Every year, we still see too many nonprofit corporations missing basic compliance obligations like filing annual reports, Form 990s, or solicitation registrations. The end of the year is a great time to review filing obligations and make sure nothing is slipping through the cracks since the consequences can be devastating for nonprofit corporations.
1. Annual Meeting. Most nonprofit corporation bylaws require that the directors meet at least annually. Many state nonprofit corporation statutes also require an annual meeting. The annual meeting is typically the meeting where the board (or voting members) fill vacancies on the board, appoint officers, approve budgets, circulate and sign conflict of interest disclosures, and ratify actions taken during the year.
2. Annual Report. Most nonprofits organized as nonprofit corporations are required to file an annual report with their state of incorporation as well any states where they are registered to do business. Failure to file an annual report can result in the corporation losing its good standing with the state which can lead to administrative dissolution. Year-end is a good time to ensure all filings are up to date and to evaluate whether the corporation is “doing business” in any new jurisdictions where it may be required to register.
3. Tax Filing Deadlines. Confirm tax returns are up to date. The end of the year is a good time to make sure federal information and unrelated business filings (Forms 990, 990 EZ, 990-N, and 990-T) are up to date. Virtually all tax-exempt organizations regardless of size (other than churches and certain religious organizations) are required to file an information return annually with the Internal Revenue Service. Most states require a state-level filing as well. The due date is 5 ½ months after the fiscal year-end (May 15 for those on a calendar year). Late filing can result in substantial penalties. Failure to file for three consecutive years results in automatic loss of tax exemption.
4. Solicitation Registrations. Confirm solicitation registrations are up to date. Many states and some local jurisdictions require nonprofits to register before they solicit funds in their jurisdiction. The definition of soliciting is typically broadly defined and may encompass any ask targeted to residents of the jurisdiction. Most jurisdictions require annual renewals making year-end a good time to determine whether the organization is registered in all of the jurisdictions where it plans to fundraise in the coming year and to review the status of renewals in the states where it is currently registered to solicit funds.
5. Gift Administration Issues. Review grant agreements to ensure terms and restrictions are being honored.
6. Insurance Policies. Review insurance policies (e.g., general liability, officers and directors liability, etc.). Determine whether limits of coverage are adequate. Determine whether policies cover the organization’s current activities.
7. Private Foundation Considerations. Spend funds on charitable activities or make grants to public charities sufficient to avoid excise tax penalties. Call your CPA to obtain the exact number that must be spent. Review business holdings of private foundations and all disqualified persons to ensure they do not collectively exceed 20% of voting control.
8. Thank Your Donors with Proper Gift Receipts. Most importantly, make sure contributions from donors are properly acknowledged pursuant to IRS rules. Donors who don’t have a gift receipt by the end of the year to substantiate their tax deduction are unlikely to give again.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations. Ellis is licensed to practice in Washington and Arizona and advises nonprofits on federal tax and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.
 In Arizona, the annual report must be filed with the Arizona Corporation Commission. In Washington, the annual report is filed with the Secretary of State’s Corporation Division.
 In Arizona, a copy of the federal return must be filed with the Arizona Department of Revenue. In Washington, a combined excise tax return must be filed with the Washington Department of Revenue by January 31.