Nonprofit Essentials Conference, August 10, 2017 LEGAL REQUIREMENTS & THE IMPORTANCE OF BEING TRANSPARENT

About the Presenters Heidi Christianson Attorney Nilan Johnson Lewis, PA Kris Kewitsch Executive Director Charities Review Council @heidineffchrist @kkewitsch @smartgivers hchristianson@nilanjohnson.com 612-305-7698 kris@smartgivers.org 651-328-6970

Required Disclosures IRS Public Minnesota Attorney General Multi-State Solicitation Disclosure Requirements State Corporate Filing Requirements

Disclosure to IRS Application for Exemption: IRS form 1023 or 1024 Annual Information Report: IRS form 990/990-EZ/990-N

Disclosure to IRS NEW Requirement for some 501(c)(4) organizations Section 506 Notice Requirement, via Form 8967 Applies to organizations that existed on or before 7/8/16 and had not filed either a 1024 or a Form 990- series return Applies to all 501(c)(4)s formed after July 8, 2016 Must be filed within 60 days after the organization s creation

Disclosure to IRS Failure to file an annual return or notice for 3 years results in automatic revocation Exceptions to filing requirements Churches and certain church affiliates Governmental units and affiliates of government units

Disclosure to IRS Automatic Revocation IRS website page: Exempt Organizations Select Check is the place for information If automatically revoked, must reapply on 1023/1023- EZ or 1024 Generally, exemption is lost for period between revocation and application An IRS document (Rev. Proc. 2014-11) describes a streamlined process to follow for reinstatement, and explains when reinstatement can be retroactive

Disclosure to the IRS Filing thresholds 990N: $50K or less in gross receipts 990EZ: less than $200K in gross receipts and $500K in assets 990: $200k or more in gross receipts and $500k or more in assets 990PF: For all private foundations Form 990-T, for reporting unrelated business taxable income, certain excise taxes, etc.; requirement if greater than $1k in UBI Due Date: 15 th day of 5 th month after end of accounting period, can request 2 3-month extension (So 11 months and 15 days); starting with returns filed 5/15/17 it will be an automatic 6 month extension

Disclosure to the IRS 990 Highlights* Who is on your board, whether you enter into any business transactions with them Who are your highest paid employees? What programs did you conduct and what did they achieve? Your governance practices Amount of revenue and where it comes from How you spent your funds *990-EZ filers disclose some of this, but to a lesser degree

Disclosure to the IRS Governance Mission Statement # of directors & independent directors Business and family relationships between insiders Changes to organizational documents Diversion of assets Policies (Conflict of Interest, Whistleblower, etc ) Executive Compensation Use of Comparability Data Practice for board review of IRS form 990

Disclosure to the IRS Part VII Compensation Anyone who was an officer or director during the tax year (no minimum) Chief operating and financial officers, regardless of title Key employees (over $150K) High five employees (over $100K) Former officers, employees (over $100K) Former directors as directors (over $10K) Five highest independent contractors (over $100K)

Disclosure to the IRS Compensation/Director Independence Filing organization must make a reasonable effort to provide accurate information on the return Distribute a questionnaire annually to each officer, director, key employee, highest paid employee, and independent contractor requiring name, title, date and signature The questionnaire should contain the family and business definitions set out in the instructions

Disclosure to the Public All exempt organizations must make certain documents available to the public and provide copies upon request Exemption application + supporting documents Three most recently filed 990s (Not Schedule B) 990T

Disclosure to the Public Widely Available Option: If an organization makes information widely available, it need not comply with individual requests www.organizationname.org www.guidestar.org Must tell requesters how to access information

Disclosure to Members & Directors Minn. Stat. 317A.461 Members and Directors have access to books and records for proper purposes at any reasonable time Articles of Incorporation, Bylaws, accounting records, minutes of Board and Committees with authority of the Board 6 years of information should be kept Last year s Financial Statements Serious remedy for relief in the Statute

Disclosure to Attorney General Soliciting charitable organizations must register before soliciting in Minnesota under Minn. Stat. 309 Charitable organizations that do not solicit register as charitable trusts under Minn. Stat. 501B

Disclosure to Attorney General Exemptions from Charitable Solicitation Registration: No paid staff, and no professional fundraiser, and less than $25,000 in contributions last year Religious organizations Some educational institutions Alumni, trade, professional associates who solicit members only Single person solicitations Private foundations, if fewer than 100 persons solicited per year

Disclosure to Attorney General For Charitably Soliciting Organizations: Initial Registration: Charitable organization registration statement, financial statements, $25 Annual Reports: Annual report form 990, audited financial statements if revenue of $750,000, and filing fee of $25 When? 15 th day of 7 th month, and a 4 month extension is available if requested in writing before expiration of 7 th month Additional disclosures (dissolution, etc.)

