Non-Profit Corporate Governance

The IRS Position:

Remarks of Sarah Hall Ingram Commissioner, Tax Exempt and Government Entities Internal Revenue Service Before the Georgetown University Law Center Continuing Legal Education June 23, 2009
Nonprofit Governance – The View from the IRS

A foundational principle is that the organization should clearly understand and publicly express its mission. This helps assure that the organization provides a public benefit and does not drift away from a charitable purpose. It helps an organization avoid practices that are inconsistent with tax-exempt status.

Equally important is the principle that the organization’s board should be
engaged, informed and independent. The board should have real responsibility and authority. It must, for example, be able to implement, in the life of the organization, the rules against inurement and self-dealing.

Another set of key good governance principles are those relating to the proper use and safeguarding of assets. These principles are supported by policies and practices that address executive compensation, that protect against conflicts of interest, and that support independent financial reviews.

Transparency is another key principle. I believe that board decisions should be reflected in minutes, that records supporting decisions should be retained for reasonable periods, that whistle blowers should be protected, and that each year’s Form 990 should be complete, accurate and prepared in good faith.

My vision of governance is not of a vast scheme of rules, but of a more compact set of guiding principles.

Steps  Non-Profits Should Take

• Check Your Corporate ByLaws - your attorney should make sure the ByLaws comply with current State and IRS Regulation.
• Officer's Report - Corporate Officers should prepare a report to the Board summarizing the actions of the past year.
• Treasurer's Report - The Treasurer should prepare an annual financial statement.
• Board Of Trustees Meeting - The Board should have an official meeting at least once per year.
• Board Agenda - your attorney should draft a detailed Agenda and corresponding Resolutions for the Board to Adopt.
• Mission Statement - Adopt a Mission Statement outlining the purposes aligned with  the non-profit status.
• File 990 and State Tax Returns - Have your returns prepared by your accountant and attorney.

Ronald J. Cappuccio, J.D., LL.M.(Tax)
Counsellor at Law
1800 Chapel Avenue West
Suite 128
Cherry Hill, NJ 08002
856-665-2121