Omar Bennett
Nonprofit organizations are required to meet specific criteria to maintain their status and receive tax exemptions. While the IRS does not always require updates to a nonprofit's constitution, changes to the organization, such as amendments to its bylaws or Articles of Incorporation, must be reported and may impact its tax-exempt status. Nonprofits should be diligent in understanding the legal requirements and staying up-to-date with IRS regulations to ensure compliance and avoid losing their tax-exempt privileges.
| Characteristics | Values |
|---|---|
| Documentation requirements | Vary depending on the type of nonprofit entity (e.g., corporation vs. trust) |
| Informal updates | Alerting stakeholders, changing names on social media, and informing clients and vendors |
| Address change requirements | File an amendment with the state; can be reported in the annual filing in most cases |
| Name change requirements | File an amendment with the state; can be reported in the annual filing in some states |
| Bylaw changes | Do not need to be filed at the state level but must be reported to the IRS annually |
| Purpose statement changes | Require an Amendment filing and may need approval from the Attorney General |
| Director or officer changes | Must be filed and reported to the state's Charities Bureau if registered there |
| Group exemption | The central organization can apply for a group exemption letter for its subordinates |
| Filing requirements | Form 1023, Form 990, Form 990-EZ, Form 990-PF, and related forms, schedules, and attachments |
| Payment of user fees | Required with each application and must be paid through Pay.gov |
| Exemption recognition | Not required but can be chosen to receive a determination letter |
| Tax-exempt entities | Social welfare organizations, civic leagues, social clubs, labor organizations, and business leagues |
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What You'll Learn
- Nonprofit entities have different documentation requirements
- The IRS doesn't automatically update when a state's nonprofit status changes
- Nonprofits must file an amendment when changing their purpose statement
- Nonprofits can choose to file Form 1023 to receive a determination letter
- Nonprofits must file certain returns electronically
Nonprofit entities have different documentation requirements
Nonprofit entities have distinct documentation requirements that must be met to maintain their legal and tax-exempt status. These requirements vary depending on the type of nonprofit entity, such as a corporation or trust. Here are the key documentation considerations for nonprofits:
Articles of Incorporation
The articles of incorporation are essential for a nonprofit to obtain its legal status. They include basic information such as the nonprofit's name, registered agent, address, and membership structure. Any changes to these articles typically require filing an Article of Amendment with the respective state and other jurisdictions where the nonprofit is registered.
Bylaws
Bylaws are the governing documents for a nonprofit and its board of directors, outlining rules and procedures for meetings, elections, and appointments. They also define the conditions of office for directors and officers, such as the secretary, treasurer, and president. Nonprofits should ensure they have properly adopted bylaws, as they are legally binding and required for incorporation. Amending bylaws typically requires a supermajority vote, and changes should be reported to the IRS and, in some cases, the state's Charities Bureau.
Tax-Exempt Status
To maintain tax-exempt status, nonprofits must adhere to specific requirements. This includes disclosing certain financial information to the public upon request, such as annual information returns (IRS Form 990) and the organization's application for tax exemption. Nonprofits should also be transparent about executive compensation and adopt sound financial management and expense policies.
Name and Address Changes
When changing their name or address, nonprofits must file an amendment with the state and, in some cases, the state's Charities Bureau. These changes should also be reported on the next annual return or information notice, using forms like Form 990 or Form 8822-B. Additionally, it is essential to update stakeholders, social media, clients, and vendors about these changes.
Compliance with State Laws
Nonprofits must comply with their state's nonprofit laws and ensure that their bylaws address relevant issues. In cases where the bylaws do not cover a specific matter, state law will take precedence. Therefore, nonprofits should carefully review and adhere to the applicable state regulations.
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The IRS doesn't automatically update when a state's nonprofit status changes
Nonprofit organizations are required to meet specific criteria to maintain their status. These criteria vary depending on the type of nonprofit entity, such as a corporation or trust. For instance, a nonprofit must be organized as a corporation, LLC, unincorporated association, or trust, with its purpose(s) and activities permanently dedicated to maintaining its tax-exempt status.
While the IRS provides resources and updates for tax-exempt organizations, it is important to note that the IRS does not automatically update a nonprofit's status when changes are made at the state level. This means that if a nonprofit organization undergoes any changes, such as amending its Articles of Incorporation or changing its name or address, it is responsible for proactively updating the IRS. In most cases, this involves filing an Article of Amendment with the state in which the organization is incorporated and repeating the process in other jurisdictions where it is registered.
Additionally, certain changes, such as updates to the bylaws, must be reported to the IRS through Form 990 during tax time. It is worth noting that while changes to the nonprofit organization's bylaws do not require filing at the state level, they are legally binding and crucial for maintaining the tax-exempt status of the nonprofit. To ensure compliance, it is recommended to consult the IRS website or seek legal advice for specific requirements and procedures.
