8 Steps to Keep Your Nonprofit Compliant
To maintain a 501(c)(3) nonprofit corporation in North Carolina you must:
- Apply for exemption from state taxes
- File Annual Federal Returns for Tax-exempt organizations
- Maintain a Registered Agent
- Pay the North Carolina Franchise Tax
- Apply for permits and licenses
- Register/Renew Charitable Registration
- Register with the Department of Revenue
- Comply with Public Inspection Rules
1. Apply for exemption from state taxes
A. State income tax exemption
Once your nonprofit becomes incorporated, the North Carolina Secretary of State will notify the Department of Revenue who will, in turn, send a questionnaire to you. To obtain state income tax exemptions, your organization should fill out this questionnaire and submit it, along with a copy of your Articles of Incorporation and Bylaws.
B. State sales tax exemption
In North Carolina, nonprofits must pay their sales and use taxes up front and later apply for a refund. You can apply for a refund twice each year - June 30th and December 31st. To apply for a sales and use tax refund, you’ll need to submit form E-585, along with a cover letter that includes your nonprofit’s name, EIN, and a description of your activities/purpose. These documents can be mailed to the North Carolina Department of Revenue:
PO Box 25000
Raleigh, NC 27640-0640
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 North Carolina. If your registered agent, or their office address, changes, you must file Form BE-06 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. Pay the North Carolina Franchise Tax
Every nonprofit that operates in North Carolina will be required to pay a state Franchise Tax, unless the North Carolina Department of Revenue has granted them an exemption. You can apply for a franchise tax exemption at the same time you apply for your state income tax exemption.
5. Apply for Permits and Licenses
The majority of North Carolina nonprofits will not need a general business license of any kind. You may, however, need a special permit if you plan to perform certain activities like selling beer, etc. In addition, your nonprofit will be required to obtain a license if you plan to host charitable bingo and can only host a raffle if you follow strict guidelines.
You will need to have a North Carolina Bingo License if your nonprofit wishes to host bingo games.
Your nonprofit will need to follow the General Assembly of North Carolina’s guidelines if you wish to hold a raffle.
6. Register/Renew Charitable Registration
Nonprofits operating in North Carolina must follow strict guidelines if they wish to solicit charitable contributions. The overwhelming majority of charitable nonprofits will be required to register with the Secretary of State. Access this guidance from the NC Department of the Secretary of State’s Charitable Solicitation Licensing department for more information.
If your organization is required to register or renew, or you are applying for an exemption, you may do so on the Secretary of State’s website.
7. Register with North Carolina Department of Revenue
If your nonprofit will have employees, you will need to register with the North Carolina Department of Revenue.
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 identifies 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 asks 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.