California Nonprofit Compliance

Importance of Compliance

Nonprofits are held to a high standard of government regulation and public scrutiny. This is for good reason, as 501(c) nonprofits are exempt from federal corporate taxes and have access to public funding. These benefits are not typically available to for-profit businesses, so laws are in place to protect the public and ensure nonprofits do not abuse their financial privileges. California and the IRS have ongoing requirements that nonprofits must meet.

While a 501(c) nonprofit receives key financial benefits, the penalties for failing to meet government requirements can be very serious. The IRS can revoke a nonprofit’s tax exemption and impose fines that can accrue daily. A state can administratively dissolve a nonprofit corporation and levy steep financial penalties. Outside of state and federal requirements, an organization can lose out on a grant or large donation as a result of not keeping itself in good standing. A proactive approach to compliance helps ensure sustained success and the cost is small in comparison to the much larger costs of citations and penalties.

(1) File IRS Form 990

Agency: Internal Revenue Service (IRS)
Forms: IRS Form 990-N, 990-EZ, 990-PF or 990
Initial form if your status is revoked: Form 1024
Instructions: See Form 990 Thresholds to determine which form to file.  Then see Current Form 990 Series for instructions.
Due: The 15th day of the 5th month following the end of the taxable year.  For most organizations, the tax year ends December 31 so the Form 990 is due May 15.
(2) File California Corporate Tax Exemption Renewals
Agency: California Franchise Tax Board
Forms: Form 199: Exempt Organization Annual Information Return
Exempt Organizations List
Revoked Organizations List
Initial form if your status is revoked is 3500
Agency fee: $10
Due: Annually within 4.5 months of your fiscal year end.
Notes: Most exempt organizations need to file an information return every year. Certain organizations are exempt from this filing requirement.
(3) File California Statement of Information
Agency: California Secretary of State – Business Programs Division
Form: Form SI-100: Statement of Information – Nonprofit
Business Search
Filing method: Mail, in-person, or online.
Agency fee: $25.00
Turnaround: Online version is filed in 1 business day.
Due: Biennially by the end of the month when the Articles of Incorporation were initially filed. Can be submitted up to 5 months prior to this date.
Law: California Corporations Code sections 6210
Penalties: $50 late penalty.
Notes:
  • We recommend filing online.
  • Every domestic nonprofit corporation formed to manage a common interest development under the Davis-Stirling Common Interest Development Act (for example, a homeowners’ association) must also file a Statement By Common Interest Development Association (Form SI-CID) together with the biennial Statement of Information.
  • Original signatures are not required.
  • Agricultural cooperative corporations file annually.

(4) California Charitable Solicitation Registration

Agency: California Attorney General – Registry of Charitable Trusts
Form: Annual requirement: Form RRF-1
Initial form: CT-1
Filing method: Mail
Agency fee: CT-1 = $25.00
RRF-1 = $0 to $300.00 depending on gross annual revenue
Due: Renewal is due annually 4 months and 15 days after the close of your organization’s fiscal year. If your fiscal year closes December 31, then renewal is due May 15.
Law:

Section 12586 and 12587, California Government Code
11 Cal. Code Regs. section 301-307, 311, and 312

Penalties: Failure to submit renewal on time can result in loss of tax exemption and assessment of minimum tax of $800, plus interest, and/or fines or filing penalties. The Attorney General will notify the California Franchise Tax Board to disallow your state tax exemption. Directors, trustees, officers, and return preparers are personally liable for these fees and penalties – you cannot use charitable assets to pay them, they must be paid out of pocket!
Notes: There is no annual filing requirement for Mutual Benefit organizations who have filed and been
approved as “exempt” through the Attorney General’s Office.