Nonprofits Archives - Page 4 of 5 - Gordon Fischer Law Firm

Posts

YOUR FAVORITE NONPROFIT NEEDS THESE TEN (10) POLICIES

I. INTRODUCTION

Happy New Year! A great way to start 2024 for Iowa nonprofits? Adopt the ten (10) policies referenced on IRS Form 990, as discussed fully below.

II. IRS FORM 990

Every nonprofit, every year, must complete and file a version of Form 990, which the IRS calls its “Return of Organization Exempt From Income Tax.” The “long” version of Form 990 asks about many financial matters – donations, money on hand, non-cash assets, breakdown of expenses, and so on.

Form 990 goes even further however, and asks nonprofits if they have certain policies in place. In fact, there are ten (10) specific policies that the IRS asks about on Form 990.

To be clear, the IRS does not mandate adopting these ten (10) policies. But the IRS, at least to me, is signaling what policies nonprofits should have in place. Again, my read of Form 990 is that the IRS is showing nonprofits what it considers to be “best practices.”

III. REASONS FOR THESE TEN (10) POLICIES AND THEIR BENEFITS

One might ask, if these policies are not absolutely required, why have them?

Generally, these ten (10) policies provide substantial benefits, including, but hardly limited to:

Enhanced confidence of donors and other stakeholders
Consistent framework for decision making
Increased compliance with federal, state, and local laws
Reduced risk to the nonprofit and its management and governing board

The existence of policies doesn’t mean compliance is always assured of course, but having policies in place provides a framework and sets expectations for a nonprofit’s board members, employees, donors, volunteers, and other stakeholders. Such policies can be referenced if (when) issues arise.

Another major reason to invest in adopting these policies is because the IRS audits tax-exempt nonprofits, just as it audits companies and individuals. Having certain policies in place will only serve to benefit the nonprofit should it happen to be audited. Also, proper policies provide a foundation for soliciting, accepting, and facilitating charitable donations.

Last, but not least, Form 990 is made accessible to the public, meaning it can be used as a public relations tool if filled out diligently. Major donors can and often do review a nonprofit’s Form 990 to ensure the nonprofit is compliant, putting charitable donations to good use, and continuing to operate in alignment with its overall mission.

IV. WHAT POLICIES ARE WE TALKING ABOUT?

The IRS made a major revision to Form 990 in 2008. The old version focused largely on financial data. Now, Form 990 reports extensive information on operations such as board governance, fundraising, non-cash assets, and more. Let’s cover all ten (10) policies the IRS asks nonprofits to report on in its Form 990. I’ll discuss each policy in alphabetical order.

1. COMPENSATION

Data related to compensation is reported in multiple sections on Form 990: Part I, Part VI, Part VII, Part IX, and Schedule J.

Competitive compensation is just as important for employees of nonprofits as it is for for-profit employees. Having a policy that objectively establishes salary ranges for positions, updated job descriptions, relevant salary administration, and performance management establishes equality and equity in compensation practices. A statement of compensation philosophy and strategy, which explains to current and potential employees and board members how compensation supports the nonprofit’s mission, should be included in the compensation policy.

2. CONFLICT OF INTEREST

Found on Form 990 Part VI, Section B, Line 12 a-c.

A conflict of interest policy should do two important things. First, it should require board members with a conflict (or a potential conflict) to disclose said conflict. Second, it should exclude individual board members from voting on matters in which there is a conflict.

The Form 990 glossary defines a “conflict of interest policy” as follows:

A conflict of interest policy defines conflicts of interest, identifies the classes of individuals within the organization covered by the policy, facilitates disclosure of information that can help identify conflicts of interest, and specifies procedures to be followed in managing conflicts of interest. A conflict of interest arises when a person in a position of authority over an organization, such as an officer, director, manager, or key employee can benefit financially from a decision he or she could make in such capacity, including indirect benefits such as to family members or businesses with which the person is closely associated. For this purpose, a conflict of interest doesn’t include questions involving a person’s competing or respective duties to the organization and to another organization, such as by serving on the boards of both organizations, that don’t involve a material financial interest of, or benefit to, such person.

