In essence, nonprofit compliance is a set of laws set by the government ensuring that nonprofit organizations function viably and do not misuse the privileges and authorities granted to them by the state.
This includes exemption from corporate taxes and access to public funding resources. Let’s discuss how nonprofits can ensure they are practicing compliance.
What Is A Nonprofit Compliance Checklist?
The nonprofit compliance checklist is created to ensure that the financial privileges provided to these nonprofit companies are not abused or taken advantage of adversely. The requirements include:
- 990 form with the IRS
- Financial statements
- Maintain records of all transactions
- Should have a registered agent
- State-level tax registrations
- Tax exemption registrations
- Fundraising and charity registrations
- Record of fundraising activities
- Updated licenses and permits
- Should follow the set ‘bylaws’
- Implementation of ‘Whistleblower’ policy
- Execution of ‘Conflict of Interest’ policy
Some of the general compliance checklist requirements remain the same throughout the USA. However, some additional nonprofit regulatory compliance requirements vary from state to state.
The New York nonprofit compliance laws include renewal of the registration after 4.5 months of every fiscal year. A fee of $25 is charged from all 7A organizations for registration.
In comparison, the EPTL organizations need to pay a fee anywhere between $0-$1500 depending upon their financial resources. If a nonprofit organization follows all these regulations and has a good track record, it is considered to be abiding by the nonprofit compliance laws. But if the benefits are misused, and there is sufficient proof for it, in that case, severe legal actions are taken against the company according to the nonprofit regulatory compliance laws.
Why Do Nonprofits Need To Stay Compliant?
Nonprofit organizations must abide by nonprofit compliance. If they don’t follow the rules, the state will take over their organization and charge them a hefty amount.
The company will be liable to pay the fine from its funds. But, if the fraud is too severe or the company fails to pay, immediate legal action will be taken.
A nonprofit organization also needs to submit a ‘tax form’ in Form 990 so that it remains compliant. It is an application that needs to be presented annually. As stated above, the submission period for different states of the US varies.
Importance Of Staying Compliant For A Nonprofit Organization
Nonprofit compliance plays a vital role for nonprofit organizations. Compliance provides them with certain privileges like tax exemption and safety from certain lawsuits.
It also provides the company with a range of ethical benefits by ensuring that the organization’s employees work in a safe, discrimination-free, and healthy environment.
Other than that, the organization can also access public funding and enjoy other official benefits by staying compliant.
This is why every nonprofit organization strives to achieve the status of being compliant with laws.
Risks Of Breaching Compliance
If the organization fails to submit the form annually, a penalty will be charged. Initially, it amounts to $20 per day. But if prolonged, then the state can even dissolve the nonprofit organization temporarily, or permanently.
Observe Nonprofit Compliance With The Best Consultation Services
Nonprofit regulatory compliance is undoubtedly mandatory for any nonprofit organization in the US. Failure to stay compliant can lead to severe consequences.
Contact ‘Computer Resource of America’ (CRA) if you want viable IT consultation. At CRA, you will find the best IT consultants in the US that can provide you with the best legal advice regarding nonprofit compliance.
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