Nonprofit organizations and their boards need to carefully follow the IRS rules that apply to 501(c)(3) entities. This includes maintaining their tax-exempt status and ensuring they can receive tax-deductible donations. With constant changes in tax laws and the usual business risks that affect both nonprofit and for-profit organizations, staying vigilant is essential.

Here are three vital tips to help your organization stay in good standing:

1. Avoid Private Inurement Like the Plague: The IRS is very stringent about the concept of “private inurement” in nonprofits. Crossing this line could jeopardize your organization’s tax-exempt status. Charities are meant to serve the public interest, not private individuals. It’s a critical balance to maintain, and thankfully, there are resources that explain private inurement in an accessible yet informative way. Understanding and adhering to these rules is fundamental for the health of your organization.
2. Elevate Donor Retention with Strategic Planning: If you’ve noticed a decline in donor numbers, you’re not alone. Recent data shows a significant decrease in both overall donors and major donors in the U.S. This trend underscores the importance of focusing on donor retention. Enhance your communication to emphasize long-term goals and the impact of planned giving. By doing so, you’re not just asking for funds; you’re inviting donors to become long-term partners in your mission, contributing to a sustained positive impact in the community.
3. Strengthen Your Volunteer Protocols: With a robust participation of seniors in volunteering, it’s imperative to ensure that your volunteer management practices are up to par. This includes refining risk management protocols and providing clear guidelines for volunteers. Effective volunteer management not only enhances your organization’s capacity to achieve its mission but also minimizes potential risks.