Rules for Non-Profit Organizations: What You Need to Know about Regulatory Requirements

By August 30, 2018 Blog No Comments
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There are around 1.5 million non-profit organizations in the U.S. Between social causes and charity work, non-profits bring awareness of others’ needs and work to address those needs.

If you have a non-profit, you wonder about the rules for your establishment. How do you figure out the regulations? In this post, we are going to look at the rules for non-profit organizations.

Regulations and Rules for Non-profit Organizations

One thing people know about non-profit organizations is that they are tax exempt. There are a few different types of non-profit organizations:

  • Business leagues
  • Political parties
  • Advocacy
  • Labor unions
  • Churches

Non-profit rules and regulations vary from state to state.

No Financial Gain

Non-profits are sometimes called 501(c)(3)s due to the IRS tax exemption 501(c)(3). This exemption states that to be exempt, no shareholder can gain from the organization.

If the government finds out someone is gaining from a non-profit, they will be in trouble. Sizable fines are on the lesser end of punishment from the government if this happens.

No Campaigning

One non-profit organization law is that no money can go toward a political candidate. There can be no endorsement, in word or action. The government allows lobbying in some circumstances, but not past the organization’s expenses.

Also, no one in the organization can pressure its members into supporting political agendas.

No Outside Income

When it comes to gaining financial support for the non-profit, the rules are clear. No non-profit corporation can get their income from outside the organization.

What does that mean? It means you cannot run any side business to bring in income for the non-profit. The only money a corporation can receive is something generated by the non-profit.

Income Reports

Businesses and corporations must turn in their income reports every year. Non-profit organizations are no different.

You must file certain tax forms annually, such as the 990. There could be other taxes on the corporation, such as an excise tax and even state taxes. Churches and other related religious organizations are exempt from these taxes.

Filing Corrected Forms

Sometimes organizations switch from being non-profit to a for-profit. This switch could occur if your corporation decides they want to start making a profit.

If this happens with your non-profit, new forms must be completed to inform the government and is crucial that these are completed promptly. Once you file, you are expected to pay the correct taxes required for a for-profit organization.

Fundraising Rules

Fundraising is one of the biggest ways non-profits can gain the money they need for causes. Like everything else, there are also regulations for fundraising. These rules do not only apply to the organization, but also to the donor.

Donors are not allowed to gain anything in return for their donations. Non-profits can get into serious trouble for giving anything in exchange for donations.

If an event or fundraiser is happening, there are certain steps to follow. The most important being registering the event with the state. This rule is to protect everyone involved, including donors and members.

Non-Profit Help

The extensive regulations and rules for non-profit organizations can be confusing. The IRS website is not always the easiest to navigate. James P. Richardson, CPA, Inc. is here to help with all your accountancy needs.

Need more information? Read about hiring a CPA for your non-profit on our blog and contact us today.

James P. Richardson, CPA, Inc. is an accountancy firm founded in 1978 that specializes in working with non-profit organizations. No matter what stage your non-profit is in, we understand your needs and serve them. Whether your business is for-profit or non-profit, we make sure it is run efficiently, guided by best practices. Our firm brings a worldview of contribution, determination, and hard work to all client engagements.