Professional Fundraiser Registration Registration is Required with the Attorney General s Office for all persons who (for pay) provide professional fundraising services Grant Writers are professional fundraisers if they are paid AND they are not employees The Attorney General s Office watches 990s for professional fundraising expenses www.ag.state.mn.us/charities

Other Fundraising Disclosures Prior to asking for a contribution or at the same time as a written request, charitable organizations and their professional fundraisers must disclose: The name and location by city and state of the charitable organization; The tax deductibility of the contribution; and A description of the specific charitable program funds are requested for; and, if different, a description of the programs and activities of the organization generally. If the solicitation is made in person, these disclosures must be made both orally and displayed prominently in writing. If the solicitation is not in person (i.e., radio, television, letter, telephone, or internet) the disclosures must be clearly made in the solicitation. In addition, professional fundraisers must also disclose their name as on file with the Attorney General and that the solicitation is being conducted by a professional fundraiser. Minn. Stat. 309.556

Other Fundraising Disclosures Soliciting in other states can trigger registration requirements in those states www.multistatefiling.org will explain which states require registration and has a link to a unified registration statement Cause Related Marketing is allowing a for-profit to use your name in connection with the sale of a good or service In many states registration is required, and it is regulated Best practices require a contract and full disclosure

Secretary of State Annual corporate filing By December 31 st No fee unless change of address/registered agent Annual failure = Administrative dissolution (but law holds name for one additional year) www.sos.state.mn.us

Other Disclosure Requirements Still not an exhaustive list Minnesota Campaign Finance and Public Disclosure Board (lobbying, political campaign-related activities, ballot measure advocacy) Federal Election Commission (federal political campaign-related activities) Lobbying Disclosure Act (federal lobbying) Minnesota Department of Revenue (sales tax, unrelated business income) Property Tax Employment-related disclosures Sector/industry specific disclosures

Disclosure to IRS Failure to file for 3 years results in automatic revocation Exceptions to filing requirements Churches and certain church affiliates Governmental units and affiliates of government units

Who we are Mission: Mobilize informed donors and accountable nonprofits for the greater good. Nonprofit Services: Accountability Standards Accountability Wizard & Meets Standards Seal Nonprofit Strengthening Projects Diversity, Equity & Inclusion Toolkit Donor Services: Giving Guide Great Givers Curriculum Accountability Partners Donor & Nonprofit Services: FORUM 2019

Our History

Accountability Standards Co-created Benchmarks Shared expectations for donors, nonprofits and the Public A foundation of nonprofit strength Nonprofit Sector Practices Legal and Regulatory Adherence Donor and Public Expectations IRS Form 990

WHY DOES TRANSPARENCY MATTER? TO WHOM DOES TRANSPARENCY MATTER? WHEN DOES TRANSPARENCY MATTER?

PUBLIC DISCLOSURE

Annual Communication & Reports

Annual Communication & Reports WHAT TO INCLUDE: Mission Statement Description of each major program, with specific & objective accomplishments for each Geographic location(s) or population(s) served Financial Statements Including: Total cost of each major program balance sheet (assets & liabilities) statement of activities (revenue & expenses) List of Board of Directors Key Staff members (as defined by the IRS Form 990), or volunteer staff (if no paid staff)

Impact on Community Your So What? We served 150 Kids 90% of the kids we served increased their reading skills two grade levels this year.

Financial Transparency Audits are required for organizations over $750K Accounting Don t confuse your donors: Be Consistent between IRS form 990 and Annual Communications Finance Training & Philosophy Software Strategic plan & leadership Controls & Processes Bookkeeping

Legal Compliance IRS Determination Letter IRS Form 1023 3 years of IRS Forms 990s upon request Comply with all applicable laws Registered to solicit (when required) Donor acknowledgements Document Retention & Destruction policy Much of this information is already available to the Public!

GOVERNANCE 37

Monitoring Mission & Strategy Board of Directors complete annual review of mission and strategies Are you doing what you say you re doing? Ensure your are being stewards of the public, participants and donors support!

Diversity, Equity & Inclusion

Diversity, Equity & Inclusion A majority of support for nonprofits comes directly or indirectly from the public. Being representative & inclusive of the population identified by a nonprofit s mission and goals is key to maintaining public trust!

Chief Executive Assessment & Compensation VS [It] builds public trust to assure that compensation decisions are carefully considered and that pay is reasonable.

Conflict of Interest Policy Real or perceived Conflict of Interest can cause public, financial and legal issues. Include staff and board of directors Ask about conflicts perceived or real Disclose Recuse Document & share if needed

FINANCIAL ACTIVITY 43

Use of Funds At least 65% of the nonprofit s three year average of expenses should be used to directly support programs

FUNDRAISING 45

Fundraising Disclosures Solicitations include: Purpose the funds will be used for specifically. Contact information for the organization The tax deductibility of the contribution Your gift is tax deductible to the extent of the law.

Donor Financial Information Security & Donor Privacy Donor Information Security: Have a plan for keeping information safe Don t keep financial information on site Vet your plan and stick to it! Donor Privacy: Create a policy that clearly communicates: what you collect, why you collect it, how it will and will not be used. Stick to your policy and honor it!

ANY ORGANIZATION CAN MEET STANDARDS!

Earn Meets Standards Seal: Accountability Wizard Review Cloud-based capacity building tool: Focused on education Help along the way as you work to Meet Standards Self-paced Goal of review process: Strengthen Nonprofits Connect strong nonprofits to thoughtful donors and funders 49

Diversity, Equity & Inclusion Toolkit What is it? Affordable, organization-focused, self-administered assessment for organizations that wish to build a more effective and reflective organization from the inside out.

Diversity Equity & Inclusion Toolkit How Does it work? Understand internal diversity Set internal and external equity and inclusion goals Clarify responsibilities and roles to create momentum toward goals Commit to organizational priorities that maintain and advance diversity, equity and inclusion