With the New Year approaching and many of us contemplating fitness regimes and spending moratoriums, do you think it may be time to make a resolution for your nonprofit organization?
Yes! You worked hard to get your 501(c)(3) determination from the IRS. Now you need to keep it. Feeling exhausted already? Here’s help.
The Basic Ten Commandments for Staying Exempt
- Always operate your organization and use your resources exclusively to advance your mission.
- Make sure none of your revenues or resources are used to benefit “insiders” such as Board members or their families, or any other individuals who have a private financial interest in your organization or activities.
- Keep your Board of Directors fully informed of your activities and ensure that they exercise strong oversight of your finances and strive to act in the best interests of your organization.
- Maintain books and accurate records of all your activities — revenues, expenditures, grants, investments, employment, and any income you receive for activities that are not related to your mission.
- Do not attempt to influence legislation (lobby) as a substantial part of your activities. For any limited lobbying you may engage in, keep track of your activities and expenditures.
- Do not participate in campaign activities for or against political candidates.
- Thank your donors promptly and in writing for their contributions.
- File your Annual IRS returns: Form 990, Form 990-EZ or Form 990-N (depending on your organization’s assets).
- File any annual reports required by your state. If you’re in Massachusetts, this means the Annual Report required by the Secretary of the Commonwealth, and the “Form PC” required by the Massachusetts Attorney General.
- Register or file any reports required by other states in which you do fundraising.
Ok, I guess this isn’t so basic.
There are a lot of requirements, and keeping track of them can be overwhelming. So don’t go it alone. Get advice from an attorney who specializes in tax-exempt organizations. Some compliance mistakes are fixable, but others can jeopardize your hard-won 501(c)(3) status.
May your New Year be successful and legally compliant!
Ellen Lubell provides guidance to nonprofit leaders on a wide variety of transactions, as well as risk management, governance, fundraising, and practices to preserve tax-exempt status and assure the proper expenditure of resources.