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Frequently Asked Questions
As individuals
interested in forming a nonprofit organization or a board, staff, or volunteer
of an existing organization, questions arise from time to time about starting
or managing a nonprofit entity. This question and answer page will highlight
frequently asked questions about nonprofit issues. In the coming months,
questions will be developed for the following topics:
Bookmark this
page of the Network website for an ongoing tool to lead your nonprofit
organization. Network members offer public workshops on these topics on a
regular basis. Upcoming workshops are listed on the workshop tab.
Board
Governance
| Q |
Where can I find board governance materials in different
languages? (March 2003) |
| A |
BoardSource is Washington D.C. is known internationally
for their board governance training and resources. They produce materials in
Arabic, Australian English, Bulgarian, Dutch, Japanese, Portuguese, Russian,
Slovak, and Spanish. Contact BoardSource at 1-800- 883-6262 or
1-202-452-6262
or www.boardsource.org.
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| Q |
Can
Texas nonprofit organizations hold a board meeting through teleconferencing or
video conferencing? (April 2002) |
| A |
According
to Section 9.11 of the Texas Nonprofit Corporation Act, “unless restricted by
the articles or bylaws, members or directors may participate in and hold a
meeting of conference telephone or similar communications equipment by means of
which all person participating in the meeting can hear each other.”
As with in-person board meetings, it is advisable to publish and distribute the
meeting agenda prior to the board meeting. |
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| Q |
How
many board members are required in a Texas nonprofit corporation? (May 2001) |
| A |
The
Texas Nonprofit Corporations Act requires a minimum of three directors on the
Governing Board of Directors. In an organization's Bylaws & Articles of
Incorporation, it is common to state the minimum and maximum number of members
required on the Board. |
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| Q |
What
are duties of board members? (May 2001) |
| A |
Board
members have oversight responsibility for the nonprofit organization. The legal
structure for the entity will dictate the responsibilities and liabilities of
the directors. For directors of nonprofit organizations, there are three
duties: the duty of care, the duty of loyalty, and the duty of obedience.
Additional
Resources:
Am I Liable,
Responsibilities & Liabilities of Texas Nonprofit Organization Directors,
2nd edition, Glen A. Yale. Book is available through the Nonprofit Resource
Center of Texas at
www.nprc.org.
The National
Center for Nonprofit Boards (NCNB) is a key publisher of board governance
materials. Available titles include Ten Basic Responsibilities of Nonprofit
Boards, Nonprofit Board Answer Book: Practical Guidelines for Board Members and
Chief Executives. Materials are available at the Online Bookstore at
www.ncnb.org.
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| Q |
How
often should a board meet? (May 2001) |
| A |
In
the start-up of a nonprofit organization, board members may need to meet more
frequently to establish the organization. There is not a minimum number of
meetings specified by state or federal law governing nonprofit organizations.
Based on readings and experience with boards, many nonprofit boards meet 9-12
times per year. The amount of work often dictates how often the board meets.
Prior to the
start of the organization's fiscal year, it is a good idea to survey board
members about the best day and time for regular board meetings.
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Financial,
Administrative, & Legal Issues
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Q |
Are nonprofit organizations with less
than $25,000 in revenue required to file an annual form with the
IRS? (November, 2007) |
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A |
Effective 2008,
smaller nonprofit organizations will be required to file the
e-Postcard (Form 990N) every year by the 15th day of the fifth
month after the close of their tax period. According to
the Pension Protection Act, the IRS will revoke the tax-exempt
status any of organization failing to meet their annual filing
requirement for three consecutive years. Additional
information is available at
www.irs.gov/. Information will include the
organization's name, mailing address, web address, Employer
Identification Number, name and address of principal officer,
organization's tax period, statement about annual revenues, and
if organization is closing down business.
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Q |
Is a nonprofit organization required
to make public income not related to their charitable missions?
(February, 2008) |
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A |
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Until 2006, nonprofit
organizations were not required
to make public the federal tax
returns on income not related to
their charitable purpose.
However, the law now requires
that all charities publicly
disclose their "Exempt
Organization Business Income Tax
Return, the Form 990-T. The law
covers forms filed with the IRS
after August 17, 2006, the date
the statute went into effect.
This guideline applies to all
organization with charity status
under Section 501(c)(3) of the
Internal Revenue Code including
churches and religious groups
that are exempt from filing the
Form 990. Disclosure rules
require that nonprofit
organizations provide a copy of
their Form 990-T on the same day
as requested by an individuals.
If there is a written request,
it must be provided within 30
days. If charities refuse to
provide the forms or allow them
to be copied, they can be fined
$20 per day up to a maximum of
$10,000. If copies are easily
accessible through their
website, they are not required
to provide a separate copy. For
additional information, contact
go to
www.irs.gov. |
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Q |
How does a nonprofit organization change its name in Texas?
(December, 2007)
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A |
The nonprofit organization must
file a Certificate of Amendment with the Secretary of State's
Office.
An entity that is governed
by the Texas Business Organizations Code (BOC) changes
its legal name by filing a Certificate of Amendment. See
Form 424 (Word
80kb ,
PDF 90kb) . An entity that is not governed
by the BOC changes its legal name by filing Articles of
Amendment. See
Forms 404-409.
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Q |
Must a charitable nonprofit organization register with the state
of Texas? (May, 2007)
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A |
The majority
of nonprofits are not required to register with the state of
Texas. However, exceptions exist for organizations soliciting
funds for law enforcement, public safety, or veteran causes.
Your organization may be affected by the Texas Law Enforcement
Telephone Solicitation Act, the Public Safety Solicitation Act,
and the Veterans Solicitation Act. Being registered does not
imply endorsement. As stated on the Secretary of State’s
website, “The Secretary of State is the filing agency for the
documents required by the Public Safety Solicitation Act
("Act"). Registration with the Secretary of State does not imply
approval or endorsement of the organization or its solicitor.”
Additional information: Secretary of State’s website at
www.sos.state.tx.us and the Office of the Attorney General’s
website
http://www.oag.state.tx.us/consumer/charityregform.pdf.
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Q |
What is the Unified Registration
Statement? (October, 2006) |
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A |
The Unified Registration Statement (URS)
is an effort to consolidate the information data requirements of all
states that require registration of nonprofit organizations
performing charitable solicitations within their
jurisdictions. It is organized by the National Association of
State Charities Officials and the National Association of Attorney
Generals. It is one Standardized Reporting Project and it is
meant to standardize and simplify the reporting requirements for
nonprofit organizations. The most recent version of the URS is
v.3.02.
http://www.multistatefiling.org/ |
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Q |
Which state department represents the
public interests in charity? (March 2005) |
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A |
The Attorney General Office's represents
the public interest in charity and acts to protect that interest.
The Charitable Trusts Section of the AG's Consumer Protection
Division has key responsibilities in this area. |
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| Q |
What website outlines the duties of the Charitable Trust Section?
(March 2005) |
| A |
The website is
http://oag.state.tx.us/consumer/charitabletrusts.shtml |
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| Q |
What form can I use to file a complaint about a Texas tax exempt
entity (March 2005) |
| A |
The form can be downloaded at
http://www.oag.state.tx.us/consumer/charitycomplaint.pdf |
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| Q |
What is Form 1024? (February 2005) |
| A |
It is the IRS form used to apply for certain types of exempt
organizations. If you are applying as a 501(c)(2), (4), (5),
(6), (7), (8), (9), (10), (12), (13), (15), (17), (19), (25)
organization, use this form to apply for exemption from the IRS.
The form and instructions are available at
www.irs.gov. |
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| Q |
What is the filing fee for tax exempt status with the IRS?
(February 2005) |
| A |
Nonprofit organizations seeking first-time rulings that qualify as
charities generally will continue to pay $500. A reduced fee
of $150 applies to organizations with annual receipts of $10,000 or
less during the previous four years. For additional
information, go to www.irs.gov. |
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Q |
What are the IRS
Group Exemption Numbers, Subsection Codes and Classification
Codes for tax exempt organizations? (September 2004) |
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A |
Based on the tax
exempt application, the IRS determines whether the organization
is exempt according to one of the following codes.
Table of EO
Subsection and Classification Codes
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Subsection
Code |
Classification
Code |
Description |
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01 |
1 |
Government Instrumentality |
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02 |
1 |
Title-Holding Company |
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03 |
1 |
Charitable Organization |
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03 |
2 |
Educational Organization |
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03 |
3 |
Literary Organization |
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03 |
4 |
Organization to Prevent Cruelty to Animals |
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03 |
5 |
Organization to Prevent Cruelty to Children |
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03 |
6 |
Organization for Public Safety Testing |
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03 |
7 |
Religious Organization |
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03 |
8 |
Scientific Organization |
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04 |
1 |
Civic
League |
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04 |
2 |
Local
Association of Employees |
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04 |
3 |
Social
Welfare Organization |
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05 |
1 |
Agricultural Organization |
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05 |
2 |
Horticultural Organization |
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06 |
1 |
Board
of Trade |
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06 |
2 |
Business League |
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06 |
3 |
Chamber
of Commerce |
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06 |
4 |
Real
Estate Board |
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07 |
1 |
Pleasure, Recreational, or Social Club |
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08 |
1 |
Fraternal Beneficiary Society, Order or Association |
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09 |
1 |
Voluntary Employees’ Beneficiary Association
(Non-government Employees) |
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09 |
2 |
Voluntary Employees’ Beneficiary Association (Government
Employees) |
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10 |
1 |
Domestic Fraternal Societies and Associations |
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11 |
1 |
Teachers Retirement Fund Association |
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12 |
1 |
Benevolent Life Insurance Association |
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12 |
2 |
Mutual
Ditch or Irrigation Company |
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12 |
3 |
Mutual
Cooperative Telephone Company |
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12 |
4 |
Organization Like Those on Three Preceding Lines |
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13 |
1 |
Burial
Association |
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13 |
2 |
Cemetery Company |
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14 |
1 |
Credit
Union |
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14 |
2 |
Other
Mutual Corporation or Association |
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15 |
1 |
Mutual
Insurance Company or Association Other Than Life or
Marine |
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16 |
1 |
Corporation Financing Crop Operations |
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17 |
1 |
Supplemental Unemployment Compensation Trust or Plan |
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18 |
1 |
Employee Funded Pension Trust (Created Before 6/25/59) |
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19 |
1 |
Post or
Organization of War Veterans |
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20 |
1 |
Legal
Service Organization |
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21 |
1 |
Black
Lung Trust |
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22 |
1 |
Multiemployer Pension Plan |
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23 |
1 |
Veterans Association Formed Prior to 1880 |
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24 |
1 |
Trust
Described in Sect. 4049 of ERISA |
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25 |
1 |
Title
Holding Company for Pensions, etc. |
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26 |
1 |
State-Sponsored High Risk Health Insurance Organizations |
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27 |
1 |
State-Sponsored Workers’ Compensation Reinsurance |
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40 |
1 |
Apostolic and Religious Organization (501d) |
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50 |
1 |
Cooperative Hospital Service Organization (501e) |
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60 |
1 |
Cooperative Service Organization of Operating
Educational Organization (501f) |
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70 |
1 |
Child
Care Organization (501k) |
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71 |
1 |
Charitable Risk Pool |
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81 |
1 |
Qualified State-Sponsored Tuition Program |
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92 |
1 |
4947(a)(1) – Private Foundation (Form 990PF Filer) |
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| Q |
How long are
nonprofit organizations required to maintain documents?
(December 2003) |
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A |
It is recommended that nonprofit organizations have a written
document retention and destruction policy. The National Council
of Nonprofit Associations in Washington, D.C. has published the
following table with the minimum retention requirements:
|
Type of Document |
Minimum Requirement |
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Accounts payable ledgers and schedules |
7 years |
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Audit reports |
Permanently |
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Bank reconciliations |
2 years |
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Bank statements |
3 years |
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Checks (for important payments and purchases) |
Permanently |
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Contracts, mortgages, notes and leases (expired |
7 years |
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Contracts, mortgages, notes and leases (still in effect) |
Permanently |
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Correspondence (general) |
2 years |
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Correspondence (legal and important matters) |
Permanently |
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Correspondence (with customers and vendors) |
2 years |
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Deeds, mortgages, and bills of sale |
Permanently |
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Depreciation schedules |
Permanently |
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Duplicate deposit slips |
2 years |
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Employment applications |
3 years |
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Expense analyses/expense distribution schedules |
7 years |
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Year end financial statements |
Permanently |
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Insurance policies (expired) |
3 years |
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Insurance records, current accident reports, claims,
policies, etc. |
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