Charitable and social welfare organizations that file annual financial reports with the New York Attorney General's Charities Bureau now must file those reports—and potentially two other reports—with the New York Department of State. These requirements are a result of changes to the New York Executive Law, effective January 1, 2021. The following are key deadlines:
- May 15: Annual financial reports (the CHAR 500) are due to the Charities Bureau and the Department of State by the fifteenth day of the fifth month after the close of the filing organization's fiscal year. For organizations operating on a calendar year fiscal year, this means the CHAR 500 is due on May 15. Extensions are available for up to 180 days (mirroring the filing schedule for the IRS Form 990).
- July 31 and January 31: New reports for 501(c)(3) and 501(c)(4) organizations related to certain advocacy activities in New York, if applicable, will be due to the Department of State before July 31 and January 31.
The new semiannual reporting rules for 501(c)(3) and 501(c)(4) organizations revive aspects of previous rules requiring donor disclosure for groups involved in New York advocacy that were struck down as unconstitutional in 2019. Although nonprofits subject to the new rules will be required to disclose certain donors to the state, the law prohibits the state from disclosing individual donors' names and addresses to the public. Reports filed with the Department of State will not be made public upon filing. However, as described further below, reports may be published on the Department of State's website upon a determination by the Secretary of State that the activities disclosed are inconsistent with the filing entity's charitable purposes.
New Filing Requirements
- Annual Financial Report (CHAR 500): Charitable and social welfare organizations that are registered to solicit funds in New York under Article 7-A of the New York Executive Law and have gross revenue exceeding $250,000 must now file their annual CHAR 500 financial report with the New York Department of Law and the New York Department of State. See N.Y. Exec. Law § 172-b(9). Previously, the CHAR 500 was filed only with the New York Department of Law (more specifically, with the Attorney General's Charities Bureau). Reports are due the fifteenth day of the fifth month after the organization's fiscal year end (i.e., by May 15 for a December 31 fiscal year end). Extensions are available for up to 180 days (mirroring the filing schedule for the IRS Form 990). A mission statement must now also be submitted to the Department of State (described further below).
- 501(c)(3) Funding Disclosure Report: 501(c)(3) organizations must file a new "Funding Disclosure Report" with the Department of State if the 501(c)(3) makes in-kind donations of staff time, personnel, or any other human resources, office space, or office supplies valued at more than $10,000 during a 6-month reporting period to a 501(c)(4) organization that is required to file a source of funding report with the Joint Commission on Public Ethics (JCOPE) under the New York lobbying disclosure law. See N.Y. Exec. Law § 172-e.
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 percent 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. See N.Y. Legis. Law §§ 1-h(c)(4); 1-j(c)(4). It is thus possible (and not unusual) for a 501(c)(4) organization to be registered and reporting with JCOPE without having to file a source of funding report. If the 501(c)(4) is not required to file a source of funding report with JCOPE, a 501(c)(3) Funding Disclosure Report will not need to be filed with the Department of State. A 501(c)(4) organization that discloses an in-kind donation from a 501(c)(3) on its source of funding report filed with JCOPE is required to provide the 501(c)(3) with reasonable notice that it must file a Funding Disclosure Report with the Department of State.
If required, the new 501(c)(3) Funding Disclosure Report must include the name and address of the 501(c)(3) and (c)(4) organizations, the name of at least one person who exerts managerial control over the 501(c)(3), the donation date, and a description of the donation, including any restrictions on use of the donation. Reports reflect reportable in-kind donations made during the 6-month period within a calendar year and are due before July 31 (covering January 1 – June 30) and January 31 (covering July 1 – December 31). The report must also be accompanied by a mission statement (described further below).
Funding Disclosure Reports filed with the Department of State will not be made public upon filing. However, as described further below, reports may be published on the Department of State's website upon a determination by the Secretary of State that the activities disclosed are inconsistent with the filing entity's charitable purposes.
- 501(c)(4) Financial Disclosure Report: 501(c)(4) organizations 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," which include communications to at least 500 members of the public that refer to and advocate 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 or pending legislation, rule, regulation, hearing, or decision, or advocate for or against action by any elected official, executive or administrative body, or legislative body. See N.Y. Exec. Law § 172-f.
Covered communications do not include communications with the press or with members or donors, and do not include communications for the purpose of promoting or staging a candidate debate, town hall, or similar forum. Covered communications also do not include any communications that are otherwise reported by the 501(c)(4) pursuant to the state's lobbying and campaign finance laws. If a 501(c)(4) only makes expenditures for covered communications that are reported on the organization's state lobbying or campaign finance reports—which may be likely, given the overlap between the "covered communication" definition and the types of communications regulated under state lobbying and campaign finance law—then no Financial Disclosure Report will be required. 501(c)(4) organizations will need to carefully parse the covered communication definition and determine whether any planned communications fall outside the scope of reportable activity under the lobbying and campaign finance laws to determine whether a Finance Disclosure Report must be filed.
