1. Is the organization incorporated, and if so, correctly? Unincorporated status generally raises issues of board and officer personal liability, title holding concerns, and
fiduciary standards of responsibility in public-trust form settings. In Pennsylvania, the Department of State's forms are missing a few key paragraphs the IRS requires if 501(c)(3) status is the goal?
2. Do the organization's bylaws appear to describe a different organization? Often an organization's practices and procedures evolve without consideration being given to making corresponding amendments to the bylaws. It is not unusual for organizations to find that they have been operating out of conformity with their bylaws. Do the bylaws contain a conflict of interest procedure the IRS requires if 501(c)(3) status is the goal?
Stay on Mission and Clarify Voting Procedures
3. Is the organization considering a significant change in its activities? The articles and bylaws should be reviewed to determine whether the change in activity is in furtherance of the purposes of the organization. A change in activities may also require notice to the Internal Revenue Service.
4. Does the Board of Directors include members on an ex-officio, honorary, or emeritus basis? The bylaws should clearly define the status of such a director and whether or not the director has the right to vote. Also, the attendance at board meetings, or the receipt of materials, by these individuals may adversely affect attorney-client privilege in litigation situations.
Conflicts of Interest and Risk Management
5. Do any of the board members provide services or goods to the organization for remuneration? Care should be taken that such activities, and payment therefor, do not constitute a conflict of interest, otherwise violate the director's duties to the organization, or amount to private inurement thereby jeopardizing exempt status.
6. Does the organization have in place risk and crisis management policies? These policies may be necessary for the very survival of the organization and for the protection of the officers, directors and others who are involved with the organization.
IRS Exemption Letter and Accountability
7. Does the organization maintain on file its Internal Revenue Service exemption letter and the application and other communications leading to it? These documents are the basis for the organization's tax-exemption and should be reviewed from time-to-time by the officers and directors to make certain that the organization's current or anticipated activities are in compliance.
8. Is the organization prepared to comply with a request to make its exemption application, ruling letter and last three years' tax returns available to the public? The law requires this public disclosure and organizations should have in place procedures for compliance. Significant penalties may be imposed for noncompliance. In addition, the application and tax returns should be drafted with an understanding that they are subject to public disclosure (other than donor lists).
Notices to the State and the Public - Get Good Help
9. Does the organization, if not a 501(c)(3) organization, provide appropriate notice of non-deductibility in its solicitation activities? The law requires that organizations with annual income or net worth in excess of $100,000 give notice of non-deductibility for charitable purposes.
10. Are the organization's tax and information returns prepared or reviewed by a person with significant expertise in the areas addressed by the returns? Tax Forms 990 and 990-T are constantly evolving as the Internal Revenue Service attempts to deal with perceived abuses and Congress attempts to gather more information for purposes of future legislation. An incorrect or incomplete understanding of the concepts embodied in the forms may lead to audits, imposition of taxes, interest and penalties, and in some occasions, loss of exemption.
11. Are facilities or personnel of the organization shared with one or more other profit or nonprofit organizations? Appropriate systems for allocating the costs and revenue of shared facilities or personnel must be in place for reporting substantiation and compliance purposes.
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