Nonprofit Corporate Compliance:   Required Annual and Periodic Reports and     the Consequences of Failing to Comply      ...
INTEGRATED PLANNING            Advising nonprofits in:        www.synthesispartnership.com            • Strategy          ...
Affordable collaborative data             management in the cloud.A Service   Of:                        Sponsored by:
Today’s Speaker                                         Ron Barrett                               Vice President of Nonpro...
Presenter’s Contact    Information   Ron Barrett   VP of Nonprofit Services   National Corporate Research. Ltd.   1100 G S...
 Frequently Asked Questions Practical Aspects of Compliance Consequences of Noncompliance
 Nonprofit, Tax Exempt, 501c, Charity:    Nonprofit status is a matter of state law, which governs the     organization ...
 How is “nonprofit corporate compliance”  defined?  - Term is broad (Conflict of Interest, Document    Retention, Whistle...
 Why is compliance required?          -    Not optional (except in Mississippi)          -    Statutes mandate          -...
 When should compliance occur?             -   Annually, Biennially, Periodic             -   By or before due date      ...
Who must comply?          - All incorporated or qualified nonprofits          - All domestic and foreign nonprofits (few ...
 Where is compliance required?            - Secretary of State or Department of State                   - Division of Cor...
 What are the consequences of        noncompliance?             -   Late fees             -   Loss of Good Standing (susp...
 Corporate vs. Charitable Compliance    Some Nonprofits File Both           Qualification Prerequisite           Simil...
 Complexity of Annual Report Filings:   Delaware . . .Easy   Illinois, California . . .Complex Types of Reports Paper...
 Annual Report Requirements   Filing Information Report; update address, names of contact    at company   Annual Fee D...
Initial and/or Annual (most states)  Biennial (AK, DC, IA, NE & VT)  Periodic (NH, OH, PA & TX)  Special (MD, MO, NV &...
WHERE DO STATES SEND        REPORTS? Registered agent (VA) Entity (NM) Optional (AZ) No formal notification (DE, FL)
 Convenience / Access fees Immediate acknowledgement vs.  weeks/months to receive  evidence (e.g. AZ 30 - 45 days) Expe...
 Postmark vs. Online deadline Signature block character limits List of officers and directors   Complete list required...
Annual Report vs. Tax Return Annual Report and UBIT Return   AL (Form 20C) & SC (SC990-T) Annual Report and Department ...
Fees  Free: AR, ID, IA, MD, MN (domestic), VT (no payroll)  Low Cost: ($5 to $40)       AK, AZ, CA, CO, GA, HI, IL, IN, ...
Due Dates…get out your calendar February 1: ND                 July 1: AK, OK March 1: DE domestic           August 1:...
Due Dates…get out your calculator Last day of anniversary month:   CA, CT, ID, IN, NJ, NV, SD, VA & WA Last day of 2nd m...
SignaturesBylaws authorize Executive Director, Officer, Authorized SignatoryListed officer required in some statesPower...
Beware of Scams  Misleading Annual Report and Compliance   Solicitations    http://www.nationalcorp.com/ncr/service/show/...
Sanctions for NOT filing Annual              Reports on a timely basis            Late fees and penalties imposed        ...
 Loss of access to courts Default judgment Directors may be liable Difficulty with contracts & bank accounts Bad PR f...
What Constitutes Good Standing??  Variations in State Terminology . . . In Good Standing   DE Active   PA Active/Deli...
Entity Compliance Audit   Identify whether all entities    are in good standing and any    fees owed   Identify next ann...
Entity Compliance Audit   Identify entities that require    dissolution/withdrawal   Identify where affiliated entities ...
Helpful Resources National Association of Secretaries of State  http://nass.org/index.php?option=com_user&view=login&Item...
This presentation is provided for informational purposes only and should not be relied upon as legal or tax advice. Matter...
Find listings for our current season          of webinars and register at:            NonprofitWebinars.comA Service   Of:...
Nonprofit Corporate Compliance
Nonprofit Corporate Compliance
Nonprofit Corporate Compliance
Nonprofit Corporate Compliance
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Nonprofit Corporate Compliance

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To maintain corporate good standing status in most states, nonprofits are required to file annual or periodic reports with the Secretary of State, just like their for-profit counterparts. Though the forms and procedures are similar in every state, there is very little uniformity in how states handle due dates, fees, signature requirements, filing methods (paper vs. online) and additional filing requirements of other state agencies. Though the fees and financial penalties for failing to make these required filings are usually nominal, there are much more damaging consequences for failing to comply.