Form 990 asks whether the nonprofit has a conflict of interest policy, as well as how the nonprofit determines and manages board members who have an actual or perceived conflict of interest. This policy is hugely important, as conflicts of interest that are not successfully and ethically managed can result in sanctions against both the nonprofit and the individual with the conflict(s).

3. DOCUMENT RETENTION AND DESTRUCTION

Found on Form 990 Part VI, Section B, Line 14.

This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques. The document retention and destruction policy (sometimes called, sometimes simply called a “DRD policy”) is useful for a number of reasons. The principal rationale as to why any nonprofit would want to adopt such a policy is that it ensures important documents—financial information, employment records, contracts, information relating to asset ownership, etc.—are stored for a standard period of time for tax, business, and other regulatory purposes. No doubt document retention is incredibly important should litigation or governmental investigation arise.

A strong, clear DRD policy also allows nonprofits to save time, space, and money associated with both hard copy and digital file storage, by determining what is no longer needed and when…it’s like sanctioned spring cleaning!

4. FINANCIAL POLICIES AND PROCEDURES

Different than the investment policy (as discussed below), financial policies specifically address guidelines for making financial decisions, reporting the financial status of the nonprofit, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investment reporting, what accounts may be maintained by the nonprofit, and when scheduled auditing will take place. Form 990 does not make a specific ask about a nonprofit’s financial policies, but this type of policy will serve as an indispensable guide to organizing, collecting, and reporting financial data.

5. FORM 990 REVIEW

Found on Form 990 Part VI, Section B, Line 11.

Form 990 asks the following questions:

Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form? Describe in Schedule O the process, if any, used by the organization to review this Form 990.

In asking these questions, the IRS is indicating that careful distributing and reviewing Form 990 prior to filing is optimal. This policy is extremely useful in clarifying the specific process for distribution and procedure review by the governing body (such as the board of directors). It also acts as a reminder to nonprofit leaders that Form 990 is coming due!

6. FUNDRAISING

The topic of fundraising gets substantial attention on Form 990; fundraising income and expenses are asked about in Part I, Part IV, Part VIII, Part IX, and Schedules G and M.

Almost every nonprofit needs a fundraising policy, as so many nonprofits engage in some sort of charitable fundraising. This policy should include provisions for compliance with local, state, and federal laws, as well as the ethical norms the nonprofit chooses to abide by in fundraising efforts. Remember that fundraising doesn’t just include solicitation of donations, but also receipt of donations.

7. GIFT ACCEPTANCE

Gifts and contributions are referenced many times on Form 990: Part I, Part IV, Part V, Part VIII, Part IX, and Schedule M.

While related to the fundraising policy, the gift acceptance policy is different, as it establishes how nonprofits will handle certain types of assets. This policy provides written protocols for nonprofit board members and staff to evaluate proposed non-cash donations. The policy can also grant some much-needed guidance in how to kindly reject donations that can carry extraneous liabilities and obligations the nonprofit is not readily able to manage.

8. INVESTMENT

One way a board of directors can fulfill their fiduciary responsibility to the nonprofit is through investing assets to further the nonprofit’s goals. But, before investment vehicles are used, the nonprofit should have an investment policy in place to define who is accountable for the investment decisions. The policy should also offer guidance on activities of growing/protecting the investments, earning interest, and maintaining access to cash if necessary.

The policy should be written to give the nonprofit’s management personnel the authority to make investment decisions, as well as preserve the board’s oversight ability. Beyond the specifics of investments, this policy can also govern financial management decisions regarding situations like accepting charitable gifts of securities.

Many nonprofits hire a professional financial advisor or investment manager to implement investments and offer advice. This person’s role can be accounted for in the investment policy. Form 990 does not ask if a nonprofit has a specific investment policy, but it does refer to investments in multiple places throughout the form, and there is an obvious need.

