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Choosing to Serve as an Officer for a Nonprofit Organization
There is no perfect time to decide to serve as an officer for a nonprofit organization. However, the best time to consider this option is often just after you complete your first year of Board service and have relinquished your unofficial title as a “new Board member.” Insights gained from your first-year experiences interacting with Board members, management, and staff will provide a unique view that you would not have had prior to the start of your Board service term.
Q&A #133 – How does delegation to a committee impact the fiduciary duties of Board members?
While delegating a matter to a committee does not totally absolve the other Board members from their fiduciary duties, there is usually no explicit requirement that the Board retain final approval authority over day-to-day transactions. Further, state nonprofit corporation law typically provides favorable treatment to Board members who properly and reasonably delegate a matter to a committee of other qualified and experienced Board members.
Learning to Lead as an Experienced Board Member
With the first year of nonprofit organization Board service completed, it is time to reassess and consider how to best position yourself to leverage your new status as an experienced Board member. There will be no better time during your Board service term to raise the bar on your efforts, take on new and expanded leadership roles, and inspire change and innovation through increased participation at Board meetings and thoughtful engagement with the mission of the organization.
Q&A #132 – Does every nonprofit committee need to have a charter?
All nonprofit committees should have documentation describing their purpose, authority, membership, and basic meeting and recordkeeping requirements. A committee “charter” is the most common term used to describe this document, which is also sometimes described less formally as the committee’s “job description.” What you call the document is less important than ensuring that there are records containing this essential information.
Finding the Right Fit as a Nonprofit Volunteer
As a volunteer for a nonprofit organization, you can gain the strength to “move mountains.” We each have the power to give but also receive. This life-changing experience is often overlooked because it quietly hides in the background, out of our sight and consciousness. You can receive more than you give if you approach volunteering with an open mind as well as an open heart.
Q&A #131 – Do nonprofit committees need to be listed in the Bylaws?
As a general rule, it is not strictly necessary to list or reference every committee in a nonprofit organization’s Bylaws unless there are provisions in the organization’s Articles of Incorporation or Bylaws specifying this requirement. Rather, a Board motion or resolution is usually sufficient to form a new committee, so long as proper records of the Board action are maintained.
Q&A #130 – Is monthly distribution of financial reports to the Board a best practice?
Monthly distribution of financial reports to the Board and finance committee is absolutely a best practice for nonprofit organizations, and I also recommend this as a must-have procedure in your accounting policies and procedures manual. Board and finance committee members have a fiduciary responsibility to help oversee and ensure the safety and proper use of a nonprofit organization’s financial assets. Monthly financial reports are a key tool for fulfilling this important role.
Drafting Purpose and Mission Language for the Articles of Incorporation
The “purpose” clause is one of the most important provisions in a nonprofit organization’s Articles of Incorporation. This language satisfies a core legal requirement while also establishing the organization’s main mission and permissible range of activities. However, it can be deceptively challenging to get this language right.
Q&A #129 – Are 501(c)(3) organizations automatically exempt from state corporate income tax?
Organizations that receive IRS approval of 501(c)(3) status are almost always eligible for exemption from state corporate income tax, subject to exceptions for certain types of revenue. However, the process varies widely depending on the state and you should not assume that the exemption from state corporate income tax is automatic. In some states, this exemption automatically applies upon IRS approval of 501(c)(3) status and no additional steps are required. Other states require a separate application to be filed.
![Use Key Assumptions to Focus and Frame Planning and Messaging [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709213659071-1EHHWCS039H4QU9JFZER/volodymyr-hryshchenko-x_OKGbxB3fA-unsplash.jpg)
Use Key Assumptions to Focus and Frame Planning and Messaging [SUBSCRIBERS-ONLY]
My favorite “go-to” tactic for working though complex planning challenges is to develop a short list of “key assumptions” that focuses on strategic objectives and desired results. This approach helps to simplify messaging and fast-track consensus and approval by diminishing feelings of negativity and confusion.
Q&A #128 – Does the tax-exemption reinstatement process require organizations to file the Forms 990 they missed?
The process for reinstating the tax-exempt status of an automatically revoked organization is described in IRS Revenue Procedure 2014-11. In short, to obtain the maximum protection of the reinstatement process, organizations must file any missed Forms 990 or 990-EZ except to the extent they: (1) were eligible to file Form 990-N during the relevant years; and (2) file for reinstatement by the 15-month deadline.
The Overlooked Effects of Changing a Fiscal Year-End
“Should we change our fiscal year-end?” This an interesting question that will naturally pop up over time for many nonprofit organizations. As with most complicated, multi-layered questions, the highly visible positive aspects need to be balanced against potential negative outcomes that are often hidden or ignored. One often-overlooked downside of a change in fiscal year-end (FYE) is the impact on an organization’s operating reserves.
Q&A #127 – What happens when an organization’s nonprofit corporation status is revoked?
Revocation of an organization’s status as a “nonprofit corporation,” which is often called “administrative dissolution” or “termination,” has numerous consequences that warrant immediate attention, but this is separate and distinct from revocation of federal tax-exempt status. Thus, revocation of an organization’s nonprofit corporation status does not mean that its 501(c)(3) status has been revoked.
VIDEO: Formatting an Operating Reserve Policy | 5-Minute Lessons 4 Nonprofits
SE4N's A. Michael Gellman provides a short lesson on how to format an operating reserve policy in a way that shows your nonprofit organization's operating reserve goals in terms of both programs and percentage of budget, sets clear bottom-line budget targets, and provides a framework for operating reserve status reports.
Q&A #126 – Are 501(c)(3) organizations automatically exempt from sales and use tax?
A nonprofit organization’s eligibility to qualify for exemption from sales tax (and a related tax called “use tax”) is determined by the laws and procedures of the applicable state, but in general IRS approval of 501(c)(3) status does not result in automatic exemption from sales and use tax. 501(c)(3) status is often a prerequisite for exemption from sales and use tax, but most states have a separate detailed application process for this exemption. Further, in many states the sales and use tax exemption has rigid criteria and not all 501(c)(3) organizations will qualify.