Why Compliance Matters
Non-profit organizations face unique compliance requirements. Failure to file required forms can result in automatic revocation of tax-exempt status — and reinstatement is expensive and time-consuming.
Annual Filing Requirements
Form 990 (Return of Organization Exempt From Income Tax)
Who files: Organizations with gross receipts ≥ $200K or total assets ≥ $500K.
Due date: 15th day of the 5th month after fiscal year end (May 15 for calendar-year organizations).
Key sections:
- Part I — Revenue, expenses, and net assets
- Part III — Program service accomplishments
- Part IV — Checklist of required schedules
- Part VI — Governance, management, and disclosure
- Part VII — Compensation of officers, directors, and key employees
Form 990-EZ (Short Form)
Who files: Organizations with gross receipts < $200K and total assets < $500K.
Due date: Same as Form 990.
Form 990-N (e-Postcard)
Who files: Organizations with gross receipts normally ≤ $50K.
Due date: Same as Form 990.
Note: If you fail to file for three consecutive years, your exempt status is automatically revoked.
Exempt Status Maintenance
Organizational Requirements
- Operate exclusively for exempt purposes (charitable, educational, religious, etc.)
- No private benefit to insiders
- Limited lobbying activities
- No political campaign intervention
Public Charity vs. Private Foundation
Most organizations want to be classified as public charities (not private foundations) because:
- Higher deduction limits for donors
- Less restrictive investment rules
- No excise tax on investment income
Public support test: You must receive at least 33⅓% of support from the general public, government, or other public charities (not from gross receipts, interest, or dividends).
Record Retention
Non-profits should retain:
- Formation documents — Articles of incorporation, bylaws, exempt status determination letter (permanently)
- Governance records — Board minutes, conflict of interest policies, whistleblower policy (permanently)
- Financial records — Bank statements, invoices, receipts (7 years)
- Donor records — Acknowledgment letters for contributions ≥ $250 (7 years)
- Employment records — Payroll, W-2s, I-9s (7 years after termination)
Unrelated Business Income Tax (UBIT)
If your organization earns income from a trade or business that is not substantially related to your exempt purpose, you may owe UBIT.
Common triggers:
- Rental income from mortgaged property (debt-financed income)
- Advertising revenue
- Revenue from activities not related to exempt purpose
Filing: Form 990-T if gross unrelated business income ≥ $1,000.
State Compliance
In addition to federal requirements, most states require:
- Annual report filing with secretary of state
- State tax exemption application (separate from IRS)
- Solicitation registration (if fundraising)
- Sales tax exemption (for purchases, not sales)
Compliance Checklist
- ☐ File Form 990/990-EZ/990-N annually by deadline
- ☐ Maintain organizational documents (articles, bylaws, determination letter)
- ☐ Hold regular board meetings and document minutes
- ☐ Adopt and enforce conflict of interest policy
- ☐ Provide donor acknowledgment letters for contributions ≥ $250
- ☐ File state annual reports
- ☐ Maintain state tax exemption
- ☐ Register for solicitation (if fundraising)
- ☐ Monitor unrelated business income
- ☐ Retain records per retention policy
Next Steps
Non-profit compliance is complex, but critical. Alan has decades of experience serving as financial controller for a national non-profit. He provides ongoing compliance guidance, public charity classification consulting, and — when needed — full controller-level financial management.