It is imperative that nonprofit organizations fulfill all state corporate compliance obligations in a timely manner. Compliance is not an option; it’s the law, and noncompliance or late filings can be costly in many ways. Aside from the monetary penalties, in terms of late fees and other potential costs, there are more damaging consequences of noncompliance, such as:

• Loss of good standing and ability to conduct business in a state
• Suspension, revocation, or administrative dissolution
• Loss of right to use the nonprofit’s name
• Loss of access to courts
• Damage to the nonprofit’s reputation which can result in a decrease in donations

In the event of revocation or dissolution, usually there is the added expense of reinstatement or requalification, which can easily reach hundreds of dollars in some states.

Keeping up with the ever-changing requirements and differences from state to state in nonprofit corporate compliance can be quite a challenge. This program will provide a broad overview of state corporate compliance requirements for nonprofits and valuable reference material that will assist you in meeting these requirements.

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Nonprofit Corporate Compliance

  1. 1. Nonprofit Corporate Compliance: Required Annual and Periodic Reports and the Consequences of Failing to Comply Ron Barrett January 9, 2013A Service Of: Sponsored by:
  2. 2. INTEGRATED PLANNING Advising nonprofits in: www.synthesispartnership.com • Strategy • Planning (617) 969-1881 • Organizational Development info@synthesispartnership.comA Service Of: Sponsored by:
  3. 3. Affordable collaborative data management in the cloud.A Service Of: Sponsored by:
  4. 4. Today’s Speaker Ron Barrett Vice President of Nonprofit Services National Corporate Research, Ltd.Assisting with chat questions: Hosting:Jamie Maloney, Nonprofit Webinars Sam Frank, Synthesis PartnershipA Service Of: Sponsored by:
  5. 5. Presenter’s Contact Information Ron Barrett VP of Nonprofit Services National Corporate Research. Ltd. 1100 G Street, NW, Suite 420 Washington, DC 20005 rbarrett@nationalcorp.com www.nationalcorp.com linkedin.com/pub/ronald-barrett/a/680/b00
  6. 6.  Frequently Asked Questions Practical Aspects of Compliance Consequences of Noncompliance
  7. 7.  Nonprofit, Tax Exempt, 501c, Charity:  Nonprofit status is a matter of state law, which governs the organization and creation of the entity  Tax exemption is mostly a matter of federal law  All tax-exempt organizations are nonprofits  Not all nonprofits are tax-exempt  Not all nonprofits are charitable organizations  Not all tax-exempt organizations are charitable organizations
  8. 8.  How is “nonprofit corporate compliance” defined? - Term is broad (Conflict of Interest, Document Retention, Whistleblower, SarBox, etc) - Annual or Periodic Reporting to State Corporations Division of Secretary of State to maintain corporate Good Standing
  9. 9.  Why is compliance required? - Not optional (except in Mississippi) - Statutes mandate - Noncompliance has damaging consequences - Attract charitable donations - Evidence of stewardship commitment - Donor due diligence on the rise - Increased scrutiny of tax-exempt organizationswww.nationalcorp.com
  10. 10.  When should compliance occur? - Annually, Biennially, Periodic - By or before due date - Due dates will fill your calendar - If after due date, before suspension, revocation or dissolutionwww.nationalcorp.com
  11. 11. Who must comply? - All incorporated or qualified nonprofits - All domestic and foreign nonprofits (few exceptions) - Does not apply if not incorporated or qualifiedwww.nationalcorp.com
  12. 12.  Where is compliance required? - Secretary of State or Department of State - Division of Corporations - Business Services - Business and Commercial Services Division - Department of Consumer and Regulatory Affairs (DC) - Department of Commerce and Consumer Affairs (HI) - Department of Assessment and Taxation (MD) - Department of Licensing & Regulatory Affairs (MI) - Department of Treasury Division of Revenue (NJ) - Public Regulation Commission (NM) - Department of Financial Institutions (WI)www.nationalcorp.com
  13. 13.  What are the consequences of noncompliance? - Late fees - Loss of Good Standing (suspension, revocation, dissolution) - Possibly bad PR and loss of donations - Threat of Business Identity Theftwww.nationalcorp.com
  14. 14.  Corporate vs. Charitable Compliance  Some Nonprofits File Both  Qualification Prerequisite  Similar Form Names  Sometimes the Same Office  Registration Renewal  Annual Financial Reportingwww.nationalcorp.com
  15. 15.  Complexity of Annual Report Filings:  Delaware . . .Easy  Illinois, California . . .Complex Types of Reports Paper vs. Online Filings Annual Reports vs. Tax Returns
  16. 16.  Annual Report Requirements  Filing Information Report; update address, names of contact at company  Annual Fee Disclosure on Annual Report?  Names, addresses, and phone numbers of officers and directors/members or managers  Address of principal place of business  Registered Agent
