By  Dan E. Nino, CRTP

As a tax preparer  and consultant, I’d like to provide our thriving community some tips and nuances about non-profit community organizations.

There are various kinds of non-profit organizations like public benefit (501-C3), social organization (501-C7), Chamber of Commerce or business leagues (501-C6) and other organizations established for educational, religious, literary, charitable and scientific purposes.  They are usually incorporated with California’s Secretary of State if organizations are based within the State. If you don’t apply as a non-profit, these corporations are obligated to pay the minimum $800 franchise tax to the Franchise Tax Board.

What are the advantages and benefits if these  non-profit corporations if they are designated as 501-C3s. Let me count the ways.

1. They are allowed to seek unlimited funding from outside sources including government agencies, philanthropists, private foundations and major corporations. Such donations are considered tax deductible for the contributors.
2. They become tax-exempt organizations.
3.  They are supposed to work for public purposes, refraining from allowing individual members to benefit financially and from engaging in political activism or lobbying.
4. These organizations can raise funds through donations, fund-raising events and sponsorships as well as donate money to programs and projects that mitigate or alleviate sufferings of marginalized sectors of society.
5. The Board of Directors may allow the chief executive officer or executive director, employees and non-profit managers salaries. However, no board members or officers may derive financial benefits other than salaries of officers as  agreed upon by the Board. Officers though must carefully guard against the appearance of business or financial conflict of interest like taking out loans from these no-profit organizations without repaying them or got paid without doing any work.
6. These organizations may or may not have members that are actively involved in the organization’s affairs. The 501 C-3 exists to ensure that the organization is operating in a way that best meets the needs of its mission.
7. The officers of these 501 C-3 organizations coordinate with and carry out the decisions made by the organization’s board of directors. The organization may consist of paid and volunteer workers. Volunteer workers are not paid for their services.
8. Certain states may require a minimum of three people to serve on the organization’s board of directors.   
9. Other social or business clubs can affiliate with a 501-C3 organizations to seek funds so they could continue community development programs without impediments or restrictions as long as they are intended for the socio-cultural amelioration of our society like job-placement, scholarship and disaster-relief programs, among others. 

What Are The Responsibilities Of A Non-Profit Organizations In California?

These organizations shall e-file FTB Form 199-N e-Postcard with the Franchise Tax Board, Form 990-N e-Postcard with the Internal Revenue Service, Annual Registration Renewal Fee Report to Attorney General of California (Registry of Charitable Trust) and Statement of Information (SI-100) renewal with California’s Secretary of State every two years. – denino@summitbusinesscounselors.com