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Reacting to Change: Analyzing the Impact of the Modernized CHAR500 Process

In a move aimed at modernizing reporting processes, the New York State Charities Bureau implemented online filing requirements for the CHAR500 in September of 2022. This transition from traditional paper submissions to a digital platform represented a significant shift in the way charitable organizations report financial and programmatic information to the Charities Bureau.  

Historically, charitable organizations in New York State submitted their annual CHAR500 filings via mail. The requirement to obtain multiple “wet signatures” was often a hindrance to Charities who had officers located in different states. There also was no confirmation of receipt from the Charities Bureau, so tax preparers and advisors were often unable to confirm that their client mailed the form successfully.  

The Positives 

The updated process has allowed for some positive changes to the filing of the CHAR500. For example, the Charities Bureau allows officers of charities to electronically sign the CHAR500 form and provides updates to the account holder when the CHAR500 is received and accepted by the Charities Bureau. The new process also allows the Charity to designate a third-party preparer and upload the required documents directly to the portal. If the preparer does not upload all the necessary information, the Charities Bureau will alert the account owner of what is missing, and what needs to be done to bring the account into compliance. Schedule B is also not required to be uploaded with the CHAR500, which provides increased donor safety. 

The Negatives 

The new filing system does not come without hiccups. Users have complained that they’ve received error messages when logging in to the website and during the enrollment process. Others have complained that the portal will not let them continue without submitting a financial statement, even if the charity is not required to. 

What is Solicitation of Contributions? 

To allow the filing portal to operate correctly, users must answer the question regarding solicitation of contributions accurately.  

Some examples of Soliciting include: 

  • In person meetings 
  • Digital advertising 
  • Email communications 
  • Social Media Posts 
  • Website content, blog posts, event pages, and donations forms 
  • Fundraising events, including galas, auctions, and virtual gatherings 
  • Direct Mail Campaigns 

If the organization does not engage in the activities above and does not ask for contributions from the general public, then the organization does not solicit contributions from New York State residents. 

Some confusion around the term solicitation has led some organizations to answer “yes” to the question “Does the organization solicit $25,000 or more from New York State residents annually,” when in fact the organization did not solicit contributions in the first place.  

Example: Peter, a New York State resident, contributes $1,000,000 to his family’s Private Foundation of his own free will. Peter was not asked by any officers or agents of the foundation to contribute the amount, and therefore was not solicited by the organization. The foundation received no additional contributions during the year. When filing the organization’s CHAR500 Peter mistakenly answers yes to the question as to whether the organization solicited contributions from New York State residents because he assumed the organization solicited contributions merely by receiving his donations. Since he answered “yes” to the question, and the contributions totaled $1,000,000 or more, Peter is prompted to upload an audited financial statement, and cannot complete the form without doing so. Peter is now in a panic because it is November 15, and he is unable to file his CHAR500 without the financial statement and is unable to obtain an audited financial statement by the end of the day. If he had correctly answered “no” to the charitable solicitation question, Peter would have been allowed to file the Foundation’s CHAR500 without uploading a financial statement. 

This example shows exactly why it is important to understand what soliciting contributions consists of. The mere fact that an organization received contributions from New York State residents does not mean the organization solicited such contributions. 

Spring Street’s Thoughts  

While not perfect, the New York State Charities Bureau has streamlined the CHAR500 process and made it easier for tax preparers and charities to remain in compliance with New York State. It is important for charities and their tax advisors to answer all questions accurately and provide the Charities Bureau with all the required information and attachments. For this reason, it is important to choose your tax advisor carefully and ensure that they have the proper knowledge and expertise to handle the organization’s CHAR500 filings. 

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