501(c)(3) Nonprofit Maintenance Checklist
Many clients hire an attorney to assist with the initial setup of a 501(c)(3) nonprofit. This process requires filling out lots of tedious paperwork that uses confusing jargon so there are plenty of opportunities to make mistakes and so many new organizations quickly come to the conclusion that hiring an attorney for the legal setup work is best. However, many nonprofit founders (and often their attorneys, too) make the mistake of overlooking the recurring filings required to maintain the organization in good standing with various government agencies after all of the initial filings are successfully completed. While these ongoing requirements do not necessarily require the assistance of an attorney, some organizations choose to hire an attorney and/or a CPA to assist with these tasks. Other organizations have someone on their team who is detail oriented and savvy about nonprofit rules (or willing to learn) and who can complete these tasks without much trouble. In any case, it’s important that the board of directors of every 501(c)(3) nonprofit makes sure that the following matters are addressed and that deadlines are not missed. Below is a checklist of the basic ongoing requirements and best practices for California nonprofit public benefit corporations with 501(c)(3) tax-exempt status.
Important Disclaimer — please read! The checklist below is a generic checklist for California nonprofits with federal 501(c)(3) tax-exempt status. This checklist is not a comprehensive list of all legal requirements that may apply to your particular organization. For example, some organizations seek property tax exemption which entails additional annual steps to be taken and that are not included in this generic checklist. Some nonprofits are subject to additional requirements related to laws that regulate their specific activities, which are not addressed by this checklist. When in doubt, please schedule a consultation with me or with another attorney to make sure that your organization is in compliance with all laws that apply to your specific organization.
501(c)(3) Nonprofit Legal Maintenance Checklist
Forms that Must be Filed with Government Offices:
Form 990: must be submitted annually to the IRS (or Form 990-EZ for smaller budget organizations). Due Date: the 15th day of the 5th month after the organization’s fiscal year ends. For organizations whose fiscal year is a simple calendar year, the due date is May 15 each year.
Form 199 (or 199-N for small budget organizations) must be filed with the California Franchise Tax Board for most nonprofit tax-exempt organizations. Most 501(c)(3) nonprofits are exempt from the filing fee. Due Date: the 15th day of the 5th month after your fiscal year ends. For organizations whose fiscal year is a simple calendar year, the due date is May 15 of the following calendar year.
Statement of Information: must be submitted each time there is a change in address of the corporation or a change in any of the key officer positions (president, secretary, treasurer/CFO) or agent for service of process, or if no changes then at least every 2 years to the California Secretary of State. It can be done online. There is a filing fee ($20 as of this writing, but check online for current fee information).
Annual Registration Renewal, or Form RRF-1: must be submitted to the California Attorney General each year with a filing fee that varies based on the size of the organization's budget. Due Date: 4 months and 15 days after the organization's fiscal year ends, so for an organization on a simple calendar year the due date is May 15 each year.
If the organization's gross revenues ever exceeds $2 million in a fiscal year then the organization will need to hire an independent CPA to conduct an audit of the organization's finances for that fiscal year. Those audited financial statements must be submitted to the California Attorney General with the form RRF-1.
Important Internal Documents
Annual Statement Regarding Conflict of Interest Policy: many 501(c)(3) nonprofits have a conflict of interest policy modeled off of the IRS’s model conflict of interest policy for nonprofits and this model policy requires that all board members, officers, and members of committees with decision-making powers annually sign a statement regarding their awareness of the organization’s conflict of interest policy. Yes, any such person who serves over the course of multiple years should sign a new copy of the statement every year. These signed statements should be collected annually and kept on file with the corporate records. These statements do not need to be filed with any government agency and there is no prescribed due date. The law office of Christina Oatfield provides all nonprofit clients with a template statement that complies with the IRS’s model conflict of interest policy upon request.
Annual Report that includes financial statements and statements disclosing any material transactions with “interested persons” must be provided to all of the board members and, if the corporation is a membership organization then to all members (except in membership organizations with gross receipts of $25,000 or less in the prior fiscal year then the organization may opt to provide copies of the annual report to a member only upon request). Due Date: 120 days after the end of the fiscal year so for organizations whose fiscal year is a simple calendar year the due date is April 29 or 30 each year.
Note: this annual report requirement (per California Corporations Code Sections 6321 and 6322) may be satisfied by providing all board members and members with copies of the Forms 990 and RRF-1 listed above.
Note: many organizations send out mass emails and/or mailings with a document titled “annual report” which touts the organization’s accomplishments of the prior year, but provides little to no financial information. While these may be useful for fundraising purposes, many of these documents titled “annual report” do not meet all the criteria for the annual report that must be provided to all board members and voting members of the organization per California Corporations Code Section 6321-6322. Some organizations may choose to create two annual reports: one that meets legal requirements and one for fundraising and publicity.
Best Practices to Limit Personal Liability:
Maintain a general commercial liability insurance policy for the organization.
Maintain other insurance policies specific to your organization’s areas of activity, which may include workers’ compensation insurance if you have employees, automobile insurance if your staff drive automobiles on the job, product liability insurance if you sell goods, etc.
Hold regular meetings of the board as required in the Bylaws; ensure minutes are taken at each meeting and kept in a secure place where more than one director or officer can access them.
Hold regular elections as required in the Bylaws.
Generally abide by the organization’s Bylaws and other policies.
Ensure board members understand their fiduciary duties.