If required, the new 501(c)(4) Financial Disclosure Report must disclose expenditures incurred for any covered communications during the reporting period 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. Reports are due before July 31 (covering January 1 – June 30) and January 31 (covering July 1 – December 31). A mission statement must also be submitted to the Department of State (described further below).
Financial Disclosure Reports filed with the Department of State will not be made public upon filing. However, as described further below, reports may be published on the Department of State's website upon a determination by the Secretary of State that the activities disclosed are inconsistent with the filing entity's charitable purposes.
Form 990 Schedule B
CHAR-500 filers now must file a copy of the organization's "complete IRS Form 990 with schedules" with the Department of State in addition to the Charities Bureau. See N.Y. Exec. Law § 172-b(9); N.Y. Comp. Codes R. & Regs. tit. 13, § 91.5(c)(3)(i). Organizations that are required to file the new 501(c)(3) Funding Disclosure Report or 501(c)(4) Financial Disclosure Report must also file a "complete" IRS Form 990 Schedule B with the Department of State, "regardless of whether such form is submitted or required to be submitted to the Internal Revenue Service." See N.Y. Exec. Law §§ 172-e(4), 172-f(4). Additionally, a complete Schedule B must be filed with the Department of State by any 501(c)(4) recipient of in-kind donations from a 501(c)(3) Funding Disclosure Report filer if the 501(c)(4)'s CHAR-500 filing does not otherwise include a complete Schedule B. This appears to be an attempt to require 501(c)(4) organizations to provide the state with the names and addresses of donors on Schedule B, even though such organizations are no longer required to provide that information to the IRS under federal law. Under state law, the Schedule B and the names and addresses of donors disclosed in reports, including donors listed on Schedule B, are not subject to public disclosure.
Department of State's Charitable Purpose Review and Public Disclosure of Reports
Mission Statement: Organizations that file a CHAR 500, Funding Disclosure Report, or Financial Disclosure Report must provide the Department of State with a mission statement. According to the Department of State's proposed regulations, the statement must be consistent with what was or would be provided to the IRS with an application for recognition of tax exemption as a 501(c) organization, including any narrative description of the organization's activities and any supporting details to the narrative description provided with such application.
Charitable Purpose Review and Public Disclosure: The New York Secretary of State is responsible for examining the reports filed with the Department of State to determine whether "the nature and extent" of in-kind donations or covered communications expenditures disclosed on such reports are inconsistent with the filing organizations' charitable purposes. If the Secretary of State, in consultation with the Department of Law and/or the Department of Taxation and Finance, determines in-kind donations or covered communications expenditures are inconsistent with a filing entity's charitable purposes, the report—not including individual donors' information—will be published on the Department of State's website. See N.Y. Exec. Law § 93-a. Extraordinarily, there are currently no written rules, guidelines, or standards governing the Secretary's determination of whether disclosed activities are inconsistent with an organization's charitable purposes. Furthermore, unless an organization submits a statement that public disclosure of a report will cause disclosure-related harm, there are no procedures for an organization to dispute the Secretary's determination.
If an organization has reason to believe that public disclosure of a Funding Disclosure Report or Financial Disclosure Report will cause disclosure-related harm (harm, threats, harassment, or reprisals to the source of a donation or to individuals or property affiliated with the source of a donation), the organization may submit a statement to the Department of State providing relevant facts supporting that belief at the time the report is filed. If such a statement has been provided, the Department must provide the organization with a notice of intent to publish prior to publishing a filed report. The organization then has 30 days to notify the Secretary of State of its intent to appeal the Secretary's determination to publish the report. Failure to timely appeal will be deemed consent by the organization to publication. If an organization timely appeals, an administrative hearing will be held before an Administrative Law Judge ("ALJ"), who will determine whether publication may cause harm. If the ALJ's final ruling is adverse to the organization, the organization may seek judicial review.
How to File
Organizations will continue to file the CHAR 500 with the Charities Bureau either by paper or by using the Charities Bureau's relatively new electronic filing system. All reports to be filed with the Department of State must be filed online through the Department of State's website. Charitable organizations will need to create a NY.GOV account to file through the Department of State's Charitable Organization Financial Reporting System. If an organization already has an existing NY.GOV account, it can use that account to file the report. More information on filing requirements is available here.