9. PUBLIC DISCLOSURE

Found on Form 990 Part VI, Section C, Lines 18-20.

Speaking broadly, nonprofits exist to serve the public in some way or another, and some nonprofit documents must be made available to the public upon request. Other documents can be kept entirely internal. This policy should overview (1) what documents the nonprofit must disclose, and (2) to what extent does it want to make other non-required documents and information available to the public.

Form 990 specifically asks the filing nonprofit to report if certain documents are made available to the public, such as governing documents (like the bylaws), financial statements, and the conflict of interest policy. Additionally, Form 990 asks for the name, address, and phone number of the individual(s) who possesses the financial “books” and records of the nonprofit.

10. WHISTLEBLOWER

Found on Form 990 Part VI, Section B, Line 13.

Nonprofits, along with all organizations, are prohibited from retaliating against employees who call out, draw attention to, or “blow the whistle” against employer practices. A whistleblower policy should set a process for complaints to be addressed and include protection for whistleblowers. Ultimately this policy can help insulate your nonprofit from the risk of state and federal law violation and encourage sound, swift responses of investigation and solutions to complaints.

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the nonprofit, specifies that the nonprofit will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.

V. CONCLUSION

Iowa nonprofits make such a huge difference all across our state. Nonprofits can make an even larger impact by adopting the ten (10) policies referenced on IRS Form 990.

Questions about the ten (10) policies referenced on IRS Form 990? My email is:
gordon@gordonfischerlawfirm.com

January 2, 2024/by Lexi Luneckas

Nonprofit Policy Special: 10 for Form 990

Nonprofits

Tax-exempt organizations need to have specific guidelines in place to be compliant and in order to meet the IRS’ expectations. It’s never too late (or early!) to invest in comprehensive internal and external policies and procedures. That’s why I’m offering the Nonprofit Policy: 10 for 990 special. You don’t have to feel overwhelmed or burdened at the thought of trying to draft legally correct and comprehensive policies. I’m offering a special deal for 10 important policies (read on for an overview of each) at the rate of $990. This also includes a comprehensive consultation and one full review round.

If you’re a nonprofit founder, executive, board member, or even an active volunteer, this is an excellent way to ensure the organization you’re deeply invested in is meeting (and exceeding!) the gold standard for tax-exempt organizations.

I don’t know anyone who loves paperwork more than the Internal Revenue Service (IRS). But, if you’re operating a nonprofit, you’re going to have to learn how to embrace paperwork as well. Why? The IRS requires certain information from your organization be submitted annually via Form 990 “Return of Organization Exempt From Income Tax.” This 12-page document (not including schedules) serves as a check to make certain nonprofit organizations are still qualified for that coveted tax-exempt status. To that point, the 990 asks nonprofits about policies and procedures that help ensure the nonprofit is conducting business in a transparent way that’s consistent with their exempt purposes. Specific governance policies encouraged by the IRS limit potential abuse, protect against vulnerabilities, and prevent activities that would go beyond permitted nonprofit activities.

Major Benefits & Reasons for Policies for Compliance

If governance policies are not technically required, why do them?

The existence of a policy doesn’t mean compliance is assured, of course, but having policies in place provides a framework and the expectations for an organization’s executives, employees, volunteers, and board members. Such policies can also be referenced if/when issues arise.

One of the major reasons to invest in strongly written, organization-specific policies is because the IRS audits tax-exempt organizations, just as it audits companies and individuals. (Having certain policies in place will only serve to benefit the organization should it happen to be audited.)

Another major reason to have proper policies and procedures in place is because they provide a foundation for soliciting, accepting, and facilitating charitable donations. Last, but not least, the 990 is made accessible to the public, meaning it can be used as a public relations tool if filled out diligently. Major donors can and often do review a charity’s 990 to ensure the charity is compliant, putting charitable donations to good use, and continues to operate in alignment with the overall mission.

