Law Offices of John Michael Jensen
Non-Profit Organizations
John Jensen also provides services to the trustees of non-profit tax-exempt organization and to the organizations.
Non-profit organizations in California are primarily governed by the California Corporations Code, which outlines the legal requirements for forming, operating, and dissolving non-profit entities. Additionally, non-profits must adhere to federal laws, particularly those related to tax-exemption under the Internal Revenue Code. Here are some key aspects of the laws governing non-profit organizations in California:
- Formation and Registration:
- Non-profits are typically formed by filing Articles of Incorporation with the California Secretary of State. They must state their purpose, which should align with one of the categories eligible for tax exemption.
- They must register with the California Attorney General’s Registry of Charitable Trusts, which oversees charitable organizations and their fundraising activities.
- Tax-Exemption:
- To receive federal tax-exempt status, a non-profit must apply to the Internal Revenue Service (IRS) and qualify under one of the sections of the Internal Revenue Code, most commonly section 501(c)(3).
- In California, qualifying non-profits are also exempt from state income tax but must file an exemption application with the California Franchise Tax Board.
- Governance:
- Non-profits are required to have a board of directors. The board oversees the organization’s activities and is responsible for ensuring it operates in furtherance of its non-profit mission.
- The California Corporations Code sets forth certain governance rules, including conflict-of-interest policies and transactions involving interested directors.
- Reporting Requirements:
- Annual reports must be filed with the California Secretary of State and the Attorney General’s office.
- If tax-exempt, annual federal (Form 990) and state tax returns must be filed.
- Fundraising and Compliance:
- Charitable fundraising activities are regulated by the Attorney General and require compliance with specific registration, accounting, and reporting regulations.
- Non-profits must also adhere to laws governing charitable solicitations, including transparency about how donations are used.
- Dissolution:
- The process of dissolving a non-profit organization is also regulated. Any remaining assets after debts and liabilities are satisfied must be distributed to another tax-exempt organization.
What Non-Profit Organizations Typically Do and How They Operate:
Non-profit organizations are created to serve the public interest and operate without the primary goal of making profits for owners or shareholders. Instead, any surplus funds after expenses are reinvested into the organization’s mission rather than distributed as profits or dividends.
- Mission-Driven: Non-profits are oriented around a specific mission, which might be charitable, educational, scientific, religious, or cultural.
- Funding: They are typically funded through donations, grants, membership dues, and income from activities related to their mission. They must ensure that these funds are used in accordance with their tax-exempt purpose.
- Volunteer Board: A volunteer board of directors or trustees governs the non-profit, setting policies and strategic direction.
- Staff and Volunteers: Many non-profits have paid staff, but they also rely heavily on volunteers to carry out their activities and programs.
- Programs and Services: Non-profits deliver various programs and services, which can range from providing support to the needy, advancing educational or research initiatives, promoting the arts, or advocating for social change.
- Transparency and Accountability: Given their tax-exempt status and public mission, non-profits are expected to operate with a high degree of transparency and accountability.
It is important for non-profits in California to comply with both state and federal laws to maintain their legal status and public trust. They are also subject to audits and reviews to ensure compliance with financial and operational regulations.