  17. 17. Initial and/or Annual (most states) Biennial (AK, DC, IA, NE & VT) Periodic (NH, OH, PA & TX) Special (MD, MO, NV & TN) Voluntary (MS) Not Required (AL*, NY, NC, OK & SC*) * required in AL and SC if IRS 990-T is filedwww.nationalcorp.com
  18. 18. WHERE DO STATES SEND REPORTS? Registered agent (VA) Entity (NM) Optional (AZ) No formal notification (DE, FL)
  19. 19.  Convenience / Access fees Immediate acknowledgement vs. weeks/months to receive evidence (e.g. AZ 30 - 45 days) Expedited service for paper filers
  20. 20.  Postmark vs. Online deadline Signature block character limits List of officers and directors Complete list required in some states . . . presents a challenge to submit online (DE allows for upload)
  21. 21. Annual Report vs. Tax Return Annual Report and UBIT Return  AL (Form 20C) & SC (SC990-T) Annual Report and Department of Revenue Filing  CA Franchise Tax Board Filing  State Filing Requirements for 990
  22. 22. Fees Free: AR, ID, IA, MD, MN (domestic), VT (no payroll) Low Cost: ($5 to $40) AK, AZ, CA, CO, GA, HI, IL, IN, KS, KY, LA, ME, MI, MT, NE, NM, ND, NH, NJ, NV, OH, RI, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY Moderate Cost: ($50 to $125) CT, DC, DE (foreign), FL, MA (foreign), OR Potentially Higher Cost: Expedited Rush Service (e.g. OH - $25 + $100)
  23. 23. Due Dates…get out your calendar February 1: ND  July 1: AK, OK March 1: DE domestic  August 1: AR April 1: DC, GA, IA, NE, VT  August 31: MO April 15: MD, MT  October 1: MI April 30: PA*  November 1: MA domestic May 1: FL  December 31: MN June 1: ME June 30: DE foreign, KY,  Filing Windows: e.g. FL 1/1 RI, WV to 5/1, and KY 1/1 to 6/30
  24. 24. Due Dates…get out your calculator Last day of anniversary month: CA, CT, ID, IN, NJ, NV, SD, VA & WA Last day of 2nd month following filing month: CO Prior to 1st day of anniversary month: IL First day of anniversary month: WY 15th day of 6th month following year end: KS End of quarter in which nonprofit was originally filed: HI & WI (domestic only) Every 5 years on last day of anniversary month: OH
  25. 25. SignaturesBylaws authorize Executive Director, Officer, Authorized SignatoryListed officer required in some statesPower of Attorney (e.g. Assistant Secretary)Electronic signature on behalf of signatoryOriginal signature mostly not requiredNotarization not required
  26. 26. Beware of Scams Misleading Annual Report and Compliance Solicitations http://www.nationalcorp.com/ncr/service/show/68 Look official and appear to be coming from the state Unintentional change of registered agent Review the fine print: “This product has not been approved or endorsed by any government agency and this offer is not being made by an agency of the government.”
  27. 27. Sanctions for NOT filing Annual Reports on a timely basis Late fees and penalties imposed Loss of Good Standing Revocation of authority to transact business (revoke vs. reinstate) Suspension or administrative dissolution Loss of ability to make changes Loss of right to use namewww.nationalcorp.com
  28. 28.  Loss of access to courts Default judgment Directors may be liable Difficulty with contracts & bank accounts Bad PR for public charities Threat of business identity theftGrace period is granted in some, but NOT ALL, states:COST MAY BE HIGHER THAN PENALTY DEAL MAY NOT CLOSE LENDER COULD FIND DEFAULT
  29. 29. What Constitutes Good Standing?? Variations in State Terminology . . . In Good Standing  DE Active  PA Active/Delinquent  GA Revoked  MD Not in good standing  AR
  30. 30. Entity Compliance Audit Identify whether all entities are in good standing and any fees owed Identify next annual report due dates Identify entities that require reinstatement or requalification to restore good standing
  31. 31. Entity Compliance Audit Identify entities that require dissolution/withdrawal Identify where affiliated entities are not represented by same registered agent Keeping your entities compliant and in good standing will ensure the company can meet critical deadlines and avoid problems at closings!
  32. 32. Helpful Resources National Association of Secretaries of State http://nass.org/index.php?option=com_user&view=login&Itemid=427 National Corporate Research  State-by-State Guidelines (article and required filings and due dates chart)  Forms Library & Filing Guidelines http://www.nationalcorp.com/ncr/service/show/43  Corporate Transactions & Compliance Blog http://info.nationalcorp.com/blog  State Links http://www.nationalcorp.com/ncr/service/show/44
  33. 33. This presentation is provided for informational purposes only and should not be relied upon as legal or tax advice. Matters related toentity compliance policies and procedures should be developed with the approval of in-house or outside counsel.
  34. 34. Find listings for our current season of webinars and register at: NonprofitWebinars.comA Service Of: Sponsored by:

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