Nonprofit organizations and their board of directors are constantly navigating the many IRS rules and regulations that govern 501(c)(3) organizations – both their tax exempt status and their eligibility to receive tax-deductible contributions from taxpayers. In a dynamic environment where tax rulings and reform are constant, as well as the reality of ever-present general business risks affecting for-profits and nonprofits alike, vigilance is a must.
Here are a few important reminders to ensure that your organization maintains its good standing.
Private inurement is a real no-no. The IRS takes the concept of “private inurement” very seriously in its regulation of nonprofits. As in, if you do it, you’re out. Most nonprofits are well aware that they will be putting their 501(c)(3) exempt status at risk if they play fast and loose with the rules for preventing undue benefit to a private person. After all, charities are established for the public good, and public good and private profit do not mix. We really like this article because it breaks down private inurement in a fun way (if that’s possible with tax law!) while still making the point that this issue is critical for all charitable organizations.
Zero in on donor retention with planned giving. If it feels like donors are getting harder to come by, it’s not your imagination. Indeed, a recent study shows that the total number of donors in the United States fell by 10 percent, with a 3.1 percent decline in the number of major donors who give between $5,000 and $50,000. Certainly this trend is making it harder for your organization and other charities to meet fundraising goals, but you can do something about it. The study also indicated that donor retention rates fell by 3.5 percent. So, consider doubling down on efforts to retain your donors, perhaps by ensuring that every communication includes one or more mentions of your organization’s ongoing and long-term priorities and how planned giving can make a big difference. This could send a powerful signal to your donors that you view them as partners in your effort to improve the quality of life in our community, not just as supporters of annual budget needs.
Consider inviting your donors and volunteers to take advantage of Kitsap Community Foundation’s new partnership with FreeWill.com, which provides an opportunity for friends of your organization to create a legal will for FREE. It’s a simple and straightforward process that takes about 20 minutes and your donors and volunteers will be encouraged – but not required – to name charitable bequests in their will. It’s a great gift for your organization to provide to your friends and, hopefully, they’ll return the favor by adding a charitable bequest for your organizational endowment!
Tighten up volunteer protocols. As the population ages and volunteering among seniors stays strong, make sure your volunteer practices, guidelines, and risk management protocols are in ship shape. Volunteers can make a major positive difference in your organization’s ability to deliver on its mission, and you don’t want any risk slip-ups to stand in your way. Be sure to keep former volunteers on your mailing lists, because often they are the best planned giving prospects and their active volunteering and annual giving may decrease or cease as they near their final years.
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