Indiana
Updates
What You’ll Learn
If you’re a nonprofit in Indiana, or you’re a nonprofit considering fundraising or other activities in Indiana, you must understand the requirements that Indiana has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Indiana.
Getting to Know the State Nonprofit Corporation Law
Background
*Important primarily for nonprofits incorporated in Indiana
Emma Woodhouse, handsome, clever, and rich, with a comfortable home and happy disposition, seemed to unite some of the best blessings of existence; and had lived nearly twenty-one years in the world with very little to distress or vex her. She was the youngest of the two daughters of a most affectionate, indulgent father; and had, in consequence of her sister’s marriage, been mistress of his house from a very early period. Her mother had died too long ago for her to have more than an indistinct remembrance of her caresses; and her place had been supplied by an excellent woman as governess, who had fallen little short of a mother in affection.
- Emma, Jane Austen
When reading a novel, we get to know a fictional character by the author’s description. The author tells us about the character’s appearance, purpose, actions, mannerisms, and values.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us the organization’s name, purpose, way of acting, and method of making decisions.
To get to know your own nonprofit, be sure to review the sections below.
State Nonprofit Corporation Law
Corporate Governance
Conflict Transactions: Ind. Code Ann. § 23-17-13-2.5; Need to review the basic best practices for conflicted transactions? See Bylaws Module 14: Conflicts of Interest.
Director Standards of Conduct: Ind. Code Ann. § 23-17-13-1; Need a refresher on the role of directors? See Bylaws Module 6: Directors.
Members: Eligibility and Statutory Powers: Ind. Code Ann. § 23-17-7-1; Ind. Code Ann. § 23-17-7-4; Not sure what a “member” is? Need to review the basics? See Bylaws Module 5: Members.
Indemnification: Ind. Code Ann. § 23-17-16-8; Ind. Code Ann. § 23-17-16-13; Not sure what “indemnification” is? Need to review the basics? See Bylaws Module 8: Indemnification.
For Religious Nonprofits
Nonprofit Religious Corporation Act: Indiana’s nonprofit corporation law includes a designated law governing the formation and operations of nonprofit religious corporations and specific provisions to protect their right to self-government in internal affairs. See Ind. Code § 23-17;23-17-2-25; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Indiana law permits a director to rely on guidance from religious figures within his or her faith tradition in the fulfillment of the director’s fiduciary duties. Ind. Code § 23-17-13-1(b)(4)
Understanding Religious Liberty in this State
Case Study
*Important for all nonprofits doing business in Indiana, whether incorporated in Indiana or elsewhere
“Religious freedom protected by the First Amendment to the United States Constitution encompasses the right of religious institutions "to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine."
- Payne-Elliott v. Roman Catholic Archdiocese, 193 N.E.3d 1009, 1011 (Ind. 2022).
Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Remember to consult with an attorney as soon as possible if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Indiana has enacted a RFRA that is limited in application and does not provide adequate protection for faith-based nonprofits with public programming. Ind. Code Ann. § 34-13-9-0.7 -- 34-13-9-11; Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
Constitutional Protections for Free Exercise: The Indiana Constitution has been interpreted by the Indiana Supreme Court to provide stronger protections for religious free exercise or worship than the federal First Amendment. Ind. Const. Art. I, §§ 2, 3-5, 7
State Blaine Amendment: The Indiana Constitution contains Blaine Amendment-like language that broadly restricts faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. Ind. Const. Art I, § 6 “No money shall be drawn from the treasury, for the benefit of any religious or theological institution". Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Religious Freedom and Public Accommodation Laws: Ind. Code § § 22-9-1-2 Indiana’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities and provide no meaningful religious accommodations or exemptions. The law takes policy positions on matters of human sexuality, and these positions may sometimes conflict with the sincerely-held religious beliefs of faith-based organizations on the same topics. Be aware of the applicability of the public accommodation law and relevant exemptions. Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Protections for Religious Exercise in State of Emergency: Indiana law provides that religious worship can only be prohibited or restricted by an emergency order that: (a) applies equally to all “essential” secular entities in the jurisdiction, (b) serves a compelling governmental interest, and (c) is narrowly tailored. Ind. Code § § 10-14-3-12.5
Key Employment Laws and Regulations
Nonprofit corporations must also keep apprised of federal and state employment laws when operating. In addition to the requirements of Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act of 1990, Indiana prohibits employers from discriminating on the basis of ancestry. An employer is any person who has six or more employees. The definition of employer excludes nonprofit corporations organized exclusively for religious purposes. Local governments may also have employment-related regulations. An attorney can help you understand what requirements apply to your organization.
Religious Fredom for Faith-Based Employers: Ind. Code §§ 22-9-1-2, 3; Need to review the basics on religious freedom and employment matters? Walk through a self-audit of best practices here.
