For nonprofit organizations, the IRS Form 990 return must be filed on or before the 15th day of the fifth month following the fiscal year-end – or May 15 for those using a Dec. 31 year-end.
This deadline should also prompt nonprofits to engage in a start-of-the-year review of insurance, donor letters and corporate records to determine whether any changes should be made for the coming year.
Here is a review of the Form 990 requirements which charts out the essential components of a nonprofit’s annual review of its obligations and status.
Form 990/990-PF Return
For nonprofits operating on a fiscal year-end, the applicable Form 990 Return must be filed on or before May 15, unless a proper extension is filed. There are significant penalties for failure to timely file a Form 990/990-PF return, and a failure to file it for three consecutive years will result in the automatic revocation of the nonprofit organization’s tax-exempt status.
There are several different types of Form 990 Returns, and the return required of your nonprofit organization will depend on its tax classification and its annual gross receipts and total assets. To determine which Form 990 Return your nonprofit organization is required to file, visit the IRS website for a helpful breakdown of the Form 990 returns.
The Form 990/990-PF return can be complex, and the IRS and certain state agencies have been more attentive to compliance issues, many of which must be disclosed on the Form 990/990-PF return. For these reasons, it is imperative that every nonprofit organization have an accountant experienced in the tax rules applicable to nonprofits. If your nonprofit organization needs a referral for an accountant experienced in preparing and filing Form 990 returns, please contact us.
If your nonprofit organization engages in fundraising, it must register in each state in which it solicits funds. These solicitation registrations must be renewed annually and are typically due on the same date as IRS filings are due. Failure to register or renew your nonprofit’s solicitation registration(s) may result in penalties. If your nonprofit organization needs a referral for an accountant, attorney or consultant experienced in preparing and filing solicitation of funds registration statements, please contact us.
Change in Officers and Directors
A nonprofit organization should include changes in its officers and/or directors on its Form 990. In addition, all entities with an Employer Identification Number (EIN) are required to submit Form 8822B to update the IRS on any changes to the entity’s responsible party (generally, the president or treasurer). This form must be filed within 60 days of the change. While the instructions to Form 8822B note that there are no penalties for failure to file the form, interest and penalties set forth on any notice of deficiencies or assessments made against a nonprofit entity that were sent to the wrong responsible party will not be abated. Departing officers and directors should ensure that the nonprofit entity files a Form 8822B within 60 days of officer and director elections.
Additionally, many states require a nonprofit organization to notify the state when there has been a change in the nonprofit organization's officers and/or directors. Pennsylvania, for instance, requires a nonprofit organization to file an annual statement on or before April 30 of each year if there has been a change in the nonprofit organization's officers. These filing requirements vary from state to state, so it is important to be aware of and consult local laws to ensure your nonprofit organization is in compliance.
Nonprofit organizations should always review their insurance coverage at the end of each year. If this review was not done due to other more pressing year-end obligations, it is imperative that your officers, directors and/or management team immediately review your organization’s insurance policies to ensure adequate general liability insurance coverage as well as directors and officers insurance coverage.
Proper coverage will depend on a nonprofit organization’s activities and total assets. Failure to maintain proper coverage could result in a nonprofit organization’s directors, officers and/or agents being personally liable for the nonprofit organization’s actions. If your nonprofit organization needs a referral for an insurance broker who regularly obtains insurance for nonprofit organizations, please contact us.
Written Acknowledgements and Quid Pro Quo Disclosures
A written acknowledgment is the documentation your nonprofit organization must give a donor when a donor provides a donation over a certain value. If the donor does not receive goods or services in exchange for the donation, then the acknowledgement must state that no goods or services were provided to the donor. If the donor receives goods and/or services in exchange for the donation, then your nonprofit organization must provide a quid pro quo disclosure.
At the end or beginning of each year, nonprofit organizations should review the written acknowledgement and quid pro quo letters it sends to donors to ensure that such letters are in compliance with federal rules and regulations. If a nonprofit does not follow these rules, its donors may not be able to deduct their charitable contributions and the IRS may assess fines against the nonprofit.
At the end or beginning of each fiscal year, a nonprofit should review its bylaws to ensure that they remain in compliance with federal and state laws. For instance, the State of New York recently overhauled its Not-for-Profit Corporation Law, forcing many New York-based nonprofit organizations to amend their bylaws.
Bylaws should also be reviewed to ensure that they accurately reflect the organization’s corporate governance structure and operations. For example, outdated bylaws may reflect that the board of directors must be composed of five directors, when, in fact, the organization has never had more than three directors serving at a time. Additionally, outdated bylaws may call for director or officer election procedures that are no longer followed.
Further, a nonprofit should review its bylaws to determine whether the threshold for board approval is higher for fundamental decisions (super-majority vote) as compared to significant decisions (majority vote).
Keep in mind, too, that the IRS must be notified if your nonprofit organization makes amendments to its bylaws.
Corporate Records: Meeting Minutes and Written Consents
If a nonprofit took any of the following actions over the past year, it should confirm that such actions were properly documented, either in meeting minutes or written consents:
- A change in the nonprofit organization’s articles/certificate of incorporation or bylaws;
- A change in the purpose and/or activities of the nonprofit organization;
- A change in the nonprofit organization’s mailing address or registered address;
- A change in the nonprofit organization’s registered agent;
- A change in the nonprofit organization’s directors, officers or trustees;
- A change in the sources of revenue that were disclosed on the nonprofit organization’s Form 1023 Application for Exemption;
- A change in the amount and method of fundraising;
- A change in the nonprofit organization’s responsible party; and/or
- A change in the nonprofit organization’s governance policies, including but not limited to, its Signatory and Disbursement Policy, Conflict of Interest Policy, Short-Term Investment Policy, Long-Term Investment Policy, Document Retention Policy, Gift Acceptance Policy, etc.
In addition to documenting the approval for the above-listed actions in the form of meeting minutes or written consents, your organization may be required to notify the IRS of the changes. Many of these changes can be disclosed on the organization’s Form 990 or Form 99-PF return. More fundamental changes, however – such as amendments to the articles of incorporation or bylaws or modifications to your nonprofit organization’s purpose and/or activities – should be disclosed directly to the IRS’ Customer Service Group.