May 26, 2020

Bottom Line:

·      Using a compliance calendar can minimize the risk of fines and penalties associated with missed or late filings and have a measurable impact on an Organization’s efficient functioning, financial bottom line, and reputation.  

·      An effective compliance calendar will identify:(1) key filing obligations, (2) important deadlines, and (3) the individual or parties responsible for preparing and submitting the filings.

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Introduction

Federal, state, and even local governments and agencies impose a variety of filing requirements on tax-exempt nonprofit corporations (hereafter, “Organizations”).

Creating a compliance calendar can help Organizations remain in legal good standing, protect their reputations, and avoid expensive fines and penalties.

Why a Compliance Calendar is Important

Timely and accurate submission of required filings is important for many reasons. Perhaps the most obvious is that late or missing filings have legal and financial consequences. For example, late IRS filings can incur penalties of up to $50,000. Three missed filings can result in automatic revocation of tax-exempt status.

In addition to legal considerations, timely filing has financial and reputational implications. Organizations which rely on donations must be careful to maintain integrity and stewardship in fact and appearance. These characteristics are important to the mission of evangelization.

Additionally, from a practical standpoint, donors will be reluctant to contribute to an Organization which has a reputation for being poorly administered, especially if the donors have reason to believe their contributions will be applied to pay fines and penalties which were avoidable. These fines and penalties can be considerable and detract from the resources available to provide religious and charitable services.

Finally, under common law, the board of directors has a duty of diligence in overseeing the Organization’s effective functioning. In some cases, failing to complete required filings may be deemed a breach of fiduciary duty by the board of directors.

How to Establish a Compliance Calendar

The Organization’s executives, in consultation with the Organization’s board of directors, accountant, and legal counsel should create a consolidated list of all the Organization’s required filings and the associated deadlines.

The consolidated list should be shared as appropriate within the Organization. The document should designate the party or parties responsible for preparing and submitting the filing. Listing the role and name of each individual responsible ensures the filings continue to be timely prepared even as people transition in and out of their roles.

When new team members join the Organization, their training should include clear instructions regarding any filing responsibilities included in their new role. Unfortunately, without this protocol in place, many Organizations simply stop filing when the individual historically responsible for the filing moves to a new role or entity.

The dates in the Compliance Calendar should be added to a calendar program such as Microsoft Outlook or Google Calendar. The corporate secretary or another staff member (the “Administrator”) should enter each deadline as a calendar event and email invitations to the event to the parties involved in the filing or matter. The Administrator should also add calendar reminders to send alerts before the deadline. For most events, an effective reminder system would issue alerts 90 days, 45 days, and the week prior to the final deadline.

The Compliance Calendar should be updated as new filing obligations are incurred and should be reviewed annually in case of changes in applicable government or agency requirements.

Key Dates to Include

Federal, state, and local governments and agencies impose filing obligations based on an Organization’s activities. Accordingly, the specific list of filing obligations will vary by Organization. The following are just a few examples of common filings required for tax-exempt nonprofit corporations.

·      Internal Revenue Service Form 990

·      Corporate Report to the Secretary of State(often called the “annual report” or the “statement of information”)

·      Charitable Registration Reports and Renewals

·      State Tax-Exemption Reports and Renewals

·      Annual Meeting  

·      Directors and Corporate Officers Terms  

Conclusion

Using a compliance calendar will not only help an Organization function more efficiently, the Calendar can also have a significant impact on the Organization’s financial bottom line and reputation. An effective compliance calendar will identify key filing obligations, important deadlines, and the party or parties responsible for preparing and submitting the filings. With compliance matters addressed properly, the Organization can continue to evangelize and serve with confidence.