When we talked with the Michigan Charitable Trust Section about the exemption process for our last blog, we received a treasure trove of information on how to avoid common mistakes when submitting registration, renewal, and exemption forms to their office. We are glad to share them with you.
- Foreign (out-of-state) charities need a Resident Agent in Michigan. This can be a third party provider or a sister charity or even a board member.
- You can’t report on a time period that has not already passed. If you are doing an initial registration and you have not yet filed your financial forms, submit the registration with a letter identifying your organization’s FY end date and when your 990/Audit will be complete. Your organization will be put into a pending status until you submit the current 990. A pending organization may solicit unless otherwise notified.
- Provide all necessary documentation. This is actually a sticking point with most states. Before submission, carefully check that you have all materials requested in the state’s instructions. Michigan has very thorough instructions and Simple Charity Registration also provides a checklist of required attachments.
- Michigan nonprofit corporations need 3 directors on their board of directors. Your Michigan-based nonprofit corporation board of directors needs to have a minimum of 3 members (unless it is a private foundation or a corporation formed to care for a dentally under-served population). Note, this is for nonprofit corporations formed under the laws of the State of Michigan and does not apply to foreign (out-of-state) charities.
- 990-N filers need to complete financial information on their registration form. The registration or renewal form will be incomplete without it.
- Don’t include Schedule B of the IRS 990. Michigan doesn’t require it, so there is no need to make it public record.
- Pay attention to financial audit and review requirements and that your 990 and audit/review cover the same fiscal year. Essentially, you will need to provide a review or audit by a certified public accountant (CPA) if your total contributions plus fundraising minus government grants is between $275,000-$525,000. If that figure is over $525,000 you are required to attach a financial audit prepared by an independent CPA using generally accepted accounting principles. Don’t forget to attach your IRS 990, 990-EZ, or 990-PF as well. Michigan may provide a one-time waiver to these requirements. For specifics, see the Michigan line-by-line form instructions.
- BONUS: 4 exemption tips in 1 for the Michigan Request for Exemption (CTS-03) form:
- Educational Exemption: This only applies to educational institutions located in Michigan.
- Hospital Exemption: An out-of-state licensed hospital applying for this exemption must show documentation from their regulator in their home state.
- Exemption based on getting all funds from a charity already registered with Michigan: This exemption from the Charitable Organizations and Solicitations Act (COSA) cannot be used if your organization is self-funded. It only pertains to being funded in whole by another charity registered in Michigan.
- Documentation: Include the necessary documentation to prove your exemption claim as explained in the chart on pages 2-3 of the Michigan Request for Exemption (CTS-03) Form.
The takeaway for today is that the Michigan Charitable Trust Section reads your application thoroughly and will request additional or corrected information if needed. Save yourself and your charity some time by filing correctly the first time.
And of course, using Simple Charity Registration can help you do just that.