Form 990 also serves the greater nonprofit sector as the data collected allows for the monitoring of growth and trends, tracking the types of needs/issues being addressed by nonprofits, and identifying specific adopted practices.

What Policies are We Talking About?

25 Days of Giving: Nonprofit Policies Your Organization Needs to Consider

One thing’s for certain, articles of incorporation and bylaws are just the beginning when it comes to foundational documents.

The IRS made a major revision to Form 990 in 2008. The old version focused largely on financial data. Now, Form 990 reports extensive information on operations such as board governance, fundraising, international programs, non-cash receipts, joint ventures, use of subsidiaries, and more. Let’s cover all the policies the IRS asks tax-exempt nonprofits to report on:

Conflict of Interest

Found on Form 990: Part VI, Line 12 a-c

A conflict of interest policy should do two important things:

require board members with a conflict (or a potential conflict) to disclose it, and
exclude individual board members from voting on matters in which there is a conflict.

The Form 990 glossary defines a “conflict of interest policy” as follows:

A policy that defines conflict of interest, identifies the classes of individuals within the organization covered by the policy, facilitates disclosure of information that may help identify conflicts of interest, and specifies procedures to be followed in managing conflicts of interest. A conflict of interest arises when a person in a position of authority over an organization, such as an officer, director, or manager, may benefit financially from a decision he or she could make in such capacity, including indirect benefits such as to family members or businesses with which the person is closely associated. For this purpose, a conflict of interest does not include questions involving a person’s competing or respective duties to the organization and to another organization, such as by serving on the boards of both organizations, that do not involve a material financial interest of, or benefit to, such person.

Form 990 asks whether the nonprofit has a conflict of interest policy, as well as how the organization determines and manages board members who have an actual or perceived conflict of interest. This policy is all too important, as conflicts of interest that are not successfully and ethically managed can result in “intermediate sanctions” against both the organization and the individual with the conflicts.

If consistently adhered to, this policy can inspire internal and external stakeholder confidence in the organization as well as prevent potential violations of federal and state laws.

Nonprofit Policy Spotlight: Conflict of Interest

Document Retention and Destruction

Found on Form 990: Part VI, Line 14

This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques.

The document retention and destruction policy (DRD policy) is useful for a number of reasons. The principle rational as to why any organization would want to adopt such a policy is that it ensures important documents—financial information, employment records, contracts, information relating to asset ownership, etc.—are stored for a period of time for tax, business, and other regulatory purposes. No doubt document retention could be important for proof in litigation or a governmental investigation.

You may have heard of the federal law, the Sarbanes-Oxley Act of 2002. It reaffirms the importance of a DRD policy. Sarbanes-Oxley reads:

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

While the Sarbanes-Oxley legislation generally does not pertain to tax-exempt organizations, it does impose criminal liability on tax-exempt organizations for the destruction of records with the intent to obstruct a federal investigation.

Nonprofits & Sarbanes-Oxley Compliance

Another reason a DRD policy is an excellent idea, is it forces an organization to save space and money associated with both hard copy and digital file storage, by determining what is no longer needed and when…it’s like sanctioned spring cleaning!

Whistleblower

Found on Form 990: Part VI, Question 13

Nonprofits, along with all corporations, are prohibited from retaliating against employees who call out, draw attention to, or “blow the whistle” against employer practices. A whistleblower policy should set a process for complaints to be addressed and include protection for whistleblowers.

Ultimately this policy can help insulate your organization from the risk of state and federal law violation and encourage sound, swift responses of investigation and solutions to complaints. Don’t just take it from me, the IRS also considers this an incredibly helpful policy:

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported. (Instructions to Form 990)

The Sarbanes-Oxley Act (referenced under the document retention and destruction policy above) also applies here. If found in violation of Sarbanes-Oxley, both an organization and any individuals responsible for the retaliatory action could face civil and criminal sanctions and repercussions including prison time.

