Nonprofits and tax-exempt organizations in the new decade will encounter an intensifying call for innovation and transparency. Charitable needs, locally and worldwide, appear to outpace population growth. With limited resources and ever-growing demands, longterm relevance and sustainability are essential for your nonprofit to thrive.
Even ordinary donors now seek assurances that monetary gifts and volunteerism are being stewarded well. Reliable metrics and solid accounting are crucial to justify expenditures and satisfy donor concerns about ethics and your nonprofit’s impact. Likewise, satisfied employees fully on board with your mission ensure a healthier organization and lower turnover.
Nonprofits are typically founded with passionate vision and laser focus. Time tends to blur the focus. Changes in leadership, staff, communities of service, and cultural messaging, to name just a few, can cloud the vision and reception. A periodic review and refresh of the vision and deliverables can be tasked to your board or by involving key stakeholders (e.g. donors, volunteers, advisors) with different perspectives and experiences.
By measuring outcomes against vision and strategic goals over time, they can assess and recommend whether or not small or larger adjustments could increase the organization’s impact and fruitfulness. Periodic review at the senior leadership level could include questions like:
- If we were relaunching our nonprofit into the 2020 waters we now know, would we tweak our vision statement, modify our mission, communicate our message to a wider audience, adjust our deliverables or communities of service, etc
- How and where does our nonprofit fit into the neighborhood of other nonprofits or NGOs serving similar needs or communities?
- On the crowded charitable skyline, is our organization clearly visible to our particular constituent donors and charitable recipients?
- Could we partner with other compatible entities (nonprofit or business) to multiply resources, leverage impact, and increase effectiveness?
Tom Bognanno, President & CEO of Community Health Charities predicts that in this decade “declining donor trust and stagnant middle-class growth [will] create a perfect storm for nonprofits who lack clear direction, fail to collaborate, and struggle to demonstrate impact.”
In addition to refocusing vision, mission, and constituent alignment, nonprofits must be regularly refreshed on how they are satisfying applicable legal requirements. Similar to charitable demands, the local, state, federal and international regulations are growing rather than shrinking, and the regulatory world rarely gives a pass to smaller organizations.
The recent February 4, 2020 IRS Notice for Exempt Organizations from the Tax-Exempt and Government Entities Division includes news that will impact your nonprofit:
- The IRS is revising Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code and its instructions to help charities apply for 501(c)(3) tax-exempt status.
- Effective January 31, 2020, applications for recognition of exemption on Form 1023 must be submitted electronically online at www.pay.gov. The IRS will provide a grace period during which it will continue to accept paper versions of Form 1023 (Rev. 12-2017).
- The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively repealed Internal Revenue Code (IRC) Section 512(a)(7), which increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringes.
You may recall that the Taxpayer First Act of 2019 was signed into law last July. Although the main intention was to reform the Internal Revenue Service and make it more taxpayer-friendly, the Act has a direct bearing on nonprofits.
Modernizing IRS technology and bringing it up to date with today’s electronic environment is one integral element of the Taxpayer First Act. The newest filing requirements cannot be neglected. Not only does your Form 990 need to be filled out correctly, but the 990 series must now be filed electronically.
The IRS website states: “If an organization does not file a required return or files late, the IRS may assess penalties. In addition, if an organization does not file as required for three consecutive years, it automatically loses its tax-exempt status. The IRS sends back any Form 990 series returns filed on paper – and rejects electronically filed returns when they are materially incomplete or the wrong return.”
Updating your nonprofit’s navigational map of legal shoals, sandbars and changing constituent undercurrents isn’t optional if you want to eliminate the risk of capsizing your nonprofit vessel. It’s a necessary step to remaining on course and making progress. Calling in timely GPS data from your board and from professionals will further refine both of these goals.
Looking for a nonprofit lawyer? Gammon & Grange, P.C. has many knowledgeable nonprofit attorneys and church lawyers who can advise you on many areas that pertain to your nonprofit. Contact us today to discuss your particular legal needs.