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990 compliance | are you compliant?

are you compliant?

990 Compliance

Last week I was in DC for an annual law conference on Representing and Managing Tax Exempt Organizations. Some topics of interest were managing social media, executive incentive compensation, fundraising and crowdfunding on the internet, private benefit issues, donor management process, income from sales and services and unrelated business income tax. Operating a charitable organization can be complex, and that is why so many organizations and foundations have legal counsel on staff or on retainer.

One subject of great interest to me had to do with “Challenging Issues with 990 Schedules”. The presenter works in a state Attorney General’s office and spoke about the importance of 990 compliance and how revealing its data is to their office. The IRS does not have the capacity to oversee all the charities so the oversight activities have fallen to the state level. Technology allows the states to cross-check registration and compliance with information from the 990s. Some states even require auditor’s reports in order to better see the activity of the charity.

The 990s have revealed embezzlement, negative net worth of some charities, illegal loans to officers, payroll taxes being used for operations, farewell payouts and at-risk charities. The 990 is the opportunity for regulators to step in when they see a problem and to make sure the charity is compliant.

Perhaps you don’t think about how important and useful 990 compliance is to your organization. It is, however, very important to the states that are paying attention to all the charities doing business in their state. It is important to savvy donors as well. I once had a major donor, who was giving away approximately $10 million a year, and he told me that he does not even consider making a gift to a charity unless it had audited financial statements and 100% giving by the board.

Who is responsible for your 990 compliance issues? Are you registered in the states in which you are raising money? Is your board aware of its fiduciary responsibility to the organization?


“As for charity, it is injurious unless it helps

the recipient become independent of it.”

John D. Rockefeller, Jr.

Written by: Paul D’Alessandro

Founder and Chairman

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