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Purpose-Built Financial Messaging and Reporting
Financial reports show up each month with great regularity but little fanfare and excitement. Consequently, we tend to take financial reports for granted and do not give them the attention they deserve. To correct this deficiency, nonprofit organizations need to add purpose to their financial reporting, aiming to fulfill the “needs” of users while also satisfying their “wants.”
Q&A #141 – Does a grant recipient’s lobbying count towards the grantor’s lobbying limits?
A grant to an organization that engages in lobbying may count towards the grantor’s lobbying limits, depending on how the grant is structured and the tax-exempt status of the grantee. In summary, grants to a 501(c)(3) organization generally do not count towards the grantor’s lobbying limits unless specifically earmarked for lobbying activities, while grants to a non-501(c)(3) organization do not get this treatment unless structured to meet the requirements of a “controlled grant.”
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How Nonprofits Can Better Manage Overhead Expenses [SUBSCRIBERS-ONLY]
Managing a nonprofit organization’s overhead (management and general) expenses is just as important as managing program and fundraising expenses. Most nonprofits would not dispute this statement. However, most organizations tend to put an inordinate focus on managing program and fundraising expenses and ignore or not give equal attention to managing overhead expenses.
Q&A #140 – How do nonprofits report a name change to the IRS?
A formal name change must be reported on the organization’s next Form 990 or 990-EZ by checking the “name change” box in Column B on the left side at the top of page 1 and including a state-certified copy of the amendment to the organization’s Articles of Incorporation. Form 990-N filers must instead send a letter or fax with this supporting documentation to the IRS Exempt Organizations Division.
Q&A #139 – Does a nonprofit name change require an amendment to the governing documents?
A nonprofit organization may generally change its name either by amending its Articles of Incorporation and other governing documents, or, alternatively, by registering a “trade name” in the applicable states, often referred to as a fictitious name, “doing business as” name, or “DBA.” While amending the governing documents is not required, it is usually the recommended approach to minimize confusion.
Making the Most of Your Time as a Board Member
To get the most out of your commitment to serve as a Board member of a nonprofit organization, think of your service tenure as an investment of time and resources. Like any investment, you need to choose wisely and strive for high performance. Our 4-part Pathways to Effective Board Leadership Series will help you assess and choose a leadership path that is aligned to your passion and capacity to serve so that you are in a position to complete your Board service without regrets or second guesses.
Q&A #138 – How do nonprofits report a change of address to the IRS?
Nonprofits may, but are not required to, report a change of address to the IRS on Form 8822-B. Alternatively, a change of address may be reported on the organization’s next Form 990 by checking the “address change” box in Column B on the left side at the top of page 1.
Ending Your Nonprofit Board Service on a High Note
Whether your Board service is ending because of term limit rules or because you have determined that “enough is enough,” planning for a successful exit as a Board member of a nonprofit organization can be as important, if not more important, than all your active service time added together. Exiting the right way with thought and purpose will ensure that organizational momentum will be sustained, and continuity will be enhanced.
Q&A #137 – Is an amended Form 990 required to correct a minor error or omission?
Tax-exempt, nonprofit organizations are required by law to file Forms 990 that are complete and correct, but there is no affirmative legal duty to file an amended Form 990 to correct a newly discovered error or omission. While an organization may wish to file an amended Form 990 to manage public perception, show transparency, or mitigate the risk of penalties, this step may not be worth the cost and effort in the case of an inadvertent good-faith mistake like the omission of a single, volunteer Board member.
How Inflation Affects Planning, Budgets, and Operating Reserves
Inflation has always been present at some level. When inflation is low, it lurks quietly in the corner of our minds. But when inflation is revving, the ringing in our ears will not go away. During periods of uncertainty and economic volatility, inflation tends to draw attention, often triggering regressive non-thinking reactions. Inflation needs to be treated as an economic reality to be confronted and a challenging obstacle to be solved, not as a call to action by itself.
Q&A #136 – Is good cause required to remove a nonprofit Board member?
A nonprofit organization’s Bylaws generally determine whether “cause” is required to remove a Board member and, if so, what type of conduct or inaction constitutes cause for removal. The applicable state nonprofit corporation statute may have some rules and guidelines related to the removal of directors, but these laws usually defer to the organization’s Articles of Incorporation and Bylaws, so checking your own governing documents is always the first step.
VIDEO: Understanding the Public Support Test under § 509(a)(2) | 5-Minute Lessons 4 Nonprofits
SE4N's Benjamin Takis provides a short lesson for 501(c)(3) nonprofit organizations on how to understand the calculation of "public support" under Internal Revenue Code section 509(a)(2).
Q&A #135 – Must directors who left the Board mid-year be listed in the Form 990?
The IRS instructions for Part VII, Section A of the Form 990 provide that any director or trustee who “served at any time during the organization's tax year” is reported as a “current” director or trustee. In other words, Board members who step down in the middle of the year must appear on the list of directors, officers, key employees, and other individuals reported in Part VII, Section A of the Form 990.
Choosing to Serve an Additional Term as a Nonprofit Board Member
Nonprofit organizations generally have a set length for each Board service term, typically 2 or 3 years. The number of consecutive terms a Board member may serve can be constrained by term limits or be open-ended. In either case, at the end of your first Board term, a decision to continue or exit must be made.
Q&A #134 – Are pending applications for tax-exempt status subject to public disclosure requirements?
A tax-exempt organization is generally required, upon request, to make its application for tax-exempt status available for public inspection and copying (this includes the Form 1023, Form 1023-EZ, Form 1024, or Form 1024-A, as well as all supporting documents and related correspondence with the IRS). However, this requirement does not apply to applications that have not yet been approved by the IRS, so applications in “pending” status are not required to be disclosed.