Hey Nonprofits – Listen Up! You better take your “compliance” responsibilities seriously or you could find yourself in trouble.

Ok. You want to do good. You even went to the trouble of forming a nonprofit corporation as the vehicle through which you will do your good deeds. For the purposes of this article, I will call this entity the “Good Deed Foundation.” Now, you just want the Good Deed Foundation to raise money so that you can go about doing your good deeds. Awesome, but …

If contributors to the Good Deed Foundation are going to be able to lawfully deduct their charitable contributions from their income, then it is NOT enough that the Good Deed Foundation is formed as a nonprofit corporation. Nope. Why not you ask? Because until Good Deed Foundation receives “tax-exempt” status from the IRS it is a nonprofit, but not a tax-exempt nonprofit. Although Good Deed Foundation was formed as a so-called nonprofit corporation, it STILL has to apply for and receive tax-exempt status from the IRS. And it is not enough to simply apply – but you must receive notification of your tax-exempt status. That’s right. Uncle Sam will send you a letter letting you know that your application for tax-exemption has been approved. If Good Deed Foundation never applied for or received tax-exempt status, then it will be a “nonprofit” in name only – but will in fact be a fully “for-profit” corporation.

Also, after you form a nonprofit, and whether or not you have applied for tax-exempt status, as soon as you “receive assets (including good ol’ “cold-hard-cash”) for charitable purposes” you must REGISTER WITH THE ATTORNEY GENERAL (as well as make annual filings with updated information). Why you ask? What the heck does the California Attorney General (AG) have to do with my nonprofit?! A lot! The AG is then agency tasked with making sure that nonprofit assets are preserved, protected and in fact applied to the charitable purpose for which they are intended. Stated differently, and using present day jargon, if you are a nonprofit that has received charitable property, then the AG has the right “to get all up in your business!” And let me tell you, you do not want to mess with these cats.

Ok. So, let’s say you’ve organized Good Deed Foundation. Good Deed Foundation applies and receives tax-exempt status from the IRS. Furthermore, let’s say that Good Deed Foundation has registered with the AG and is on good terms with those bad-boys (and bad-girls). Is Good Deed Foundation done complying? Not a chance. You will want to remember this number. 990. Write in down and commit it to memory. Just like tax returns of individuals and for-profits entities, every year a nonprofit that is tax-exempt must file a Form 990 (there are several types depending on various factors) with the IRS. And just like those for-profit tax returns, failure to file these Form 990’s can get your nonprofit tax-exempt organization into all kinds of trouble. Simple solution: file these babies every year. No exceptions.

Every year that Good Deed Foundation is in existence it will need to file with the AG and the IRS. Just like cleaning your hair with your favorite shampoo. Wash-rinse-repeat. And I didn’t even mention in this article that Good Deed Foundation will also need to file state tax agency returns. That’s right folks. Just Get ‘er Done!