Nonprofit Compliance: Are you ready?

Nonprofit Compliance is not most board members� favorite subject, but it is one of the most necessary components for keeping a nonprofits exempt status as an eligible 501 c(3). Once a charity receives notification that it has been recognized, the charity�s officers, directors, trustees and employees must ensure that the organization maintains its tax-exempt status and meets its ongoing compliance responsibilities related to recordkeeping, reporting, and disclosure. The following tips may be a helpful starting point for assessing if your organization is on track:

  1. A nonprofit is required to inure private benefit of individuals and organizations. This is to ensure that public interest will outweigh private benefit.
  2. Public charities are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) a candidate for public office. Contributions to political campaigns or public statements of position made on behalf of the organization in favor of or in opposition to any candidate for public office violate the prohibition against political campaign activity.
  3. A public nonprofit should avoid significant legislative activity or lobbying. An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for purposes of proposing, supporting or opposing legislation, or advocates the adoption or rejection of legislation.
  4. 990 or 990EZ must be filed annually unless the nonprofit is among the precluded organizations. For those required to file a $20 per day fine may apply.
  5. In general, a public charity must maintain books and records to show that it complies with tax rules.
  6. The charity must be able to document the sources of receipts and expenditures reported on Form 990.
  7. It must be able to produce an inventory of items purchased by the organization such as investments, equipment, furniture, and buildings. Helpful TIP: It is helpful to put these on a spreadsheet with the following: tag number, use, location, and date of purchase and how. More explicit detail is available at www/irs.gov.
  8. Public charities should keep supporting documents organized by year and type of receipt or expense. Also, keep records in a safe place.