Insights
Best Practices of Highly-Effective Nonprofit Organizations
Fall 2025
Vol. 5 // Issue 2
TAX
Guard It With Your Life
C O N T E N TS GOVERNANCE
You can easily lose your exempt status.
4 / Understanding and Managing Conflicts of Interest in Nonprofit Organizations
By Kathleen M. Clayton, CPA, PSA, MBA PRINCIPAL | HOLMDEL, NJ
AUDIT & ASSURANCE
7 / How Nonprofits Must Handle Crypto Under FASB ASU 2023-08 8 / HBK Nonprofit Solutions Contacts OUTSIDE THE LINES
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onprofits are organized and operate under two scenarios. One, the organization is a “nonprofit” or a “nonprofit corporation” as defined by the state statute under which it is organized. A second, the organization qualifies as “tax-exempt” under the Internal Revenue Code. An organization of either designation can lose its tax-exempt status for a variety of reasons.
profit company. As well, you must stop telling the public you are tax-exempt and stop soliciting and collecting donations deemed to be charitable by donors. Grants from private foundations and government sources can be in jeopardy. As such, protecting your status, especially if you are a 501(c)(3), should be an ongoing, primary concern for your organization.
What to “do” to maintain your status
First, stay current with your annual reporting requirements. Most tax-exempt entities must file some Once you have set up your organization, your state might level of Form 990 each year, regardless of your gross require you to file some type of annual report. Most states revenue, assets, or activity. Even inactive organizations do. As a first step to preparing are required to file annually. your report, check with your A few organizations, mainly If your status is revoked, you may have Secretary of State’s office to churches and religious groups, to pay federal income tax like a for-profit determine if your nonprofit may not have to file, but status is current. Typically, there company ... Protecting your tax-exempt status may opt to do so in order to are steps you can take to correct demonstrate transparency to should be an ongoing, primary concern for the public. your status if you are not current; your organization. those steps vary by state. Your organization’s board and The way you achieved your tax-exempt status was by applying to the IRS after you had registered your nonprofit with your state. You filed Forms 1023/1023EZ or 1024/1024EZ with the IRS. Assuming you met the agency’s requirements, you were determined to be tax-exempt under a provision of the Internal Revenue Code 501. With that determination came specific “do’s” and “don’ts” for the organization. Failure to do or don’t accordingly can result in the IRS revoking your exempt status. If your status is revoked you may have to pay federal income tax like a for-
management should pay close attention to a formal “compliance” calendar that tracks all federal and state reporting requirements and due dates. Failure to file the required Form 990 for three consecutive years will result in your tax-exempt status being automatically revoked. As well, the IRS makes information regarding tax status publicly available through the Tax Exempt Organization Search (formerly EO Select Check) on the IRS website. Donors and prospective donors use the online tool to research your organization’s status and filings.
9 / Future-Proofing Fundraising in an Era of Change C LIENT SPOTLIGHT
12 / Bayonne Economic Opportunity Foundation: Improving the Quality of Life for Low-Income Residents
ABOUT HBK NONPROFIT SOLUTIONS HBK Nonprofit Solutions is a dedicated team of subject matter specialists within HBK CPAs & Consultants, an Accounting Today Top 50 CPA firm. With more than 800 clients in the nonprofit sector, and more than 75 years providing financial compliance and consulting to nonprofits, we offer the hands-on experience and technical skills to help nonprofit organizations fulfill their missions.