In representing small, mid-size, and even larger nonprofits, we often find the array of periodic compliance reporting can get lost. Sometimes this occurs because an individual is named the contact person for notifications, and that staff person or volunteer is no longer working. While most delinquent filing issues are fairly easy to fix, a pattern of noncompliance can cause issues over time, especially if you find yourself faced with other legal issues. Here’s a handy, though not absolutely comprehensive, checklist to help keep you on track, designed with 501(c)(3) public charities in mind.
- IRS Form 990. Every 501(c)(3) organization must file a 990 in some form or another, even if you have no activity at all during a tax year. Larger organizations will file the full 990, and this rarely slips through the cracks. This is a big, complicated form, and we strongly recommend using a tax professional to complete or at least review prior to filing. Smaller organizations can file the 990EZ, which is much easier to complete and can be done by competent staff. Organizations with less than $50,000 in receipts during any year can file the 990-N, sometimes referred to as the 990 postcard. It is a very simple form, with just a few questions, and is filed on line. IMPORTANT NOTE: Even if you have $0 in revenues, you must file the 990-N every year. No exceptions. Failure to do so will result in loss of your 501(c)(3) tax exempt status. Our friends at the IRS are completely on top of this, so don’t think they’re not watching!
- State Attorney General Filings. Nonprofit organizations are governed in most states by the state attorney general’s office, with powers arising out of their general authority over consumer protection. The reasoning here is that nonprofits are custodians of charitable funds for the benefit of the public, so the attorneys general oversee the nonprofits on this basis. In Ohio as in several other states, there is an annual filing regarding fundraising, which is required regardless of whether or not you do any fundraising. The attorney general’s office will also get involved if you seek to remove or change donor restrictions or designations on gifts.
- Secretaries of State. You should also be aware of the need periodically to file a statement of continued existence or similar filing with your secretary of state’s office, confirming you are still in business at some level. Changes in your structure, including mergers or dissolutions, are also dependent on approval by the secretary of state.
- Other State Compliance. Depending on the type of fundraising you do, you may have filings with your state department of insurance for charitable gift annuities, or with your state tax authority for certain types of charitable trusts.
- Sales Tax. Yes, you may need to collect, remit and and report sales tax on items sold in your gift shop or cafeteria if you sell to the public on a regular basis.
State attorneys general are taking a greater interest in the management of nonprofits, with Ohio being among the most proactive in compliance and enforcement. Particular areas of interest include adherence with board fiduciary duties, conflicts of interest, self dealing and related party transactions, investment management, and accurate/adequate disclosure of the use of charitable funds.