12.1 Fiscal Year:
The Nebraska 4-H fiscal year is January 1 through December 31.
12.2 4-H Club Finances:
Most 4-H clubs support their activities through the collection of dues or by holding specific fundraisers. Because 4-H is an educational organization authorized through the USDA, several procedures must be followed when working with a club treasury. Clubs that handle money are required to keep that money in a financial institution in a checking account. The key point to remember is the ability to show and prove proper accountability. Clubs must also maintain active status with at least 5 members from 3 families enrolled in the club in order to have money in the name of a 4-H club.
12.2.1 Year End 4-H Club Treasurer’s Report
Nebraska 4-H policy requires all 4-H clubs to submit a Year End 4-H Club Treasurer’s Report to account for the dollars raised and spent in the name of 4-H. This report is due to the county extension office on or before January 31st of the current calendar year. The Year End 4-H Club Treasurer’s Report form can be found at http://4h.unl.edu/resources/club-leaders. Failure to comply with this requirement will cause the club/council to lose its ability to raise money or have money in the name of 4-H. They will also be taken off the GEN subordinate status and lose exemption status.
12.2.2 Annual IRS Filing Requirements
An annual IRS 990 filing (Form 990, 990EZ, or 990-N) must be filed by May 15 for the previous tax year. The extension office will file 990-N (e-Postcard). Though this seems to contradict the financial policies and practices related to extension offices and club/council finances, this practice has previously been approved by UNL administration. If the Club is not eligible to file a 990-N (e-Postcard), the Club is responsible for filing the appropriate Form 990. If a Form 990 (e-Postcard or Forms 990 or 990-EZ) is not filed for three consecutive years, a club/council will automatically lose its tax exempt status. http://4h.unl.edu/clubs/irs-tax-exemption
12.3 4-H Council Finances:
One of the primary functions of the 4-H Council is the task of resource development, including the preparation of an annual budget and fundraising. The following policy has been developed to protect the financial interests of 4-H.
12.3.1 4-H Council Handbook - Section 5: Budget, Finances & Resources Development
The purpose of Section 5 of the 4-H Council Handbook is to provide a document that contains necessary financial management information and guidance. This section of the Handbook is intended to assist 4-H Councils in their responsibility for the accountability of all funds under their purview. In addition to accountability, there is a need to standardize procedures and practices. The policies, principles and guidelines identified are intended to be responsible while, at the same time, reasonable and practical. It is expected that the leadership of the 4-H Council will adhere to this section in the day to day operation of the 4-H Council. This manual was developed specifically for 4-H Councils. Refer to this section for more details on all financial manners covered in this policy manual. In addition, this document should assist the Nebraska Extension and all faculty and staff in meeting the conditions of sound financial management appropriate to a 4-H Council. https://4h.unl.edu/council-handbook/section-5
12.4 Sale of Products by 4-H Clubs and Councils:
12.4.1 4-H Sales and Donations
4-H groups may secure private funds to support their goals and activities through such activities as a sale of items. These groups must report their plans to local Extension staff. This is necessary to ensure compliance with Federal Laws pertaining to the “Use of The Name and Emblem.” 4-H may not be viewed as endorsing any particular company or product. It is the responsibility of the 4-H group to follow Nebraska State Laws in obtaining any required licenses or permits. The Extension Office may consult with the county 4-H Leaders’ Organization, 4-H Council, and/or consult the Nebraska State 4-H Program Administrator.
12.4.2 Local and State Sales Taxes
4-H Club and Councils are required to charge sales tax on some items that they sell. All 4-H clubs/councils who sell items must have a Sales Tax Permit and file a Nebraska and Local Sales and Use Tax Return annually. The Tax Return form is available online: http://www.revenue.nebraska.gov/tax/current/fill-in/f_10.pdf. Handling local and state sales taxes is the responsibility of the 4-H entity selling the item.
Below are examples of commonly sold or re-sold items:
- Livestock identification supplies are exempt from sales tax, so when a county resells them they should not charge tax.
- Livestock identification tags: Exempt
- T-shirts, books, or any other tangible items: Taxable
- Food sales - non-prepared food, such as bake sale items: Exempt
- Food sales - *prepared food: Taxable
- *If prepared food is provided with summer camp admission: Exempt
12.5 Grants and Donations:
Grants and donations are often received for the benefit of education programs for 4-H. Funds are managed in one of two ways:
12.5.1 Extension Staff Generated Funds
Nebraska Extension manages a revolving account in each county/multicounty unit. Funds in these accounts are generated by Nebraska Extension professionals through fee revenue, small grants, or donations and are to be used to support educational programming. Typically, a portion of these funds would be identified and used for 4-H Youth Development programs. All dollars received through programming efforts are required to be placed in a staff member’s revolving account; programming funds cannot be deposited into a 4-H Council account.
12.5.2 4-H Council Generated Funds
4-H Councils can receive donations, small grants and fund-raising revenues. These funds are generated and managed by the 4-H Council under the guidance established in the 4-H Council Financial Management Manual.
12.6 Fund Raising:
Fundraising programs using the 4-H Name and Emblem may be carried out for specific educational purposes. Such fundraising programs and use of the 4-H Name and Emblem on or associated with products and services for such purposes must have the approval of [the] appropriate Extension office (local, county, state or national level) and comply with the University of Nebraska–Lincoln Youth Activity Safety Policy.
Critical elements of these regulations and guidelines include:
- All moneys received from 4-H fundraising programs, except those necessary to pay reasonable expenses, must be expended to further the 4-H educational programs. 4-H is considered a non-profit entity; funds must not be accumulated or held over in an account without a proper spending plan.
- Private support moneys should be:
- Given and used for priority educational purposes.
- Accounted for efficiently and fully.
