Many nonprofit organizations are recognized under section 501(c)(3) of the Internal Revenue Code (IRS) and therefore considered exempt from paying federal income taxes. Despite this reprieve, federal and most state governments levy several other “taxes” on nonprofit organizations resources in the form of financial regulation, including but not limited to the dreaded annual financial statement audit. In the past several years, regulatory bodies have pushed for increased transparency and heightened the level of scrutiny placed on financial statements. Juxtapose this environment with on in which organizational budgets have been slashed from some combination of declining governmental grants and less private donations, along with reduction in dedicated resources. This difficult macro environment for nonprofits makes it particularly challenging for organizations to pay their non-IRS levied “taxes” while achieving their core mission-driven goals.
Paper by Chenae L. White, CPA, Consultant
NEPC