The Uncertainty in Nonprofit Regulations

Adrianne Geiger Dumond



The nonprofit news media is quite frantic since the election. I have read everything from the point that advocacy is now critical for agencies and boards to the notion that ‘rage donations’ might be a good motivator. Actually there has been uncertainty for nonprofit regulations before the election.

Because of IRS scandal and the responsibility for the Affordable Care Act, the IRS introduced the Form 1023-EZ.This Form significantly reduced the level of IRS review for new organizations. The drop in oversight by the IRS of tax-exempt status has caused the states to assume more control over regulations.

In 2004, California enacted its own Nonprofit Integrity Act, which added considerably more control. Significant requirements included a shortened period for registering with the attorney general (30 days after the initial receipt of property), mandatory audited financial statements, and mandatory board or board committee review of senior officer compensation.[1]

Mayer, the noted author below, has made astute observations about these changes. He states:

  • The IRS is not the only sheriff in town. Especially for charities, state regulators have the authority and the willingness to pursue wrongdoing.
  • For compliant nonprofits, increased innovation and cooperation is mostly good news.
  • For noncompliant nonprofits, there is less room to fly below the radar. This highlights the growing sophistication and cooperation of the state nonprofit regulators to work together to catch malfeance.

While naysayers have faulted the incoming administration, there might be a bright light coming. With more jobs, a stronger middle class and a better economy, maybe fundraising becomes easier. But uncertainty remains. 

Addendum: BoardSource, Smart Briefs, January 13, 2017 announced that Pay Pal processed almost $1 Billion in donations over the 2016 holiday season. The Chronicle of Philanthropy stated that 12 wealthy donors surpassed $100 Million each in 2016, and 6 more gave $100 Million exactly.

[1] The Rising of the States in Nonprofit Oversight. Lloyd Hitoshi Mayer, August 11, 2016, Nonprofit Quarterly

Author:  Adrianne Geiger DuMond, Executive Coaches of Orange County,