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Legal Filing Requirements for Nonprofits Presented by: Scott D. Harvey, Esq.

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Presentation on theme: "Legal Filing Requirements for Nonprofits Presented by: Scott D. Harvey, Esq."— Presentation transcript:

1 Legal Filing Requirements for Nonprofits Presented by: Scott D. Harvey, Esq.

2 Overview Sources of Regulation: –Federal Law Internal Revenue Code Other (e.g., Sarbanes-Oxley) –State Law Michigan Nonprofit Corporation Act Michigan Attorney General Other state laws (e.g., Michigan Property Tax Act) Types of Nonprofits: –Michigan nonprofit corporations –501(c)(3) or other 501(c) organizations

3 General Filing Requirements State Law: Articles of Incorporation Bylaws Charitable Solicitation License Charitable Trust Registration Professional Fundraiser License Annual Information Reports Charitable Gaming Federal Law: 1023 Application (1024 Application for other 501(c) organizations) Policies: –Conflict of Interest Policy (recommended) –Whistleblower Policy –Document Destruction and Retention Policy Annual Information Returns (IRS Form 990) Other Statement of Values/Code of Ethics (optional) Generally available, or must be made available, for public inspection

4 State Law: Articles of Incorporation Filed with the State of Michigan (can be filed via fax) Contents: Name Statement of Purpose Organizational basis (stock, membership or directorship) Registered office/agent (MI) Limitation of liability provisions Amendment provision IRS required provisions –Dissolution clause –Other Amendments Annual Reports

5 State Law: Bylaws Michigan Nonprofit Corporation Act Unique to the organization Not filed with the State, but filed with the initial exemption application Contents: –Name/purpose of organization –Members (if membership-based) –Board of Directors (election, number, meetings, etc.) –Officer (classifications, duties, etc.) –Committees –Indemnification provisions –Fiscal/administrative provisions (fiscal year, check signing, etc.) –Dissolution clause –Amendments

6 State Law: Charitable Solicitation License Michigan Charitable Organizations and Solicitations Act Provides information to potential donors and the AG’s office Provides AG’s office with criminal and civil enforcement powers

7 Charitable Solicitation License, cont. Provisions –Must obtain a Charitable Solicitation License if: (i) the organization solicits or receives (or expects to solicit or receive) contributions in Michigan in excess of $8,000; and/or (ii) the organization compensates any person for fund raising services, including employees or independent contractors (professional fundraisers)

8 Charitable Solicitation License, cont. Process –File an Initial Charitable Trust/Charitable Solicitation Questionnaire Articles of Incorporation Bylaws IRS determination letter Recent financial statement (if any) –If necessary, file an Application for License to Solicit Donations Board Professional fundraiser (if any) Financial information (990) (if any) Solicitation materials (if any) –Must be renewed annually (at least 30 days prior to expiration)

9 Charitable Solicitation License, cont. Exemptions –Solicit/receive < $8,000/year (gross) –Educational institutions –Veterans organizations –Hospitals –Organizations that do not solicit/receive contributions from the “public” (i.e., private foundations) –Other Can file by mail or electronically Penalties for failure to file –Misdemeanor Fine of up to $500 and/or imprisonment for up to 6 months Unified Registration Statement

10 State Law: Charitable Trust Registration Michigan Supervision of Trustees for Charitable Purposes Act –Every “charitable trust” must register with the AG’s office –“Charitable Trust” includes any person or legal entity which holds property for a charitable purpose Most charitable foundations (public and private)

11 Charitable Trust Registration, cont. Process –File Initial Charitable Trust/Charitable Solicitation Questionnaire –If necessary, file Charitable Trust Registration Statement with AG’s office Inventory of assets Board Financial information –Ongoing Requirements Copies of 990’s w/in 6 months of the end of each fiscal year

12 Charitable Trust Registration, cont. Exemptions –Religious organizations –Educational institutions –Hospitals –Interests of charitable remainder beneficiaries are remote –Organizations that are not “charitable” Penalties –Enforcement action by AG’s office

13 State Law: Professional Fundraisers Michigan Charitable Organizations and Solicitations Act Must be licensed by AG Professional fundraiser –Paid to manage a fundraising drive or campaign –Independent contractor or employee –Employees are exempt so long as compensation is not computed on the basis of the amount of funds raised

14 Professional Fundraisers, cont. Process –File an Application for License of Professional Fundraiser with AG’s office –Obtain $10,000 bond –File the Uniform Professional Fundraiser Surety Bond Form –File Professional Fundraiser Contract Summary Sheet Renew yearly by May 31st Penalties –Suspension of license –Up to $500 fine and/or 6 months imprisonment

15 Federal Law: Application for Tax-Exempt Status IRS Form 1023 (501(c)(3) organizations) or Form 1024 (others) –Certifies that the organization is exempt from federal income taxation (and provides donors with assurance that their donations are tax- deductible in the case of 501(c)(3) organizations) –Must be filed with the IRS within 27 months of creation (the date the Articles of Incorporation were filed) –Takes anywhere from 2 months to a year or more for determination –IRS may have questions or require further information

16 Federal Law: Application for Tax-Exempt Status –Major Requirements: Employer (taxpayer) Identification Number (EIN) List of directors Narrative description of activities Fundraising activities Financial information Filing fee (usually $750) Attachments: –Articles of Incorporation –Bylaws –Conflict of Interest Policy –Power of Attorney (Form 2848) –Other

17 Federal Law: Conflict of Interest Policy Technically, not required Helps preempt even the perception that funds are being used for personal gain by the managers or board members Protects the organization when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of the Corporation Provides guidelines for determining compensation Statement of Values/Code of Ethics –Optional (“best practices”) –Describes the ethical principles that an organization’s staff, board and volunteers agree to follow, and includes a statement of values articulating the principles it is committed to uphold

18 Federal Law: Whistleblower Policy The American Competitiveness and Corporate Accountability Act of 2002 (Sarbanes-Oxley Act) –Generally applicable to publicly-traded companies Two notable exceptions –Whistleblower Policy –Document Retention and Destruction Policy

19 Whistleblower Policy, cont. Whistleblower Policy –Encourages and provides protection to any member of the Board or employee who becomes aware of a breach or threatened breach of a fiduciary duty –Criminal penalties

20 Document Retention and Destruction Policy Designed to ensure compliance with federal and state laws and regulations, to eliminate accidental or innocent destruction of records, and to facilitate operations by promoting efficiency and freeing up valuable storage space Aimed at preventing destruction of incriminating documents, whether inadvertent or not Criminal penalties

21 Federal Law: Annual Information Return (Form 990) Filed annually with the IRS (w/in 5 mos. of end of fiscal year) Substantially revised for tax year 2008 (first time in 30 years) –11-part “core” form –16 schedules –Governance Policies Minutes Independence –Accountability –Compensation –Transactions with “interested parties” Committee/board review Form 990-N (e-postcard) if gross receipts < $25,000

22 State and Federal Law: Miscellaneous Filing Requirements State: –Charitable Gaming Licenses (raffles, bingo, beer tent, etc.) –Dissolution Questionnaire –Sales/Use Tax Exemption (MI Form 3372) Form 990-T –Used to report unrelated business income and pay unrelated business income tax (UBIT) Employment Tax Returns –Payroll service Other

23 Resources Websites: – – – – – – – –

24 Legal Filing Requirements for Nonprofits The End Questions?

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