8 Steps to Keep Your Nonprofit Compliant
To maintain a 501(c)(3) nonprofit corporation in California you must:
1. Apply for exemption from state taxes
A. State Income Tax Exemption
Once your organization receives your 501(c) determination letter from the IRS, you can then file for state income/franchise tax exemptions by using Form 3500A.
B. Transaction Privilege Tax
The majority of California nonprofits will be required to pay sales tax. To learn more about sales tax and exemptions, review this document published by the California Department of Tax and Fee Administration (CDTFA). If your organization does qualify for an exemption, you may find the appropriate form on the CDTFA’s website.
2. Annual Federal Returns for Tax-exempt organizations
A. Annual Federal Returns
Most tax-exempt nonprofit organizations are required to file an annual return with the IRS (Check the IRS website for a list of exceptions).
The annual gross receipt amounts for an organization determine which form should be used to file the annual federal return.
‘Gross receipt’ is defined by the IRS as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses”
For any questions, contact the IRS at
- (800) 829-3676 (Form related questions)
- (800) 829-1040 (general information)
Q: When is form 990 due?
A: Form 990 is due on the 15th day of the 5th month after the taxable year of the organization comes to an end.
E.g. If the taxable year ends on Dec 31st, form 990 is due on May 15th.
NOTE: If an organization fails to file form 990 for 3 consecutive years, it will automatically lose tax-exempt status.
B. Unrelated Business Income
If an organization has a gross income of ≥$1000 from a trade or business that is not related to the stated purpose of the organization, then it must file Form 990-T to pay tax on that income.
If your organization expects to pay $500 or more for the year in taxes on unrelated business income, your organization must pay a quarterly estimated tax on the unrelated business income using Form 990-W.
3. Maintain a Registered Agent
Any nonprofit that has incorporated must have a registered agent who has an office address in California. If your registered agent, or their office address, changes, you must file a Statement of Information (SI-100) form with the Secretary of State so that your Articles of Incorporation may be updated.
If you fail to notify the Secretary of State of this change, your corporation may be subject to termination.
4. File Periodic Reports
The California Secretary of State requires all nonprofits to submit a Statement of Interest form (SI-100) within 90 days of incorporating. After the initial Statement of Interest form, nonprofits are required to submit another form every two years and if they need to inform the Secretary of State of any changes to their organization.
Failure to file the appropriate reports may subject your organization to termination.
5. Apply for Permits and Licenses
Depending on the nature of your organization, you may be required to obtain a permit or license in order to legally operate in the state of California. The Governor’s Office of Business and Economic Development’s website can help you determine if you need to apply for any permits or licenses for your organization.
6. Charitable Registration
There are three things you need to keep in mind if your organization will be receiving donations:
- Nonprofits who will receive charitable donations, must register with the Attorney General’s Registry of Charitable Trusts within 30 days of receiving their first donation. The registration fee is $25 and can be completed by using Form CT-1. You will need to renew this registration yearly.
- If you plan to engage in specific types of fundraising activities (telemarketing, raffles, bingo, etc.) you must follow the guidelines set forth by the Attorney General. You are also required to register a raffle in advance if you are eligible to host one.
- Volunteer solicitors are not required to register with the Attorney General, but professional solicitors are.
7. Register with California Employment Development Department
If your nonprofit will have employees of any kind, you will need to register with the California Employment Development Department.
8. Comply with Public Inspection Rules
To comply with federal regulations regarding 501(c)(3) charities, you will need to release the following documents to any member of the public that requests them:
- Your organization’s annual returns for up to 3 years after the listed due date (including the following Forms: 990-PF, 990-EZ, 990-T, and 990)
- Any supporting documents and attachments for the above 990 forms. However, you only need to include the nature of the contribution and the amount contributed for Schedule B.
- Official IRS paperwork showing your organization is considered to be tax-exempt.
- Your organization’s application for exemption and all supporting documents submitted with your application (including Form 1023).
Your organization does NOT need to share the following documents and information with members of the public:
- Any portion of Form 990/990-EZ’s Schedule B that identify who contributors are.
- Anything considered to be an unfavorable ruling, which can include previous denials of tax-exempt status.
- Any additional information permitted to be withheld by the IRS, including things such as trade secrets, patents, etc.
Recommended: Inform your employees about their rights and stay compliant by posting labor law posters in your workplace.
Q: Can I charge members of the public for copies?
A: Yes, you are permitted to request a reasonable amount to procure copies of requested documents.
Q: If requested, how much time do we have to produce the documents?
A: It is ideal to produce these documents within the same working day. However, if your nonprofit has limited office hours due to the time of year, or you don’t have a physical office at all, you should produce the documents within 14 days.
Q: Do I actually need to provide physical copies of the requested documents?
A: If a member of the public as for copies of documents, whether in writing or in person, you are required to make them available.
NOTE: We recommend that nonprofits make these documents available on their website. That way, anyone who might request copies of these documents can simply head to your website to view and/or download them. This will help your organization remain compliant and save time dealing with these requests personally.