Is your non-profit organization following the law?

state lawsMy husband is a sales and use tax accountant for a large multi-national corporation, and I am a small entrepreneur who runs a non-profit consulting practice. We operate in two very different worlds, but every once in a great while there is overlap. A few months ago, John sent me an email about a sales and use tax ruling in the State of Oklahoma that very much applied to non-profit organizations that run charity auctions, and it got me thinking about the ever changing complex and overlapping legal structure in our country and the status of your non-profit organization.
Here is what the new Oklahoma sales and use tax ruling said:

“The Oklahoma Tax Commission examined the sales tax treatment of sales of tickets to a silent auction held to raise funds for a foundation. The Commission found that the ticket charges were subject to sales tax under a provision that imposes sales tax on sales of tickets for admission to (or voluntary contributions made to) places of amusement, sports, entertainment, exhibition, display, or other recreational events or activities. The Commission also found that the ticket charge did not qualify as a nontaxable donation because the charge was necessary for admission and was not an entirely voluntary contribution. (LR 14-003, 01/15/2015.)”

I could write an entire blog based upon this simple ruling, but I’m going to use some self-restraint this morning. Instead, I’m going to focus on the bigger picture.
A few weeks ago I wrote a post titled “Why your organization should worry about Haiti and Charleston, SC“. In that post, I talked about the importance of embracing donor stewardship in ways that go beyond simple gift acknowledgement.
I shared the definition of stewardship from a training curriculum I formerly used: “Stewardship is a process whereby a non-profit cares for and protects its philanthropic support – its gifts and the donors who give them – in a way that responds to the donor’s expectations and respects the act of giving.”
I also shared with readers what some of the big picture topics were from that training, including:

  • legal compliance (e.g. state registration, etc)
  • pledge/gift record keeping (including donor intent)
  • transparency & communication (e.g. demonstrating how gifts are used and if impact is being achieved)
  • policy development & organizational capacity (e.g. board engagement and governance)

Understanding that stewardship includes the concept of legal compliance and circling back to the Oklahoma Tax Commission’s ruling, I’m left wondering:

  • How many Oklahoma non-profit organizations know about this new ruling?
  • How do most non-profits stay on top of the always evolving federal, state, and local laws?

I’ve been pontificating these questions for the last few months. Having been an executive director for a small, under-resourced non-profit organization, I can honestly say that I’ve come up with very few good answers.
However, I do have a few suggestions:

  1. Make sure you pay an external accountant to conduct an annual audit or financial review every year. (I know it is expensive, but it is necessary.)
  2. Make sure your board development committee understands the importance of recruiting an attorney to serve on your board (and make sure that person understands you need them to help you keep an eye on the changing legal and regulatory environment in your community)
  3. Subscribe to non-profit blogs that focus on the law (I especially like and they even have a legal updates section to their site)
  4. Consider joining (or at least keeping in touch with) your state’s non-profit association. Click here to access a list of those groups. If you can’t afford to join, then at least visit their website periodically and subscribe to their blog if one exists.

Is your organization a good steward? Does it take its stewardship related fiduciary responsibilities beyond simple gift acknowledgement? How does your non-profit organization stay on top of legal and regulatory changes? Please scroll down to the comment box and share your best practices. We don’t need to re-invent the wheel because we can all learn from each other.
Here’s to your health!
Erik Anderson
Founder & President, The Healthy Non-Profit LLC!/eanderson847

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