Religious Freedom for Employees: Ind. Code Sections 22-9-1-2(a) and (b)
Employment Nondiscrimination Law: Ind. Code. Ann. § 22-9-1-3
State Law Protections under Church-Autonomy Doctrine. Brazauskas v. Fort Wayne-South Bend Diocese, 796 N.E.2d 286 (Ind. 2003); Payne-Elliott v. Roman Catholic Archdiocese, 193 N.E.3d 1009, 1011 (Ind. 2022).
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Indiana but incorporated elsewhere
If you are a foreign corporation conducting activities in Indiana, you must consider whether you need to register as a foreign nonprofit corporation. The state law requires entities that are “transacting business” to register. An attorney can help you decide whether you need to register based on the type and volume of activities you have in this state. Indiana law does not define “transacting business,” but it does provide a list of activities that do not constitute transacting business. Conducting business without registering in Indiana can lead to fines of up to $10,000, under Ind. Code 23-0.5-5.2(f).
Business Registration Statute
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Indiana and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
In Indiana, charitable solicitation registration is not required. However, under the Professional Fundraiser Consultant and Solicitor Registration Act, according to the Indiana Attorney General, “all professional fundraiser consultants and solicitors to register with the Attorney General's Office prior to beginning a fundraising campaign. A professional solicitor solicits contributions for, or on behalf of, a charitable organization. A professional fundraiser consultant is hired to plan, manage, advise, or act as a consultant in connection with soliciting contributions for, or on behalf of, a charitable organization. Unlike a professional solicitor, the professional fundraiser consultant does not actually solicit contributions.” Before hiring anyone that will be fundraising on your charitable organization’s behalf, ensure that the professional solicitor is registered. See Ind. Code Ann. §§ 23-7-8 et seq. Be sure to review other state registration and tax requirements, and stay apprised of updates by visiting the applicable state agency's website.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
Not applicable.
Evaluate Whether You'll Need a Registered Agent
Indiana does not require a registered agent pursuant to charitable solicitation regulation. However, out-of-state nonprofits that are “transacting business” in Indiana will need a registered agent to complete the required foreign nonprofit corporate registration. More details are in the following section.
Follow the Rules About Communicating with the Public
This state does not require organizations to post specific language when conducting charitable solicitations.
Charitable Registration Statute
Not present.
Charitable Registration Exemption Statute
Not applicable.
Annual Report Requirement
Not present.
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Indiana, whether incorporated in Indiana or elsewhere
In Indiana, organizations which have received federal income tax exemption under IRC § 501(c)(3) are automatically exempt from state income tax. Some organizations may choose to send a copy of their IRS determination letter to the state department of revenue to indicate the organization’s position that it qualifies for the exemption. Note that, although an organization may be exempt, if it has unrelated business taxable income (“UBTI”) that is subject to federal taxation, that UBTI may be subject to state income tax. (Ind. Code § 6-3-2-2.8(1).)
It is also important to consider whether your organization might be eligible for sales and use tax or property tax exemption. In this state, federal § 501(c)(3) status does not automatically provide an exemption from sales, use and property taxes. More information about the sales and use tax exemptions and applications is available on the Indiana Department of Revenue website and in Indiana administrative rules. An accountant or attorney can provide answers to specific questions regarding your organization’s eligibility for exemption.
Corporate Income Tax Statute
Indiana imposes a corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Ind. Code § 6-3-2-1; Ind. Code Ann. § 6-4-2-2.8
Corporate Franchise Tax Statute
This state does not have a corporate franchise tax.
What You Need to Know About Sales Tax
Sales and Use Tax: Indiana imposes a sales and use tax on religious organizations’ sales and purchases but generally provides a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ sales upon application. Ind. Code Ann. § 6-2.5-2-1; Ind. Code Ann. § 6-2.5-3-2; Chapter 8 Registration (§§ 6-2.5-8-0.3 — 6-2.5-8-12)
Exemptions: Ind. Code Ann. § 6-2.5-8-4 and Ind. Code Ann. § 6-2.5-3-4; Ind. Code. Ann § 6-2.5-5-25 \
As of July 1, 2022, for nonprofit corporations and “churches” in Indiana, “sales of no more than $20,000 in a calendar year engaged in as a fundraising activity are exempt from sales tax. Once a nonprofit organization passes the $20,000 threshold, it must collect state gross retail tax on subsequent sales for the remainder of the calendar year.” However, an organization must file an application for this exemption within four months of “the taxpayer’s formation.”State Tax Treatment of Unrelated Business Income: Ind. Code Ann. § 6-4-2-2.8(1); Ind. Code Ann. § 6-3-2-3.1
State-Specific Special Requirements
Miscellaneous
Useful Links
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Legal Disclaimer
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington