Charitable organizations are subject to numerous legal and regulatory requirements to maintain compliance with applicable laws governing their operations and tax-exempt status. 

Maintaining Books and Records

Public charities are required to maintain comprehensive books and records to document their compliance with tax and nonprofit laws. These include a “minute book,” which contains essential documents such as:

• The organization’s Certificate of Incorporation
• Bylaws
• The IRS Determination Letter
• Minutes of board and member meetings

Additionally, nonprofits must meticulously track revenue sources, including donor names and contributions, and maintain detailed expense records. This information is reported annually on the organization’s IRS Form 990 or Form 990-EZ, which is essential for maintaining tax-exempt status. 

Opening a Bank Account

After forming a nonprofit and obtaining an Employer Identification Number (EIN) from the IRS, the next step is to open a bank account in the nonprofit’s name. It is essential to maintain the nonprofit’s funds in a separate account, distinct from any personal accounts, and to accurately document all financial transactions.

To open an account, the board of directors must pass a resolution during the organizational meeting authorizing officers to establish the account. The officer opening the account should provide the bank with the nonprofit’s EIN, Certificate of Incorporation, and the resolution approval date.

Tracking and Substantiating Donations

Charitable organizations are legally required to maintain donor records and track contribution amounts, which may be reported on their annual IRS filings, depending on the organization’s size and donation levels. Donors claiming a deduction of $250 or more must receive a written acknowledgment of their contribution before filing their tax return.

For quid pro quo contributions over $75 (where the donor receives goods or services in return for their contribution, such as a fundraising gala ticket), the nonprofit must provide a written disclosure statement. This statement must indicate the value of the goods or services received and the remaining portion of the contribution eligible for a tax deduction. Substantiation letters are not required for goods or services of insubstantial value.

Annual Compliance Obligations

Tax-exempt organizations must complete specific annual compliance actions to maintain their status:

1. IRS Filings: File Form 990, 990-EZ, or 990-N, depending on the organization’s revenue and asset size, within five months of the fiscal year’s end.
2. New York State Filings: File CHAR500 with the New York Attorney General’s Charities Bureau annually.
3. Annual Meetings: Hold an annual meeting of members and the board of directors to address critical matters, including:
   • Electing the board
   • Appointing officers
   • Approving financial statements and budgets
   • Appointing auditors
   • Approving executive compensation

These actions ensure the organization complies with federal and state laws while demonstrating good governance practices.