Nonprofit Tax-Exempt Status Protection Annual Review
Loss of tax-exempt status is catastrophic for a nonprofit, eliminating deductible donor contributions and triggering income tax liability. This annual review proactively identifies activities that could jeopardize exempt status before they become IRS issues.
- Industry: Nonprofit
- Frequency: Annually
- Estimated Time: 3-4 hours
- Role: Executive Director / Legal Counsel / Board Chair
- Total Items: 26
Mission Alignment and Charitable Purpose
Verify all activities serve charitable purpose.
- All organizational activities substantially in furtherance of exempt purpose?
- Any new programs or activities reviewed for charitable purpose alignment before launch?
- Earned revenue activities reviewed for UBIT applicability?
- Form 990 accurately describes all current programs and activities?
Private Benefit and Private Inurement
Verify no private benefit or inurement.
- No organizational net earnings inuring to benefit of any private individual?
- All executive compensation reviewed and documented as reasonable per IRC Section 4958?
- All transactions with board members or related parties at fair market value?
- Rebuttable presumption of reasonableness process followed for ED/officer compensation?
- Form 990 Schedule J compensation reporting complete and accurate?
Political Activity Prohibition
Verify compliance with political activity prohibition.
- Absolutely no endorsement of or opposition to political candidates?
- Any voter registration or education activities strictly nonpartisan?
- Staff not engaging in political activity using organizational time or resources?
- Organizational social media accounts reviewed for inadvertent political content?
Lobbying Limitations
Monitor lobbying activities.
- Lobbying activities tracked and within allowable limits?
- 501(h) election made if organization engages in lobbying?
- Form 990 Schedule C political and lobbying activities accurately reported?
- Distinction between grassroots and direct lobbying understood and tracked?
Unrelated Business Income
Monitor unrelated business income.
- Unrelated Business Income (UBI) identified and Form 990-T filed if over $1,000?
- Unrelated business activities not threatening to become dominant purpose?
- UBIT exceptions (volunteer labor, donated goods, qualified sponsorship) applied appropriately?
- UBIT generating activities reviewed by CPA or tax counsel annually?
Form 990 Accuracy
Verify Form 990 accuracy.
- Form 990 filing current (not in revocation risk)?
- Form 990 reviewed by board before filing?
- Form 990 narrative descriptions accurate and complete?
- Form 990 made publicly available on website or GuideStar?
- All required state charitable registrations and returns filed?
Related Nonprofit Checklists
- Nonprofit Board Committee Effectiveness Review
- Nonprofit Human Resources Compliance Annual Review
- Nonprofit Insurance Coverage Annual Review
- Nonprofit External Communications and Media Policy Compliance
- Nonprofit Youth Program Safety and Child Protection Audit
- Nonprofit Youth Program Field Trip Safety and Compliance
- Nonprofit After-School Program Daily Operations
- Nonprofit Youth Summer Camp Daily Safety Operations
Related Governance Compliance Checklists
- Nonprofit Board Meeting Preparation Checklist - FREE Download
- Nonprofit Bylaws Annual Review and Compliance Audit - FREE Download
- IRS Form 990 Annual Filing Preparation Checklist - FREE Download
- State Charitable Registration and Renewal Compliance Checklist - FREE Download
- Nonprofit Executive Director Annual Performance Review - FREE Download
- Nonprofit Annual Conflict of Interest Disclosure Process - FREE Download
- New Nonprofit Board Member Orientation Checklist - FREE Download
- Nonprofit Board Governance Self-Assessment - FREE Download
- Nonprofit Whistleblower Policy Compliance and Implementation Review - FREE Download
- Nonprofit Annual Reporting and Compliance Calendar Audit - FREE Download
Why Use This Nonprofit Tax-Exempt Status Protection Annual Review?
This nonprofit tax-exempt status protection annual review helps nonprofit teams maintain compliance and operational excellence. Designed for executive director / legal counsel / board chair professionals, this checklist covers 26 critical inspection points across 6 sections. Recommended frequency: annually.
Frequently Asked Questions
What does the Nonprofit Tax-Exempt Status Protection Annual Review cover?
This checklist covers 26 inspection items across 6 sections: Mission Alignment and Charitable Purpose, Private Benefit and Private Inurement, Political Activity Prohibition, Lobbying Limitations, Unrelated Business Income, Form 990 Accuracy. It is designed for nonprofit operations and compliance.
How often should this checklist be completed?
This checklist should be completed annually. Each completion takes approximately 3-4 hours.
Who should use this Nonprofit Tax-Exempt Status Protection Annual Review?
This checklist is designed for Executive Director / Legal Counsel / Board Chair professionals in the nonprofit industry. It can be used for self-assessments, team audits, and regulatory compliance documentation.
Can I download this checklist as a PDF?
Yes, this checklist is available as a free PDF download. You can also use it digitally in the POPProbe mobile app for real-time data capture, photo documentation, and automatic reporting.