- Fundraising groups properly authorized to use the 4-H Name and Emblem are to be held accountable to the 4-H program granting authorization. There must be a definite plan to account for funds raised prior to authorization. Such a plan should be within the policy guidelines of the State for handling funds.
- Any use of the 4-H Name and Emblem is forbidden if it exploits the 4-H program, its volunteer leaders, 4-H youth participants, or the USDA, Cooperative Extension, landgrant institutions, or their employees.
- The 4-H Name and Emblem shall not be used to imply endorsement of commercial firms, products or services.
- In connection with 4-H fundraising purposes, the following disclaimer statement must be used on products or services offered for sale: “A portion of the sales price of this product or service will be used to promote 4-H educational programs. No endorsement of the product or service by 4-H is implied or intended.”
The Nebraska Lottery and Raffle Act governs lotteries which exceed $1,000 in gross proceeds (ticket sales) and raffles which exceed $5,000 in gross proceeds. The Nebraska Small Lottery and Raffle Act governs lotteries and raffles which do not exceed the $1,000/$5,000 thresholds.
The expectations for holding a raffle must be followed and are can be found at http://www.revenue.nebraska.gov/gaming/infoguide/raffle.pdf
12.7 State Sales Tax Exempt Status:
Sales tax exemption refers to not having to pay sales tax on purchases. The State of Nebraska Department of Revenue states:
“The fact that a nonprofit organization qualifies for an exemption from income tax under section 501(c) of the Internal Revenue Code does not necessarily entitle the organization to an exemption from Nebraska sales and use tax.”
Very few nonprofit organizations actually qualify for sales tax exemption. Nonprofits that are exempt are almost exclusively health care organizations (hospitals, nursing homes, etc.) and educational institutions like Nebraska Extension.
4-H Councils and 4-H Clubs have nonprofit status authorized by the federal government; however, they do not qualify for sales tax exemption status regulated by the State of Nebraska. Affiliated or subsidiary organizations like 4-H Councils/Clubs, although operating in support of or under the guidance of an exempt organization, may not use the exempt institution’s certificate of exemption.
Therefore, 4-H clubs or councils are not allowed to purchase items using the sales tax exempt status of the Extension office or University.
4-H Councils and Clubs must pay sales tax on items that they purchase, such as trophies or t-shirts that are given away.
When purchasing items for resale, such as t-shirts, pencils or water bottles, 4-H clubs/ councils do not have to pay sales tax. They do, however, need to file for a Sales Tax Permit and have this number at the time of purchase. This application is available online: http://www.revenue.nebraska.gov/tax/current/fill-in/f_20.pdf. 4-H Club and Councils are required to charge sales tax on items that they sell. (See Section 12.4.2. Local and State Sales Taxes for more information.)
12.8 Federal Income Tax Exemption for 4-H Clubs
Federal Income Tax Exemption for 4-H Clubs/Councils is currently available through a process that identifies the Nebraska 4-H Foundation as an eligible 501(c) (3) organization that is assuming responsibility for Nebraska 4-H Clubs/Councils as subordinates. As approved by the Internal Revenue Service (IRS), 4-H Clubs/Councils who are identified as subordinates will be exempt from federal income tax under the provisions which correspond to section 501(c)(3)* of the IRS Code. This means that:
- Formally authorized 4-H groups are exempt from paying federal income tax on funds raised or received on behalf of 4-H, or to support educational programs; and
- Donors may deduct contributions to 4-H clubs and affiliated 4-H organizations such as: bequests, legacies, devises, transfers, or gifts as applicable under the IRS Code.
- For a 4-H group to be included as a subordinate, they must
- be under the guidance and control of the Nebraska 4-H Foundation
- be a chartered 4-H club or council
- have a constitution/bylaws (that includes required financial statements)
- have an EIN
- Groups affiliated with 4-H that function under the authority of their own Board of Directors or other authorities would not qualify for inclusion and should establish their own tax exempt status.
- Families — while there are many families who participate in 4-H programs, the IRS does not recognize single family groups as qualified subsidiaries for inclusion under a group exemption. Inclusion of independent groups or families potentially jeopardizes the special tax exempt status continuing to be granted by the IRS to the 4-H program. In order to have an account or have money in the name of 4-H families will need to organize as a club and meet required standards.
This tax exempt status addresses only federal income tax and does not provide exemption from any state or local taxes, such as hotel tax, property tax, sales tax, or other taxes.
Further information and resources related to establishing and maintaining federal income tax exemption can be found at: http://4h.unl.edu/clubs/irs-tax-exemption
12.8.1 Electronic Filing Requirements for 4-H Groups:
The IRS requires small tax-exempt organizations, such as 4-H Clubs and Affiliated 4-H Organizations, to file electronically Form 990-N, also known as the e-Postcard, annually. https://www.irs.gov/charities-non-profits/annual-electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard. e-Postcards are to be filed annually by May 15 by the county extension office.
Though this seems to contradict the financial policies and practices related to extension offices and club/council finances, this practice has previously been approved by UNL administration. If a Form 990 (e-Postcards or Forms 990 or 990-EZ) is not filed for three consecutive years, a club/council will automatically lose its tax exempt status. http://4h.unl.edu/clubs/irs-tax-exemption
12.8.2 Employer Identification Number (EIN):
An EIN is a nine-digit number the IRS assigns to business entities. 4-H clubs/councils need an EIN to open a bank account. Personal social security numbers of volunteers should never be used to open 4-H bank accounts but may be asked for by the IRS to establish an EIN on behalf of the club.
Form SS-4, Application for Employer Identification Number, is available on the IRS website at http://www.irs.gov. Directions for completing this online application are available in the Online EIN Application Directions (7/17/19).