Volume
3 
| The Age of Accountability | How Does an Association President Know a Potential Good Volunteer? | |
| Reporting to the IRS | Categories of 501(c) Tax-Exempt Organizations | Additional Volumes |
The
climate of the nonprofit world in which associations operate has changed
from one of credibility and confidence to one of growing public scrutiny
and increasing demands for accountability. For many years, most
association board members have been ignored, invisible, or marginalized
by their proclivity to function like part-time administrators.
This is changing as a result of at least three forces that are
propelling association board members more prominently into the public
eye.
A
growing number of leaders are recognizing that if their organizations
are to be fully accountable to their members and communities, capable of
managing change, and faithful to their missions, their boards must be
made up of knowledgeable and effective board members who understand
their roles as stewards.
A
second force raising the bar for board standards is the dramatic growth
in the last decade of associations and other nonprofit organizations to
a point where they now exert a significant force on the nation’s
economy. As more
associations have become major employers and property owners, many
public officials have begun calling for a reexamination of tax-exempt
privileges. This places
pressure on association board members to be better advocates for their
organizations by being able to articulate what their communities receive
in return for these uncollected taxes.
Rapid
advances in technology, changes in the way we communicate, and growing
competition for dues paying members and volunteers contribute to a third
force: the extraordinary pace of change, which has resulted in a rising
tide of expectations on association board members to act not only as
stewards and advocates, but also as strategic thinkers.
Increasingly, an association’s ultimate survival will depend on
its capacity to anticipate the need for and to lead productive change.
Associations that are successful in mastering change while
sustaining accountability seldom do this without the support and
participation of their boards.
The growing concerns about accountability and the public’s closer look at the way associations and other nonprofit organizations do business have profound implications for governing boards. Increasingly, those with an interest in the health, vibrancy and accountability of associations believe that a strong and committed board of directors is one of the hallmarks of a successful association. At their best, boards focus the mission of their associations, provide oversight, ensure accountability, and work in partnership with staff to build support for the mission.
Look for members who have:
 |
a
commitment to the idea or project that you want to accomplish; |
|
time
to participate responsibly in the effort; |
|
effective
communication and interpersonal skills; |
|
“people”
contacts and a talent for networking; |
|
resources
or clerical support of their own upon whom they can rely when
necessary; |
|
a record of volunteer and professional accomplishments. |
| Reporting
to the Internal Revenue Service
The key-reporting document for nonprofit organizations is IRS Form
990. This is not a
tax return. It is an
information return in which the nonprofit organization informs the
IRS of all sources of income, expenses, what the association owns,
and what it owes. In
addition, a multitude of questions are asked intending to find out
whether the organization has acted appropriately under the laws
and regulations that govern nonprofit organizations. Unlike
the Corporate Form 1120, Form 990 is available to the public and
the press, so it is important to use the 990 to communicate the
good work of the association.
In keeping with the intermediate sanctions law,
associations must make the forms available in a timely manner and
charge only nominal fees to cover reproduction and mailing. If a tax is owed by a nonprofit organization, the tax return used to report this information is the IRS Form 990-T. This document, which is not available to the public, is subject to IRS scrutiny. The association’s executive management and board should carefully review both the 990 and 990-T. |
You
will likely hear references to your association’s tax-exempt status.
The IRS Code created the 501(c) designations, which include:
|
501(c)(3)
– religious, charitable, scientific, public safety, and
educational organizations; |
|
501(c)(4)
– civic leagues or organizations established for the promotion of
public welfare; |
|
501(c)(5)
– labor, agricultural, or horticultural organizations; and |
|
501(c)(6)
– business leagues, chamber of commerce, and boards of trade that
are not organized for profit. |
A nonprofit association is required to maintain its nonprofit status by continuing to fulfill its nonprofit mission. If the association provides services and benefits that the IRS does not consider to be related to the association’s nonprofit mission, the association will be required to pay unrelated business income tax, commonly known as UBIT. In extreme cases, an association’s nonprofit status may be jeopardized.