revenue Service Department
of the Treasury
1111 Constitution Avenue, NW Internal
Revenue Service
Catalog
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