Every legal entity organized in California must comply with certain reporting rules. Compliance with reporting rules is important for a variety of reasons. In the nonprofit realm, compliance can be especially important, because some technical faults can threaten the organization’s tax-exempt status. Here is a quick overview of the common reporting obligations California imposes on nonprofits operating within the state.
- Reports to the Secretary of State
To remain in good standing with the state legal entities must submit required information to the Secretary of State by prescribed deadlines. A California nonprofit corporation must provide the Secretary of State with basic information about the organization, such as its address and the names of its executive officers, within 90 days of formation and every two years thereafter. The report is made on Form SI-100. Failing to report on time results in the organization falling out of good standing with the state, which can have a range of negative consequences, including an inability to file lawsuits, and potential breaches of contractual obligations.
- Reports to the California Attorney General
The California Attorney General’s office oversees the activities of nonprofits in the state to ensure that they comply with the non-tax rules that apply to them. A key object of the Attorney General’s reporting requirements is to allow the office to ensure that organizations claiming nonprofit status are not improperly operated to benefit private individuals. All nonprofits register with the Attorney General within 60 days of formation, and submit an Annual Registration Renewal Fee Report on Form RRF-1. An organization that is delinquent in its annual reporting cannot solicit donations or disburse charitable funds until it gets back into compliance—in other words, failing to comply can force the organization to halt operations altogether.
- Reports to the California Franchise Tax Board
All California nonprofits must submit information to the Franchise Tax Board (FTB) every year. An organization’s specific reporting obligations depend on a number of factors. Organizations with less than $50,000 in gross receipts in a year file a simple, free report using FTB Form 199N. Those with more than $50,000 in gross receipts in a year must submit the longer Form 199. Special tax situations will create additional reporting obligations. For example, if the organization had more than $1,000 in income from sources that were not from its primary nonprofit purpose it must report such income and potentially pay income taxes on it.
- Other forms of compliance.
The generally applicable compliance rules described above tend to only cover part of each organization’s specific obligations. Organizations with employees will need to comply with the State Board of Equalization’s reporting rules for employers. Organizations that sell products may have sales tax reporting obligations. And organizations also need to think about local compliance requirements at the county and city level. An attorney can help organizations keep track of all of these rules so that none of them get missed.
Talk to the Church Law Center of California about your nonprofit’s compliance needs
The Church Law Center of California provides legal guidance to secular and religious nonprofits. We help clients stay on top of all aspects of compliance and governance. If your organization has questions about how to best manage its state compliance obligations call us today at (949) 689-0437 or reach out to us through our contact page.