Dear New Nonprofit Board Chair,

Congratulations on your appointment to Board Chair of this extremely special nonprofit organization!  You have the trust of the General Board, and you are starting to develop a rapport with the nonprofit's Executive Director and leadership team. You have a vision of what you believe this nonprofit can achieve during your tenure. You are ready to lead this nonprofit and make this world a better place.  You are doing God's work!

While nonprofit organizations (particularly the 501c3 public charity) were designed to be change agents for the public good, the nonprofit organization as an agent of change is a vehicle that comes with multiple legal compliance requirements you must obey.  While the law gives some leniency to nonprofits in some areas, it does not excuse nonprofits from failure to maintain legal compliance. As Thomas Jefferson once said, “Ignorance of the law is no excuse in any country.” A legal compliance mistake or (more often) omission can strip precious time, money, and other resources from your nonprofit to pursue its core mission.

You may reply that you have an Executive Director who is responsible for maintaining legal compliance. However, most nonprofit Executive Directors do not hold the Juris doctor degree let alone a license to practice law.  It's not always a given your management is as up to date on nonprofit legal compliance as an attorney with nonprofit legal experience. While you may have (and should have) Director & Officers insurance, protecting yourself from individual liability (from a wrong committed by the nonprofit against a third party) is not the same as allowing the nonprofit to suffer various legal compliance issues under your stewardship.

As our website extolls, Providence Law is there “to provide guidance and care” to your nonprofit organization. If you (or your Executive Director) are having trouble answering some of the following questions, you may want to consult with Providence Law for a ‘Nonprofit Legal Hygiene Check' to make sure you are in total legal compliance with local, state and federal law.

Let's start with a few easy questions: 

• Has your organization filed its articles of incorporation with the Secretary of State's office? 

• Have your organization filed IRS Form 1023 to apply for federal corporate income tax exemption and made it available for public inspection? 

• Has your organization requested state corporate income and franchise tax exemption? 

If those were easily answered, see if you can cover these: 

• Has your organization filed Form 990, 990EZ of 990-N (e-postcard), and made your forms available for public inspection for the past three years? 

• Has your North Carolina nonprofit applied for a state charitable solicitation license, renewed it every year, and included the required disclosure statement on your fundraising materials and donor acknowledgment forms? 

• Has your organization confirmed that any contract fundraisers or fundraising consultants are licensed by the state? 

If you made it this far and these questions are easy, see if you can cover the following: 

• If lobbying, has your nonprofit elected 501(h) status to have clearer and more generous limits on your lobbying than if you stay with the default option of ‘insubstantial part test?' 

• Has your NC nonprofit reviewed current reporting requirements for any funds your nonprofit receives from the State of North Carolina? 

• Has your NC nonprofit followed the federal grant and contract rules under the OMB Uniform Guidance (if you receive federal funds)? 

If you or your Executive Director's eyes are swimming after reading these few questions, your nonprofit should request a ‘Nonprofit Legal Hygiene Check' from Providence Law. Failing to comply with the requirements above could cost your nonprofit thousands (if not millions) of dollars in fines, penalties (or worse) loss of sustaining grant funding.

As the old Fram Oil Filters commercials used to say, “You can pay me now or you can pay me later.”  I'm proud to say that I have helped my nonprofit clients get penalties waived and retain essential grant funding when they walked in the door with a letter of non-compliance or deficiency. However, wouldn't it be better for your nonprofit to get a hygiene check today and avoid these costlier problems tomorrow? 

Contact Providence Law for more information about nonprofit law.