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State of California Franchise Tax Board

Tax News
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. A reporting nonprofit organization is a nonprofit organization that receives public resources from one or more local agencies that accounts for more than 20 percent of its annual gross revenue in the current fiscal year or either of the previous two fiscal years and is engaged in campaign activities. It does not include reporting nonprofit organizations that sponsor a committee, as defined in Section 82048.7 of the Government Code, if certain conditions are satisfied.

Reporting nonprofit organizations include all nonprofit organizations that are incorporated under the Nonprofit Corporation Law, or qualified for exempt status under Section 501(c) of the Internal Revenue Code (IRC) except for those that qualify under IRC section 501(c)(3). It also includes all governmental entities whose income is excluded from income tax under Section 115 of the IRC. A governmental entity includes any public utility, state government, local government and subdivisions, Indian tribal governments, and government instrumentalities.

The reporting nonprofit organization is also required to disclose specific information to us and on its Internet website quarterly and/or biennially. The quarterly and/or biennial reports need to disclose the identity and amount of each specific source or sources of funds received for campaign activity, a description of the campaign activity, and the identity and amount of payments the organization makes from a required separate bank account. This information should be reported on FTB 3589, which will be available on ftb.ca.gov> by March 31, 2014.

While we may conduct discretionary audits, mandatory audits will occur when a reporting nonprofit organization engages in campaign activity in excess of $500,000 in a calendar year. Law requires us 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 each violation.

Contact Information

Website: ftb.ca.gov and search for Charities

Phone: 916.845.4171. Assistance is available year-round from 7 a.m. to 4:30 p.m. weekdays, except state holidays.

Write:

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

Back to February 2014 Tax News

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