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State of California Franchise Tax Board

Reporting Nonprofit Organizations that Receive Public Resources and Engage in Campaign Activity

Effective January 1, 2014, specific reporting nonprofit organizations that receive public resources and engage in campaign activity, either directly or through the control of another entity may be subject to new reporting requirements under California Government Code Section 54964.6.  

General information

Reporting nonprofit organizations that engage in campaign activities are required to:

  • Deposit into a separate bank account all specific source or sources of funds it receives.
  • Pay for all campaign activity from that separate bank account.
  • Disclose to us and post on the nonprofit’s internet website the identity and amount of each specific source or sources of funds it receives for campaign activity.
  • Provide a description of the campaign activity.
  • Report the identity and amount of payments the organization makes from the required separate bank account.

Who must file

File FTB 3589, Nonprofit Organization Report of Funds Received and Used for Campaign Activity, if the organization is a nonprofit organization that meets the following requirements:

  • Received public resources from one or more local agencies that account for more than 20 percent of the organization’s annual gross revenue in the current fiscal year or either of the previous two fiscal years.
  • Engages in campaign activity, either directly or through the control of another entity.

Do not file this form if the nonprofit organization is one of the following:

  • Tax-exempt under Internal Revenue Code (IRC) Section 501(c)(3).
  • Tax-exempt under Revenue and Taxation Code (R&TC) Section 23701d.
  • Political action committee.

Purpose

The purpose of FTB 3589 is to disclose the use of public resources received from local agencies for the purpose of conducting campaign activity.

Determine what to file

The FTB 3589 is required to be filed if the answer to both questions below is yes. Refer to the quarterly or biennial report requirements.

  1. Is 20 percent or more of the organization's annual gross revenue in the current fiscal year or either of the previous two fiscal years from public resources received from one or more local agencies?
  2. If, yes did the organization engage in any campaign activity?

Quarterly Report   

If the answer is yes to one or both of the questions below the nonprofit organization is required to complete Schedule A and B on FTB 3589.

  1. At any point during the quarter did the organization engage in campaign activity in California of $50,000 or more related to statewide candidates or ballot measures, either directly or through the control of another entity?
  2. At any point during the quarter did the organization engage in campaign activity in California of $2,500 or more related to local candidates or ballot measures, either directly or through the control of another entity?

Biennially Report

If the answer is yes to one or both of the questions below the nonprofit organization is required to complete Schedule A and B on FTB 3589.

  1. At any point during the two calendar years did the organization engage in campaign activity in California of $100,000 or more related to statewide candidates or ballot measures, either directly or through the control of another entity?
  2. At any point during the two calendar years did the organization engage in campaign activity in California of $10,000 or more related to local candidates or ballot measures, either directly or through the control of another entity?

When to file

Quarterly report - Due thirty days after the end of each quarter.

Biennial report - Due thirty days after the end of each even year.

The quarterly and biennial reports must be posted on the organization’s website.

Mandatory audit

Mandatory audits will occur when a reporting nonprofit organization engages in campaign activity in excess of $500,000 in a calendar year. We are required to prepare an audit report and transmit the report to the Attorney General and the district attorney for the county in which the reporting nonprofit organization is domiciled. The Attorney General or the district attorney for the county in which the reporting nonprofit organization is domiciled or any city attorney may impose a civil fine or penalty for violation of the disclosure requirements. 

Glossary

Ballot measure
A state or local initiative, referendum, or recall measure certified to appear on a regular or special election ballot or other measure submitted to the voters by the Legislature or the governing body of a local agency at a regular or special election.
Campaign activity
Payment that is used for communications that expressly advocate for or against the qualification of a clearly identified ballot measure, the approval or rejection of a clearly identified ballot measure, or the election or defeat of a clearly identified candidate by the voters, or that constitutes a campaign contribution.
Campaign activity does not include the costs of adopting a position or a resolution supporting or opposing a clearly identified ballot measure or candidate, including, but not limited to, posting the position or resolution on the nonprofit organization’s internet website, communicating the position or resolution to members of the nonprofit organization, or issuing a press statement.
Campaign activity does not include incidental or minimal use of public resources.
Campaign activity does not include incidental costs related to the establishment or administration of a sponsored committee as defined in Section 82048.7. A reasonable accounting method may be used to determine the use of nonpublic resources to pay for that cost. Establishment and administration means the cost of office space, telephones, salaries, utilities, supplies, legal and accounting fees, and other expenses incurred in establishing and operating a sponsored committee.
Candidate
An individual who has qualified to have his or her name listed on the ballot, or who has qualified to have write-in votes on his or her behalf counted by election officials, for nomination or election to an elective office at any regular or special primary or general election, and includes any officeholder who is the subject of a recall election.
Expenditure
Payment used for communications that expressly advocate the approval or rejection of a clearly identified ballot measure, or the election or defeat of a clearly identified candidate, by the voters or that constitutes a campaign contribution.
Local agency
A county, city, whether general law or chartered, city and county, town, school district, municipal corporation, district, political subdivision, or any board, commission or agency thereof, or other local public agency, including entities created pursuant to the Joint Exercise of Powers Act.
Nonprofit organization
Any entity incorporated under the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) or a nonprofit organization that qualifies for exempt status under Section 115 or 501(c) of the Internal Revenue Code, provided, however, that “nonprofit organization” does not include any nonprofit organization that qualifies for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.
Public resources
Any property or asset owned by a local agency, including, but not limited to, cash, land, buildings, facilities, funds, equipment, supplies, telephones, computers, vehicles, travel, and local government compensated work time that is provided to a nonprofit organization, except funds received in exchange for consideration for goods or services.
Funds received by a nonprofit organization which have been generated from any activities related to conduit bond financing by those entities subject to the conduit financing and transparency and accountability provisions of Chapter 10.7 (commencing with Section 5870) of Division 6 of Title 1, whether or not those funds are received by the nonprofit in exchange for consideration for goods or services.

Where to file

Mail FTB 3589 to:

EXEMPT ORGANIZATIONS UNIT MS F120
FRANCHISE TAX BOARD
PO BOX 1286
RANCHO CORDOVA CA 95741-1286

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