Nonprofit organizations in California do not pay state income tax, but they are required to file state income tax returns. Among the required filings is California Exempt Organization Annual Information Return (Form 199 Annual Return), which is required to be filed annually to the Franchise Tax Board (FTB). This form is used to report and update the tax-exempt organization’s financial and operational data.
Purpose of Form 199 Annual Return
Form 199 is the California version of the federal IRS Form 990 series. The organization must report a summary of the organization’s income, expenses, activities, and assets for the fiscal year to the state. This provides the FTB with the data needed to confirm the organization still operates for the charitable or exempt purpose stated.
Nonprofits do not pay state income tax, but to attain and maintain their exemption status, they must complete and submit their financial statements.
Who Needs to Submit Form 199
Almost all California 501(c)(3) and other tax-exempt organizations need to file Form 199 each year. But there are some exceptions for smaller organizations.
- Organizations with gross receipts for the year of $50,000 or less may file the Form 199N (e-Postcard) instead.
- Certain private foundations, social welfare organizations, some religious organizations, and other nonprofits may have extra filing requirements.
If a nonprofit receives unrelated business income, they also need to file Form 109 (Exempt Organization Business Income Tax Return) along with Form 199.
When to File and Associated Costs
Organizations with a fiscal year that ends December 31 should submit their Form 199 by May 15. These organizations also need to pay at least $10, which is the most the state will charge for filing. Organizations that qualify for a small-organization exemption will not have to pay a filing fee.
We recommend filing electronically, because it is much easier and faster and you receive verification right away.
Importance of Filing Form 199
Not filing Form 199 in a timely manner can lead to fines, and even the loss of state tax exemption. Filing Form 199 annually shows you are accountable and have been compliant with state law which will in turn boost donor confidence.
Conclusion
Filing the California Exempt Organization Annual Information Return (Form 199) continues to be an important compliance obligation for nonprofits. Completing the form accurately and filing it on time every year will help your organization remain tax-exempt and in good standing within the state. Dimov Tax is ready to offer expert aid. Reach out to us today for professional assistance.