Maintaining Your Tax Exempt Status

Is your organization following the required policies and practices to maintain your tax exemption?

Back in December 2009 the IRS issued its Governance Check Sheet after examining nonprofit organizations to collect data about governance and internal controls.  This was around the same time that Form 990 was redesigned to include additional questions on these topics.  Although the Governance Check Sheet is several years old, it is still a valuable resource in assessing your organization’s strengths over controls and best practices.

The Check Sheet is divided into 6 main parts covering the following areas.

• Governing Body and Management
• Compensation
• Organizational Control
• Conflict of Interest
• Financial Oversight
• Document Retention

Although not all of the items addressed on the Check Sheet are required by law, the IRS encourages nonprofits to have them in place as they are considered best practices.  The view of the IRS is that good governance and accountability practices provide safeguards that an organization’s assets will be used consistently for its exempt purpose.

If you have not used the Governance Check Sheet in the past, it would be good practice to perform an analysis on your organization.  The Check Sheet can be accessed at the IRS website here – https://www.irs.gov/pub/irs-tege/governance_check_sheet.pdf

In addition, the Governance Check Sheet, the IRS has available the Tax Exempt Organization Search tool on its website that allows users to determine if a nonprofit is still in good standing with the IRS.  Organizations that fail to file a Form 990 with the IRS for three consecutive years will automatically lose their tax exempt status.  Information regarding the nonprofit’s exact legal name, employer identification number, public charity status, copy of determination letter (dated 2014 or later), and copies of Form 990 can also be accessed.  Use this tool to look up your own organization to make sure you are still in good standing with the IRS.

Contributed by: Carrie Minnich, MAcct, CPA | Director | DWD CPAs & Advisors