Your tax-exempt entity does not have to pay business income tax, is exempt from a variety of other taxes, and, under appropriate circumstances, may accept tax-deductible donations from individuals. This is because it has been found by the Internal Revenue Service to be organized and operated for public purposes based on the statements and documents that were submitted in its Application for Tax Exempt Status. It must continue to be operated in conformity with those documents, and IRS rules and regulations in order to maintain that status. Some rules to remember:
- Every tax-exempt organization, regardless of revenues, must file a Form 990 (except churches).
- Operate in conformity with your Articles and Bylaws; keep minutes. Any changes to Articles and Bylaws must be submitted to the Internal Revenue Service.
- Watch for “Mission Drift”. If you find your organization taking on different projects, or going in a different direction, make sure your organizational documents are amended to reflect those changes and that those changes do not jeopardize your tax exempt organization.
- Avoid private inurement.
The rules governing tax-exempt entities can be complex, especially as organizations develop and see themselves going in new directions. Eileen can consult with you at any time in the process to be sure your nonprofit organization keeps its tax-exempt status.