To summarize, while the IRS provides resources and updates for tax-exempt organizations, it is the responsibility of the nonprofit organization to proactively update the IRS regarding any changes to maintain its tax-exempt status. This includes filing amendments, reporting bylaw changes, and staying compliant with state and IRS requirements. By staying vigilant and informed, nonprofit organizations can effectively maintain their status and continue their important work.
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Nonprofits must file an amendment when changing their purpose statement
The purpose statement, also known as the "corporate purpose statement," is a written declaration that outlines the long-term goals and aspirations of the nonprofit organisation. It is typically included in the articles of incorporation, which are filed when the nonprofit is first established. The purpose statement is crucial as it serves as evidence of the nonprofit's qualifications for various tax exemptions at the state and federal levels. It also provides a framework for organisational decision-making and helps distinguish the nonprofit's mission from that of other organisations.
When a nonprofit decides to modify its purpose statement, it must follow specific procedures to ensure compliance with legal requirements. In most cases, an amendment must be filed with the state in which the nonprofit is incorporated. If the nonprofit is registered in multiple states, the amendment process must be repeated in each of those jurisdictions. Additionally, the nonprofit may need to notify other agencies, such as the state's Charities Bureau or the Franchise Tax Board, depending on the specific state regulations.
It is important to note that changes to the purpose statement can potentially impact the nonprofit's tax-exempt status. Therefore, it is advisable to seek approval from the Attorney General before finalising any amendments. Once the amendments are made, the nonprofit must ensure that all public announcements, mission statements, and documents are updated to reflect the new purpose statement. Informing stakeholders, board members, vendors, and donors about the change is also a recommended practice.
While the process of amending the purpose statement may seem straightforward, it is crucial to carefully consider the potential consequences of any changes. Nonprofits should review their bylaws and seek legal advice if needed to ensure that the amendments align with the organisation's goals and comply with all applicable laws and regulations.
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Nonprofits can choose to file Form 1023 to receive a determination letter
Form 1023 is subject to federal public inspection, so the information filed on the form could be seen by the public at large. The form must be completed and submitted with the appropriate user fee. If the nonprofit is not eligible to file Form 1023, they may be eligible to file Form 1023-EZ, a streamlined version of the application for recognition of tax exemption.
If the nonprofit's income increases, the IRS will be notified through the annual nonprofit filing. The organisation will then be asked to provide additional information about how it runs. However, nonprofits do not need to refile with Form 1023.
It is important to note that the IRS is not automatically updated by the state, so nonprofits may need to update the IRS themselves. For example, if a nonprofit changes its name, it will need to file an amendment with the state and report this change on its next annual return or information notice.
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Nonprofits must file certain returns electronically
Nonprofits are generally required to file annual returns of their income and expenses with the Internal Revenue Service (IRS). While some organizations are exempt from this rule, such as churches and certain church-affiliated organizations, most nonprofits must comply. The specific form to be filed depends on the nonprofit's annual revenue and assets in its most recent fiscal year.
There are three versions of the IRS annual information return: Form 990, Form 990-EZ, and Form 990-N. Nonprofits with annual revenue of $500,000 or more must file Form 990. Small nonprofits with less than $50,000 in annual revenue may usually file Form 990-N, also known as the "e-Postcard." However, some categories of nonprofits are not permitted to file this form and must use another version. Nonprofits with revenue of any size that have unrelated business income will need to file Form 990-T as part of their annual return filing.
Additionally, certain forms must be filed electronically. For example, Form 990-T for tax years ending in December 2020 and later must be filed electronically. Private foundations and non-exempt charitable trusts that file at least 250 returns annually are also required to file Form 990-PF electronically, regardless of their asset size. Exempt organizations with $10 million or more in total assets may be required to e-file if they file at least 250 returns in a calendar year, including income, excise, employment tax, and information returns.
It is important to note that if a nonprofit fails to file its Form 990 for three consecutive years, its tax-exempt status will be automatically revoked. Therefore, nonprofits must stay compliant with their filing requirements to maintain their tax-exempt status and avoid penalties.
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Frequently asked questions
No, the IRS does not need to approve a nonprofit's bylaws. However, the bylaws are legally binding and are a requirement for incorporation.
Yes, the IRS must be notified of changes to a nonprofit's bylaws. This can be done with Form 990, annually, at tax time.
Yes, if your nonprofit is registered with the state's Charities Bureau, you may need to file your name change with them. Check to see if you can submit this with your annual filing or what timeframe you have to submit within.
Yes, you’ll need to file an amendment with the state, and take note of additional requirements. For example, in most cases, you can report the change of address for your nonprofit in your annual filing.
Yes, changing your purpose statement requires an Amendment filing, and in some cases, you may first need to obtain approval from the Attorney General.
