FAQ – Existing Nonprofits
Is an exemption application subject to public disclosure?
An exemption application is subject to public disclosure once it has been finally approved or denied.
Are the books and records of a nonprofit corporation available for inspection?
The government gives a member of a nonprofit corporation, on written demand, the right to examine and copy the corporation’s books and records. The member, or the member’s agent, accountant, or attorney, may examine and copy these records at any reasonable time and for a proper purpose. The government also requires a nonprofit corporation to maintain financial records in accordance with generally accepted accounting principles; the board of directors is required to prepare or approve an annual financial report for the preceding year.
Additionally, the government requires certain nonprofit corporations to make all records, books, and annual reports of financial activity available to the general public for inspection and copying. However, it does not apply to (1) corporations that solicit funds only from their members; (2) corporations that do not intend to solicit and do not actually receive contributions in excess of $10,000 during a fiscal year from sources other than their members; (3) proprietary schools; (4) religious institutions; (5) trade associations or professional associations whose principal income is from dues and member sales and services; (6) insurers; or (7) alumni associations of public or private institutions of higher education.
Under certain circumstances, a nonprofit corporation’s books and records are also available to the public under the Public Information Act. The Public Information Act defines “governmental body” to include the “part, section, or portion of an organization, corporation, commission, committee, institution, or agency that spends or that is supported in whole or in part by public funds.” For more information on the Public Information Act, please contact the Attorney General; the secretary of state cannot provide advice regarding the application of the Public Information Act to a particular nonprofit corporation.
How can I obtain a copy of the bylaws, tax exempt filings or other documents for a nonprofit organization?
If the entity is organized as a nonprofit corporation, you may obtain a copy of the certificate of formation or other filing documents maintained by the secretary of state by contacting our records team.
The secretary of state does not maintain the bylaws or tax exempt filings of any nonprofit organization. Some organizations that have obtained tax-exempt status from the Internal Revenue Service are required to make certain documents available to the public. Bylaws may be available if included as part of the organization’s application for exemption. For more information, please visit the IRS website. The secretary of state’s office cannot assist you in obtaining these documents.
Can I obtain a copy of a nonprofit corporation’s IRS Form 990 from the secretary of state?
No. Although organizations filing Form 990-PF must submit a copy to certain state attorneys general, nonprofit corporations are generally not required to file Form 990 with the State attorney general or the secretary of state. The IRS provides information about how to obtain copies of Forms 990, exemption applications, and related tax filings on its Form 990 Resources and Tools for Researchers page. For more information about registrations and filings with the Charities and Nonprofits section of the IRS website.
Who has authority to investigate the activities of a nonprofit corporation?
The State has statutory authority to (1) investigate charities that operate as nonprofit corporations, and (2) inspect the books and records of all corporations, including nonprofit corporations. Additionally, the IRS can revoke a nonprofit corporation’s tax exemption for violations of federal tax laws.
What is the “public support” test? How do I calculate it?
The IRS uses the public support test to check if a nonprofit receives substantial support from the general public, as outlined by Section 509(a) of the Internal Revenue Code. This test determines if a nonprofit is a private foundation or a public charity.
According to the IRS, an organization is a publicly supported charity if it meets one of two tests:
1. The organization receives a substantial part of its support in the form of contributions from publicly supported organizations, governmental units, and/or the general public. Example: A human service organization whose revenue is generated through widespread public fundraising campaigns, federated fundraising drives, or government grants is a publicly supported charity.
2. The organization receives no more than one-third of its support from gross investment income and more than one-third of its support from contributions, membership fees, and gross receipts from activities related to its exempt functions. Examples: A membership-fee organization, such as parent-teacher organization, or an arts group with box office revenue is a publicly supported charity.
An organization will lose its public charity status if it cannot pass the public support test for two consecutive years. If the organization cannot meet the public support test for two consecutive years, it will be reclassified as a private foundation as of the start of the second consecutive year. To avoid unexpectedly losing your public charity classification, you should keep careful track of your public support information through out the year.
IRS Pub. 557: Tax-Exempt Status for Your Organization, details how to calculate public support (see pp. 29-35, “Qualifying as Publicly Supported”). Also, most handbooks on establishing a nonprofit organization have a section on calculating public support.
Can a nonprofit corporation pay a salary to its officers, directors and/or employees?
Yes. Any corporation may pay reasonable compensation for services rendered to the corporation. However, board members are normally voluntary.
Can a nonprofit corporation give political contributions?
There are specific restrictions on political contributions by nonprofit corporations. For information, on this topic, you may wish to contact your private attorney.
Category : Existing Nonprofit &FAQ &IRS Posted on August 15, 2011
Sugel
8 months ago
Special computation period for new organizations (Computation period for public support). If, at the time of applying for tax-exempt status, an organization can reasonably be expected to meet the one-third support test or the facts and circumstances test during its first 5 tax years, the organization will qualify as publicly supported for its first 5 years. The organization will be classified as a public charity for its first 5 years, regardless of the public support actually received during this period. Beginning with the organization’s sixth tax year, the organization will qualify as publicly supported if it meets the one-third support test or the facts and circumstances test for its sixth year (based on support received in its second through sixth tax years), or as a carryover for its fifth tax year (based on support received in its first through fifth tax years). If the organization is required to file Form 990 or 990-EZ, it must establish that it meets the public support test each year on Schedule A (Form 990 or 990-EZ).