December 10, 2019

Pomeroy Law P.C. assists non-profit organizations to maintain compliance with their corporate and employment practices. Non-profits must maintain documents and adhere to certain reporting requirements to state and federal agencies. This is a brief overview of some of the document and reporting requirements of non-profits that sometimes get overlooked:

  • Registration of the Entity – A non-profit organization must prepare and file with certain agencies specific documents before it can call itself a “non-profit” organization. In addition, the non-profit’s governance must have bylaws drafted to provide for how the organization’s board, officers and others may take part in the running of the non-profit organization. For example, an entity must register in the state it intends to incorporate.
  • Reporting to State and Federal Agencies – Simply calling yourself a non-profit does not equate to the fact that donations to the organization will be tax deductible. For example, an organization who wishes to be recognized as a tax exempt entity and for charitable contributions to be deductible by the contributor must obtain approval by the IRS to become a tax exempt organization. If an organization obtains approval to be a 501(c)(3) tax exempt entity, the organization must annually file tax returns that report the organization’s business income and liabilities. Many of these documents are then available for public inspection. State law may also require certain filings with their taxing organization. All non-profits are required to file forms with the Internal Revenue Service (IRS) as well as state agencies. The reporting requirements will differ depending on the type of reporting and whether it is to a state or federal agency. Non-profits may also need to file certain reports with state agencies that oversee charities, in Massachusetts this is the Attorney General’s Office.
  • Corporate Bylaws with Conflict of Interest Policy – Many states require, and federal agencies strongly recommend, that non-profit entities maintain a conflict of interest policy as part of their bylaws. This type of policy governs how the board of directors will address when a board member or officer has a financial or pecuniary beneficial interest in a transaction between the organization and the officer, board member or their family members or clients. These policies outline how a board of directors must conduct voting and approval of such transactions and requirements on maintaining records for these transactions.
  • Record Retention Policies – Non-profits must have record retention policies for their organization. This policy outlines the length of time the organization will maintain copies of certain documents. The length of time will depend on the type of document. This policy should also contain terms relating to how documents and electronical documents will be stored and preserved, and how the organization will handle documents during actual or potential litigation or audits.
  • State Reporting – Many states have different requirements for non-profits to report certain matters to the state. For example, Massachusetts requires that non-profits that will be canvassing for donations to the public file for certain permission before they conduct such campaigns. Additionally, Massachusetts requires the annual filing of a form PC to the Attorney General’s office that include copies of certain tax forms.
  • Out of State Organizations Intending to Do Business in A Different State – Many states and local governmental organizations require the registration of state non-profits if they intend to do business or solicit funds from citizens of a different state than where the organization is registered.
  • Dissolution of a Non-Profit – Non-Profit organizations must take certain legal steps if it intends to close or stop operations. This involves filing documents with the courts and reporting the transfer of any remaining funds to another non-profit organization.

The key to a non-profit’s compliance with the law is understanding the laws that impact its activities. Executive directors and board members should retain legal counsel and accountants knowledgeable in these areas so that the organization may be properly guided through the myriad of regulation that impacts non-profits.

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