Can Governance Affect Tax-Exempt Compliance?

Lois Lerner, director of the IRS’ exempt organizations division, says YES. Specifically, an IRS  study (albeit a small one) found that if your nonprofit follows these 4 governance practices, it is more likely to also comply with IRS tax rules:

1.    Have a written mission statement.
2.    Compare your nonprofit to other nonprofits when making decisions about compensation.
3.    Have internal procedures to ensure your nonprofit’s funds are used in accordance with its charitable mission.
4.    Require the entire Board of Directors to review the 990 every year.

Lerner also noted that nonprofit organizations with broader board and staff involvement are more likely to meet IRS tax-exempt standards.

With our extensive experience, we could have told the IRS the same thing.