Compensation

Competitive compensation is just as important for employees of nonprofits as it is for for-profit employees. Data related to compensation is reported in three different sections on Form 990: “Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees;” “Statement of Functional Expenses,” lines 5, 7, 8, and 9; and Schedule J;” and “Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees.”

Having a set policy in place that objectively establishes salary ranges for positions, updated job descriptions, relevant salary administration, and performance management, is used to establish equality and equity in compensation practices. A statement of compensation philosophy and strategy, which explains to current and potential employees and board members how compensation supports the organization’s mission, can be included in the compensation policy.

Generally, this policy provides the benefits of:

Enhanced confidence of donors and supporters
Consistent framework for decision making on compensation
Increased compliance with federal and state employment laws
Reduced risk to the organization and its management and governing board

Fundraising

The topic of fundraising gets substantial attention on Form 990; fundraising income and expenses are asked about in Part I, three places in Part IV, Part VIII, Part IX, and Schedules G and M. Almost every nonprofit needs a fundraising policy, as almost all engage in some sort of charitable fundraising. This policy should include provisions for compliance with local, state, and federal laws, as well as the ethical norms the organization chooses to abide by in fundraising efforts. Remember that fundraising doesn’t just include solicitation of donations, but also receipt of donations.

4 Tips for Effectively Managing a Monthly Giving Program

Gift Acceptance

Found on Form 990: Schedule M, Part I, line 31

While related to the fundraising policy, the gift acceptance policy relates to charitable contributions. There are no legal requirements for a gift acceptance policy, however this policy provides written protocols for nonprofit board members and staff to evaluate proposed non-cash donations. The policy can also grant some much-needed guidance in how to kindly reject donations that can carry extraneous liabilities and obligations the organization is not readily able to manage.

Investment

One way a board of directors can fulfill their fiduciary responsibility to the organization is through investing assets to further the nonprofit’s goals. But, before investment vehicles are invested in, the organization should have an investment policy in place to define who is accountable for the investment decisions. The policy should also offer guidance on activities of growing/protecting the investments, earning interest, and maintaining access to cash if necessary.

Beyond the specifics of investments, this policy can also govern financial management decisions regarding situations like accepting charitable gifts of securities.

The policy should be written to give the nonprofit’s management personnel the authority to make investment decisions, as well as preserve the board’s oversight ability.

Many organizations hire a professional financial advisor or investment manager to implement investments and offer advice. This person’s role can be accounted for in the investment policy.

Form 990 does not ask if an organization has a specific investment policy, but it does refer to investments in multiple places throughout the form, hence the obvious need.

Financial Policies and Procedures

Different than the aforementioned investment policy, the financial policies and procedures policy specifically addresses guidelines for making financial decisions, reporting financial status of the organization, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investments reporting, what accounts may be maintained by the nonprofit, and when scheduled auditing will take place. Similar to the investment policy, Form 990 does not make a specific ask about an organization’s financial policies, but this type of policy will serve as an indispensable guide to organizing, collecting, and reporting financial data.

5 Resolution Ideas for Nonprofit Pros

Form 990 Review

Found on Form 990: Part VI, Section B, Line 11

Form 990 asks the following questions:

Has the organization provided a copy of this Form 990 to all members of its governing body before filing the form?
Describe in Schedule O the process, if any, used by the organization to review this Form 990.

In asking these questions, the IRS is indicating that distribution of the form prior to filing is optimal. (This is also one of those gold standard governing practices that is beneficial when using the form as a public relations material.) There are no federal tax laws requiring Form 990 review, and Form 990 does not mandate a written policy. However, a written policy is incredibly useful in clarifying a specific process for distribution and procedure review by the governing body (such as the board of directors). It also formalizes a review process and acts as a reminder to nonprofit leaders to distribute accordingly.

