Tax-exempt nonprofit organizations need to keep correct and complete records of important accounts. Specific items vary by state corporate law and according to the specific tax-exempt section assigned to the organization. Generally, however, most 501(c)(3) nonprofit organizations should maintain:
- Federal, State & Local Tax Documents. All rulings, letters, and other documents relating to the organization’s federal, state, and local tax status. These include:
- State sales tax exemption letter
- Form 1023 or Form 1024 application to the IRS (application for tax-exempt status)
- IRS determination letter that shows tax-exempt classification (501(c) letter)
- Federal, state, and/or local tax returns for three most recent years. Learn more about filing taxes for nonprofits here.
- State Formation Documents. A file-endorsed copy of all documents filed with the Secretary of State relating to the organization, including, but not limited to, the Certificate of Formation (often called the Articles of Incorporation) and any articles of amendment, restated articles, articles of merger, articles of consolidation, and statement of change of registered office or registered agent.
- Governing Documents. A copy of the Bylaws, and any amended versions or amendments of the Bylaws.
- Directors. A list of the names and addresses of the Directors, officers, and any committee members of the organization.
- Employer Identification Number (EIN) letter from the IRS
- Insurance certificate
- Minutes of meetings of Directors and any committees having the authority of the Board of Directors
- Complete books and records of accounts. This may include a profit/loss statement and a financial statement showing the assets, liabilities, and net worth of the organization at the end of the three most recent fiscal years.
It is essential to have your books in order. Most state laws require it. In Texas, for example, the Texas Business Organization Code §22.353 requires certain nonprofits to make certain records, books, and annual financial reports available to the general public for inspection.
Public inspection of certain documents
Certain tax-exempt organizations may need to maintain additional documents and may need make certain records available to the public. These documents may include:
- Financial Records – A financial statement showing the income and expenditures of the organization for the three most recent fiscal years.
- Annual Report. Boards may need to prepare and approve a report of financial activity (often called an “annual report”) for the nonprofit for the preceding year that shows a statement of support, revenue and expenses, changes in fund balances, statement of functional expenses, and balance sheets for all funds.
- Informational Tax Returns. The organization’s federal, state, and local information or income tax returns (IRS Form 990) for each of the organization’s three most recent tax years. Learn more about filing taxes for exempt organizations here.
Please note that most organizations do not have to disclose the name of contributors and the organization may charge for the reasonable expense of preparing a copy of the records or reports.
Nonprofits with employees must keep records in accordance with employment laws.
- Keep all payroll information, including time cards, sick and other leave, overtime, and payment history for at least four years.
- Keep records of work-related injuries and illnesses for at least five years.
You should check with your state’s specific employment law provisions to determine what needs to be kept on file and for how long.