Organization
INRC Director Richard Koontz offers training sessions on nonprofit startup filings. For the next available session, watch the INRC home page.
II. A. Principle–Statutory Guidelines
Iowa charitable nonprofit organizations, whether nonprofit corporations, trusts or unincorporated associations, must ensure that they comply with statutory guidelines and common law in creation of their legal form.
Practices
- A charitable nonprofit organization can be organized in Iowa as a corporation, a trust, a limited liability company or an unincorporated association. While partnerships and sole proprietorships are legal entities in Iowa, the Internal Revenue Service will not give 501(c)(3) status to such entities.
a. Nonprofit corporation status under Iowa Code chapter 504 is often a preferable form for charitable nonprofits, due to the limitation on liability of all those working for the charitable nonprofit corporation. Contrast this to unincorporated associations, in which there is a higher degree of exposure for all association members.
Starting an Iowa Charitable Nonprofit Corporation, by Richard Koontz (2008).
Frequently Asked Questions about Organization
Under Iowa law, your exemption from state-level income tax is automatic once federal exemption has been obtained. However, there are Iowa taxes beyond income tax which you need to consider as your organization engages in different kinds of transactions. These include sales, use, and property taxes. The Iowa Principles and Practices for Charitable Nonprofit Excellence states, "The charitable nonprofit entity should make application for other state and local tax exempt status, such as property and sales tax (see Iowa Code 427.1(8), Iowa Code 422.45)." (II,D, 4) Take property tax for example. An additional filing is required in order for nonprofits to be exempt. The circumstances under which the nonprofit can gain exemption from property tax are limited. A nonprofit that owns the property from which it runs its business can apply for exemption from property tax. A nonprofit renting real estate is not entitled to any exemption on behalf of the landlord. Nonprofits which generate revenue from the real estate have more difficulty getting property tax exemption and should consider partial property tax exemption if the revenue generating portion of the real estate (such as a museum’s gift shop) can be distinguished from the rest of the facility. The application for property tax exemption is available online. A valuable resource for Iowa nonprofits is Iowa Tax Issues for Nonprofit Entities on the Iowa Department of Revenue's Web site.
Yes. Private foundations are subject to excise taxes in the Internal Revenue Code (IRC) 4940 to 4946 whereas public charities are not. These taxes are the net investment income taxes under IRC section 4940; the self-dealing acts rules under section IRC 4941; failure to distribute income rules under IRC section 4942; the business enterprise rules under IRC section 4943; jeopardizing investments in IRC section 4944; and taxable expenditures under IRC section 4945. Private foundations file Form 990-PF annually. There are numerous questions related to these excise tax provisions on that form. In certain circumstances if the excise taxes are involved an additional filing of IRS Form 4720 must be made. Section 7.27 of the IRS Tax Exemption Manual has a significant amount of information on these various excise taxes. An index of this information is available in Part 7. Rulings and Agreements.
Yes there are stricter limitations on gifts to private foundations. Gifts to public charities by individuals have an annual limit of fifty percent of the donor's adjusted gross income. Gifts to private foundations however place that limit at thirty percent of the donor's adjusted gross income. The figures are somewhat different for corporate donors who can deduct ten percent of their taxable income. If the contribution is capital gain property rather than cash, the limitation is then thirty percent for public charities and twenty percent for foundations. The Iowa Principles and Practices for Charitable Nonprofit Excellence states that "Charitable nonprofits must be aware of and comply with Internal Revenue Code provisions (see e.g. I.R.C. section 170)" (VIII E 2). This is to make sure inaccurate information about gifts is not passed on to donors. A good source for these rules is IRS Publication 526 Charitable Contributions
No. Under Iowa law, a nonprofit corporation is only required to have one or more board members (Iowa Code 504.803), but the IRS, on the Form 1023 Application for Exemptions, wants to see at least three board members. The Iowa Principles and Practices for Charitable Nonprofit Excellence recommends at least five board members (V.B.3).
Yes. According to the Iowa Principles and Practices for Charitable Nonprofit Excellence an Iowa nonprofit corporation that expands its activities into other states should submit the required foreign corporation filings in those states. (II. D. 5.) Usually the foreign corporation filing requirements are spelled out on the Secretary of State Web site for the state in which the nonprofit has begun to operate. The required forms are available on those sites. Forms and more information for the states bordering Iowa are available at these Web sites:
Illinois - Application for Authority to Conduct Affairs in Illinois (Form NFP113.15); $50 filing fee.
Minnesota - Select pdf for Certificate of Authority to Transact Business in MN; $50 filing fee.
Missouri - Go to Nonprofit Foreign Corporations and choose Foreign Nonprofit Corporation Application for Certificate of Authority to do Business in Missouri (Corp. 55A); $25 filing fee.
Nebraska - Corporations Nonprofit (Foreign) and choose Application for Certificate of Authority; $25 filing fee.
South Dakota - At the Secretary of State Web site choose Nonprofit Corporations Informational Pamphlet; $25 filing fee.
Wisconsin - go to Corporation Section Filing Forms and choose Foreign Nonstock Corporation Certificate of Authority Application (Form 121); $45 filing fee.
Yes, it's called Tech Soup. The site is designed to assist nonprofits with their technology needs.