Public Disclosure

Found on Form 990: Part VI, Section C, Lines 18 – 20

Public charities exist to serve the public in some way or another, and some organizational documents must be made available to the public upon request. Other documents can be kept entirely internal. This policy should overview (1) what documents must the organization disclose, and (2) to what extent does it want to make other non-required documents and information available to the public.

Form 990 specifically asks the filing organization to report if certain documents are made available to the public, such as governing documents (like the bylaws), conflict of interest policy, and financial statements. Additionally, the form asks for the name, address, and phone number of the individual(s) who possesses the financial “books” and records of the organization.

Where Do I Start?

The mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa, and to that point I want to help every Iowa nonprofit be legally compliant.

The 10 policies part of this promotion will save you time, resources, and you can feel good about having a set of high quality policies to guide internal operations, present to the public (if appropriate), and fulfill form 990 requirements.

If you already have some (or all) of the above listed policies in place, seriously consider the last time they were updated. How has the organization changed since they were written? Have changes to state and federal laws impacted these policies at all? It may be high time for a new set of policies that fits your organization.

Interested? It’s always a good day to contact Gordon Fischer Law Firm via email Gordon@gordonfischerlawfirm.com or by phone (515-371-6077).

June 12, 2021/by Gordon Fischer

Come Together and Support #GivingTuesdayNow

Charitable Giving, Events

Over the past few years Giving Tuesday has claimed its rightful place in the post-Thanksgiving “days” that kick-off the holiday shopping season as well as the end-of-year giving push. Billed as a “global giving movement,” the tag #GivingTuesday encourages people to donate your time, monetary donations, or even just your voice and ideas to a charity/cause that you care for.

Yet, with the threat and immense need caused by COVID-19, waiting until Giving Tuesday for a global, unified call for charitable giving isn’t sufficient. #GivingTuesdayNow (on May 5, 2020) was organized as an international day “designed to drive an influx of generosity, citizen engagement, business and philanthropy activation, and support for communities and nonprofits around the world. It’s a day when we can all come together and give back in all ways, no matter who or where we are.”

Use this day a chance to celebrate the power of giving by supporting the nonprofit organizations you care deeply about—particularly those providing social services and essentials to beneficiary populations in need.

Of course, with unemployment at a record high, donors can also celebrate and support the COVID-19 efforts through donating time or blood/plasma.

3 Ideas for How to Help Nonprofits During COVID-19

Want to discuss how to be strategic with your charitable giving during this difficult time? Don’t hesitate to shoot me an email or give me a call at 515-371-6077.

May 5, 2020/by Gordon Fischer

Mark Your Calendar: #GivingTuesdayNow is Tomorrow

Charitable Giving

Over the past few weeks, it has been easy for the days to blur together⁠—with schedules important for stability but also keeping our socially distant lives accordingly mundane. But tomorrow, May 5, 2020 is an important day to note, promote, and celebrate! #GivingTuesdayNow was organized, in part, as an effort to encourage donations to nonprofit organizations helping to address the immense collateral damage inflicted by COVID-19. Now.GivingTuesday.Org offers other ways to support the effort while maintaining social distancing:

Support healthcare workers by donating supplies, advocating for them, and staying home
Help out small businesses by buying gift cards or writing an online review
Combat loneliness by reaching out to a neighbor, relative, seniors or veterans

A simple-but-important step every Iowa nonprofit can and should take is to promote #GivingTuesdayNow as a part of fundraising⁠—particularly with programs and services focused on serving populations affected by COVID-19.

Estate Planning & Charitable Giving during COVID-19: 2 New Iowa Lawyer Articles

Engage board members, staff, past donors, potential donors, and other stakeholders with fundraising efforts by posting #GivingTuesdayNow content and participating in the international digital conversation. Consider the many resources hosted on now.givingtuesday.org as a good starting point for content inspiration.

#GivingTuesdayNow is an important reminder that especially during this challenging time Iowans need high-functioning nonprofits now more than ever.

