Ask a Nonprofit Specialist

Ask a Nonprofit Specialist - Applying for 501c3 status with new 1023-EZ form

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center

 

 Question: I am starting a nonprofit organization and need to apply for 501c3 status.  Can I fill out the new 1023-EZ form?  

The Internal Revenue Service recently released Form 1023-EZ, the streamlined application for recognition of exemption of 501c3 status. This form is significantly shorter and easier to complete than the regular application, which is a welcome change for aspiring small nonprofit organizations. In order to utilize the streamlined applications, organizations must meet eligibility requirements and complete the Form 1023-EZ Eligibility Worksheet. There are 21 questions on the worksheet and an affirmative answer to any of the questions makes your organization ineligible to utilize the streamlined application.

Organizations with Budgets and Previous Expenses Less than $50,000 per year
The streamlined application is intended for small organizations, so only those with projected budgets of less than $50,000 per year are eligible. If the organization has been operating already, gross receipts from each of the last three years also must be less than $50,000 per year and total assets cannot exceed $250,000.

Ask a Nonprofit Specialist: Legal protection of control within public charities

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: I am the interested in starting a public charity, and I want to legally protect my influence and ability to control the affairs of the organization.  How can I do this?

 

 

I get this question or some variation of it fairly regularly, and my response is a quite lengthy description on the nature of public charities and the reality that nonprofit organizations of this type do not have owners, by design, making it impossible to legally protect an individual’s control of an organization.

 

Short answer:  You can’t.

 

Long answer: Public charities are an IRS designation of organizations that are organized and operated for exempt purposes.  Exempt purposes can span a wide variety of activities intended to improve the common good.  The organized and operated requirements for charitable organizations are very specific, including a prohibition of private benefit, so private ownership is not an option.

 

Ask a Nonprofit Specialist: Using collaborative inquiry to engage stakeholders

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: My board of directors and staff are working, doing their jobs in the day to day, but they don’t seem to have the energy or interest in the overall mission and future of the organization. We need to develop a plan for the future, but I can’t seem to muster up their enthusiasm and creativity for the effort. How can I increase engagement in order to lay strategic groundwork for the future?

A friend of mine once gave me a card that pictured a crisis center, on fire and afloat on a river, about to fall over a cliff.  I was the director of a crisis center at the time, so it was amusing and a bit true to my experience.  Unfortunately, the portrayal of a crisis center in crisis is not so farfetched. The day-to-day work of nonprofit organizations is often so demanding, the big picture is often overlooked in response to the daily “crisis” of staying afloat.

Ask a Nonprofit Specialist: What does the repeal of Arizona's solicitation law mean to my nonprofit?

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: How have the requirements for charitable solicitation registration in Arizona changed with new legislation? What does this mean for my organization? Are we still required to file annual reports? What about internet based fundraising? Are we required to register with other states? Is this good or bad for nonprofits in Arizona?

The Arizona legislature recently passed legislation that repeals Arizona’s solicitation registration laws and the requirement that nonprofit organizations file annual solicitation registration or renewal forms with the Secretary of State. This should not be confused with the Corporate Annual Report required by the Arizona Corporation Commission, which is still required.

Most states typically regulate nonprofit organizations through solicitation laws that are concerned with charitable solicitations from the general public. These laws were designed to protect the public from misleading or unethical fundraising practices.

Ask a Nonprofit Specialist: Should we charge fees for our services?

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: We provide our services free to our program participants, but we are feeling the strain of limited resources. Some have suggested we charge a fee for our services, but I am reluctant to go down this road. What should we consider about charging fees for our services? Will we be required to pay taxes on fees collected?

The traditional charity model is based on the expectation that organizations raise funds from institutions and individuals in order to provide services to those in need, primarily free of charge. Charitable giving continues to flourish in this country; according to the Giving USA report, charitable giving totaled $298 billion in 2011,with 73% of funds donated by individuals. Americans continue to be very generous, but unfortunately, the demand for services outstrips our ability to fund services with charitable gifts alone.

Ask a Nonprofit Specialist: How do I fill out form 1023?

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: I am starting a nonprofit organization, and I need to secure our 501(c)3 status. I don’t know how to fill Form 1023, the Application for Recognition of Exemption, from the IRS. Do I need an attorney to complete it? Can you help?

Questions about the application for 501(c)3 status or form 1023 are by far the most common I get in my role as a professional-in-residence at the ASU Lodestar Center. The instructions from the IRS are almost 40 pages and the form itself is 26 pages, so it is no wonder the task may feel overwhelming! Fortunately, there are resources available, and a clear perspective will help focus your efforts.

Ask a Nonprofit Specialist: Engaging the board of directors in fundraising

posted by
Anne Byrne,
Professional-in-Residence,
ASU Lodestar Center


Question: My board of directors is not effective at raising funds to support our organization. Many members seem afraid of the issue and say things like “I will do anything but fundraise.” How do I get them involved?

Effectively engaging board members in fundraising is a very common challenge for nonprofit organizations. Many board members are unaware of their responsibilities to fundraise or feel inadequate in meeting the challenge. Others may have had bad experiences or have misconceptions about fundraising. While it can be difficult to engage board members in fundraising, there are a few steps that will help ease the way, build confidence and improve effectiveness.

Ask A Nonprofit Specialist - Engaging the Board in Financial Reports

posted by

Anne Byrne,

Professional-in-Residence,

ASU Lodestar Center


Question:
This question was recently posed to the ASU Lodestar Center’s “Ask a Nonprofit Specialist”:

Every time the financial report is made at my organization’s Board meeting, the members seem to either fixate on a number that is not especially meaningful or the opposite:  their eyes glaze over in boredom.  How can I make the reports more meaningful?  One member suggested we use a dashboard to report our finances?  What do you suggest?

Engaging members of a nonprofit Board of Directors in the organization’s financial affairs can be challenging, given the diverse skills and expertise Board members bring to the work. This Board member’s experience is very common. It’s not easy to report on financial statements in an engaging fashion. However, since financial accountability is one of the most significant legal and ethical responsibilities for nonprofit Boards of Directors, effectively engaging the Board in financial matters is critical.  Consider the following background information to improve your organization’s financial reporting and the Board’s engagement in your organization’s financial affairs.

 

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