Nonprofit Corporate Compliance
38
Sponsored by: A Service Of: Nonprofit Corporate Compliance: Required Annual and Periodic Reports and the Consequences of Failing to Comply Ron Barrett January 9, 2013
description
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.
Transcript of Nonprofit Corporate Compliance
Sponsored by: A Service
Of:
Nonprofit Corporate Compliance:
Required Annual and Periodic Reports and the Consequences of Failing to Comply
Ron Barrett
January 9, 2013
Sponsored by: A Service
Of:
Advising nonprofits in:
• Strategy
• Planning
• Organizational Development
www.synthesispartnership.com
(617) 969-1881
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Today’s Speaker
Ron Barrett Vice President of Nonprofit Services
National Corporate Research, Ltd.
Assisting with chat questions: Jamie Maloney, Nonprofit Webinars
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Presenter’s Contact
Information
Ron Barrett
VP of Nonprofit Services
National Corporate Research. Ltd.
1100 G Street, NW, Suite 420
Washington, DC 20005
www.nationalcorp.com
linkedin.com/pub/ronald-barrett/a/680/b00
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 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
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
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 organizations
www.nationalcorp.com
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 dissolution
www.nationalcorp.com
Who must comply?
- All incorporated or qualified nonprofits
- All domestic and foreign nonprofits (few exceptions)
- Does not apply if not incorporated or qualified
www.nationalcorp.com
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
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 Theft
www.nationalcorp.com
Corporate vs. Charitable Compliance
Some Nonprofits File Both
Qualification Prerequisite
Similar Form Names
Sometimes the Same Office
Registration Renewal
Annual Financial Reporting
www.nationalcorp.com
Complexity of Annual Report Filings:
Delaware . . .Easy
Illinois, California . . .Complex
Types of Reports
Paper vs. Online Filings
Annual Reports vs. Tax Returns
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
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 filed
www.nationalcorp.com
Registered agent (VA)
Entity (NM)
Optional (AZ)
No formal notification (DE, FL)
WHERE DO STATES SEND
REPORTS?
Convenience / Access fees
Immediate acknowledgement vs.
weeks/months to receive
evidence (e.g. AZ 30 - 45 days)
Expedited service for paper filers
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)
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
Annual Report vs. Tax Return
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)
Due Dates…get out your calendar
February 1: ND
March 1: DE domestic
April 1: DC, GA, IA, NE, VT
April 15: MD, MT
April 30: PA*
May 1: FL
June 1: ME
June 30: DE foreign, KY,
RI, WV
July 1: AK, OK
August 1: AR
August 31: MO
October 1: MI
November 1: MA domestic
December 31: MN
Filing Windows: e.g. FL 1/1
to 5/1, and KY 1/1 to 6/30
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
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
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.”
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 name
www.nationalcorp.com
Sanctions for NOT filing Annual
Reports on a timely basis
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 theft
Grace period is granted in some,
but NOT ALL, states:
COST MAY BE HIGHER THAN PENALTY
DEAL MAY NOT CLOSE
LENDER COULD FIND DEFAULT
In Good Standing
DE
Active PA
Active/Delinquent
GA
Revoked
MD
Not in good standing
AR
What Constitutes Good Standing??
Variations in State Terminology . . .
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
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!
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
This presentation is provided for informational purposes only and
should not be relied upon as legal or tax advice. Matters related to
entity compliance policies and procedures should be developed with
the approval of in-house or outside counsel.
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