3 Ideas for How to Help Nonprofits During COVID-19

The mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa. This is all year long—not just on #GivingTuesdayNow. GFLF is available to work with nonprofit organizations on every element of operations including but certainly not limited to:

Training of nonprofit boards and staff and educating on charitable giving tools and techniques
Employment law guidance for nonprofits including advice about hiring and firing, and drafting of policies and procedures
Handling compliance issues, like forming a 501(c)(3)and Form 990 reporting
Working with nonprofit and donors on complex gifts

Interesting in discussing your nonprofit’s operational needs? Contact me for a free consultation at 515-371-6077 or gordon@gordonfisherlawfirm.com.

May 4, 2020/by Gordon Fischer

When do Nonprofits Need to File Form 990 in 2020

Nonprofits

Most people have Tax Day earmarked in their minds like a birthday or federal holiday (typically it’s April 15, although with the nationwide COVID-19 pandemic the IRS pushed the due date for filing income taxes back to July 15, 2020). Nonprofit leaders should have another day highlighted on their calendars for the next few years: when the annual reporting return, Form 990, is due.

Tax-exempt nonprofit organizations don’t pay federal taxes (obviously from the “tax-exempt” category), but the IRS still requires certain information in order to evaluate organizations on details like programs, finances, governance, and mission. It’s a way of confirming that tax-exempt entities are still qualified to operate without paying federal taxes. Form 990s are also made available to the public so there’s also accountability and transparency involved.

Due date?

So, when is Form 990 due exactly? It depends on the end of your organization’s taxable year; the form is usually due the 15th of the fifth month after the organization’s taxable year. For most tax-exempt organizations that follow the typical calendar year (January 1 through December 31), this means Form 990 is due on May 15 every year.

However, on April 9, 2020, the IRS issued Notice 2020-23, which granted nonprofits and foundations the opportunity to extend the filing due date out to July 15, 2020. Taxes owed with Form 990-PF and Form 990-T are also due at the time of the filing. Additionally, Form 8868, “Application for Automatic Extension of Time to File an Exempt Organization Return,” can be filed to request an additional extension until November 15, 2020. Note that

What happens if there’s a failure to file?

Just like if you fail to file your income taxes there are repercussions, if an organization is required to file Form 990 and fails to for three consecutive years, the IRS will automatically revoke tax-exempt status. That’s right, no questions, no appeal process, just revocation in accordance with the law. Timely submission of Form 990 also can help your nonprofit organization avoid filing additional documents and certain user fees.

Collective Responsibilities of Nonprofit Boards

What happens if tax-exempt status is revoked?

If your nonprofit’s tax-exempt status is revoked, then the organization will have to pay corporate income tax on annual revenue. Additionally, the organization may be subject to penalties and back taxes if the revocation date was in the previous tax year. The nonprofit will then lose any state tax exemptions that were dependent on federal tax-exempt status. (Common examples of such state tax exemptions are property, income, and sales/use taxes.) Of course, the organization will no longer be able to receive tax-deductible charitable contributions and, accordingly, donors will no longer be able to receive the federal income charitable deductions for any gifts post-revocation date. Losing tax-exempt status will also disqualify the nonprofit from receiving many private foundations’ grants.

First Day of the Season: Spring Ahead with Nonprofit Success

Be prepared for the filing date!

Form 990 is over 10 pages (not including additional schedules and written attachments) so your organization should get jump start on the process. The best way to be prepared, year after year, is to have updated and applicable policies asked about on the form readily available to be referenced. I’m offering a great deal that features 10 policies related to Form 990 for $990. The rate includes a comprehensive consultation and full review round.

Any questions about when your nonprofit specifically needs to file, or want to discuss how the “10 for 990” special could work for you? Contact me at any time via email or by phone (515-371-6077).

April 13, 2020/by Gordon Fischer

COVID-19: GFLF Legal Services Still Available & Accessible

From Gordon's Desk..., News

Picture of tablet offering self isolating guidance for COVID-19

Many of us are facing uncertainty and tough times as COVID-19 has forced much of daily life to look different for the time being. Many are working from home for the first time; students are engaged in distance learning; and some of us are taking care of loved ones and friends.

