Protecting Your Nonprofit Corporation’s Tax-Exempt Status

Nonprofit organizations must meet certain requirements to maintain its tax-exempt status. To protect your tax-exempt status, make sure your organization complies with the following rules:

• The articles of incorporation must limit the corporation’s purposes to one or more of the exempt purposes set forth in IRC section 501(c)(3). If your exempt purpose has changed since inception of the corporation, your tax-exempt status could be at risk. In addition, the corporation must pay taxes on income from activities unrelated to its exempt purpose and cannot make substantial profits from these unrelated activities.

• Upon dissolution, the corporation’s assets must be distributed to another charitable corporation.

• The corporation cannot contribute to or participate in political campaigns directly or indirectly. The corporation also cannot endorse or oppose (either verbally or in writing) a particular candidate.

• The corporation can engage in only limited lobbying activities. Excessive lobbying is prohibited.

• The corporation cannot be organized to financially benefit its members, officers, or directors. A dividend may not be paid to, and no part of the income of the corporation may be distributed to the corporation’s members, directors, or officers. However, reasonable salaries and expense reimbursements are permitted.

For additional information, go to http://www.irs.gov or contact us.