A sizable amount of the funding received by nonprofit organizations consists of restricted gifts meant for specific programs or projects. Many nonprofits use unrestricted operating revenue to cover the cost of managing their restricted funds, leaving the organization with insufficient unrestricted cash. These management costs, however, can often be met by the restricted fund itself.
A nonprofit’s board of directors is responsible for establishing the compensation (salary and benefits) for the chief executive (typically referred to as either the Executive Director, the CEO, or the President). Although the IRS does not provide specific dollar amounts or an acceptable range of compensation levels, they stipulate that compensation must be reasonable and not excessive; “reasonable” is defined as the value that would ordinarily be paid for like services by like enterprises under like circumstances.
Ultra vires is a Latin term conveying that acts outside the permissible scope of authority set forth in a corporation’s governing documents are an unauthorized activity that cannot be ratified by its Board of Directors. Although many states have effectively abolished this common law concept by granting corporations significant autonomy, ultra vires continue to be an important doctrine in the tax-exempt nonprofit context because such organizations are required to limit their powers to qualify for tax exemption.
The need to register is triggered by active solicitation efforts such as sending out mailers or participating in commercial co-ventures. The charity does not need to actually receive a donation to trigger registration in many states.
Nonprofit organizations are governed by a board of directors responsible for making significant decisions and ensuring that the organization operates in compliance with relevant laws and regulations. However, to carry out the board’s responsibilities, nonprofit corporations need to have officers elected by the board.
Charities raise funds in a variety of ways, including in person, by telephone, direct mail, email, and through internet solicitations. They also sponsor fundraising events such as dinners, galas, door-to-door sales, concerts, carnivals, sports events, and auctions. Both state law and federal law apply to fundraising activities.
The date of gift rules can be convoluted, but they are important for 501(c)(3)s to understand. 501(c)(3)s must provide receipts to donors, which include the date on which the contribution was received. Having a healthy grasp of these rules will help facilitate donor acknowledgments and ease the burden of frantic donors requesting information come year-end.
This is Part IV of a four-part series about applications of blockchain technology in the nonprofit sector. Part I of this series introduced blockchain technology
This is Part III of a four-part series about blockchain technology in the nonprofit sector. In this Part, we cover decentralized autonomous organizations and how
This is Part II of a four-part series covering blockchain technology in the world of nonprofits. In this Part, we discuss smart contracts and
Most states require you to register your organization if you solicit donations from their residents. Many states also require registration if your organization collects substantial or ongoing donations from their residents, even if you aren’t specifically targeting donors in that state. Download our comprehensive list of each state’s requirements.
Download our free guide to learn about the many elements needed to run a successful nonprofit organization, as well as how to avoid common pitfalls and mistakes.