GFLF appreciates and respects the health and safety precautions we should all take to mitigate the spread of COVID-19. While I greatly enjoy meeting with all of my clients, for the immediate future all of my services can still be provided—in full and without any change in quality—through phone calls, emails, and video conferencing. I’m also still offering free consultations and would love to chat about your estate planning, charitable giving, or nonprofit needs.

While I’m certainly not a health care professional, I want to help our heroes on the frontlines of this virus by sharing important information. Over the past couple of weeks, I’ve seen some informative graphics and have included some of my favorites below. If you have important Iowa-specific information, especially related to charitable giving or nonprofit organizations, please don’t hesitate to share with me on Facebook, Twitter, Instagram, or email.

March 21, 2020/by Gordon Fischer

Stanley Cup Inspired: How Policies & Procedures Help Nonprofits Win the Game

Nonprofits

Robert Frost famously quipped that writing poetry that doesn’t rhyme is like “playing tennis without a net.”

Right now, a different sport without a net is grabbing our attention. Currently, the NHL sports fans are tuned into the NHL All-Star Game where representatives from some of the best teams like the St. Louis Blues and Boston Bruins take to the ice. So, allow me to make a Frost-ian point about nonprofits in a hockey context.

For a nonprofit to operate without having proper policies and procedures in place, is like playing the NHL All-Star Game without a net – and without sticks, skates, helmets, or a puck. Without certain policies in place, a nonprofit simply cannot run properly. Without rules, there can be no expectations. Board members, officers, staff, donors, volunteers, and other stakeholders must work to ensure they’re not skating on thin ice. Give your stars the protection they need, and the tools they require, to be a winning team.

25 Days of Giving: Nonprofit Policies Your Organization Needs to Consider

Where to Start?

From working with a wide range of nonprofit clients, I’ve learned that many want proper policies and procedures, but they are simply stymied or confused on where to start. That’s where an attorney well-versed in nonprofit law can come in.

Many nonprofits have to fill out an annual form, IRS Form 990. Form 990 is unique in that it not only asks about financial information but also many of its questions directly ask about policies and procedures. There are at least 10 major polices asked about on Form 990.

Special Offer!

I offer 10 major policies and procedures nonprofits definitely need for a flat fee of $990. This includes consultations and a full review round to make sure the policies and procedures fit the needs and operations of your particular nonprofit. Adopting the policies explained in this guide will ultimately save your nonprofit organization time and resources, and you can feel great about having a set of high-quality documents to guide internal operations, and present to the public.

Nonprofit Policy Special: 10 for Form 990

All Nonprofits Need These 10 Policies

Whether a nonprofit is large or small, new or decades-old, a mission that is narrow or multi-faceted, all nonprofits should have these policies in place. Yes, these policies are asked about on Form 990, but even if a tax-exempt organization is not required to submit a variation of the 990, the benefits are still immense. In general, having policies in place provides a framework and the expectations for an organization’s executives, employees, volunteers, and board members. Such policies can also be referenced if/when issues arise.

Another major reason to have proper policies and procedures in place is that they provide a foundation for soliciting, accepting, and facilitating charitable donations.

Additionally investing in strongly written, organization-specific policies is a practice in preparation in case of an audit. (The IRS audits tax-exempt organizations, just as it audits companies and individuals.

Policy Highlight

Among the major policies and procedures included in my special 10 for 990 offer are the following. (You can download my free guide with more extensive information and explanations regarding these policies and procedures.)

Compensation

Under IRS rules, compensation for nonprofit staff must be “reasonable and not excessive.” The IRS recommends a three-step process for determining appropriate compensation: (1) conduct a review of what similarly-sized peer organizations, (2) in the same or similar geographic location, (3) of comparable positions.