Washington Nonprofit Handbook 2018 Edition

WASHINGTON NONPROFIT HANDBOOK:

How to Form and Maintain a Nonprofit Corporation in Washington State July 2018 Edition

Published by Wayfind In Partnership with

Washington Nonprofits and

Washington State Office of the Secretary of State

Acknowledgements

We wish to express our gratitude to the Advisory Committee, authors and editors of the July 2018 Edition of the Washington Nonprofit Handbook. This book was a collaborative project that could not have been accomplished without the good work of all its contributors.

Advisory Committee

Judith Andrews Nancy Bacon Putnam Barber Joanna Plichta Boisen Lorri Dunsmore Jodi Nishioka

Willa Osborn Laura Pierce Tony Ramsey Cory Sbarbaro Brenda Tausch Lapora

Authors

Judith Andrews Nancy Bacon Putnam Barber Joanna Plichta Boisen Jeff Brennan Howard Donkin Lorri Dunsmore Scott Galloway Bruce Goto Mark Hugh Sarah Kuipers

Jaimie Lanier David Lawson

Danny Lisa Lindsay McAleer Anthony (Tony) McCormick

Jodi Nishioka Willa Osborn Cory Sbarbaro Lisa Schaures Nancy Williams LaVerne Woods

Author and editor biographies can be found in Appendix A.

We would like to thank Document Processing at Foster Pepper PLLC for their extensive editorial and word processing support.

We would also like to thank Lisa Durant for her graphic design skills in designing the Washington Nonprofit Handbook cover and Lane Powell PC for donating Lisa's time.

Finally, thank you to Washington Nonprofits and the Washington Office of the Secretary of State for their editorial and financial support.

Judith Andrews Joanna Plichta Boisen

Jodi Nishioka Lead Editors Washington Nonprofit Handbook, July 2018 Edition

Publisher's Note

Wayfind would like to give special thanks to lead editors, Judy Andrews and Joanna Plichta Boisen, for partnering with Wayfind on the revision of the Washington Nonprofit Handbook (July 2018 edition). Content, integrity and writing quality were ensured because of Judy and Joanna's knowledge and dedication to this project. We would also like to thank Willa Osborn, Pro Bono Fellow at Foster Pepper for her time and editing skills to make sure that all of the chapter references and links were accurate.

Wayfind would also like to acknowledge Washington Nonprofits for their on-going partnership with Wayfind to develop high quality learning tools, including the Washington Nonprofit Handbook. The Introduction to the Handbook, was based on the Starting a Nonprofit toolkit, authored by Nancy Bacon, Director of Learning and Engagement at Washington Nonprofits. Along with Nancy, Laura Pierce, Executive Director, provided critical input to the Washington Nonprofit Handbook. We are grateful for their ongoing support and commitment to the nonprofit sector.

Finally, Wayfind would like to thank the Washington Office of the Secretary of State, Corporations and Charities Division, for its support in developing educational tools like the Handbook and for its commitment to creating a thriving environment for nonprofit organizations in our state. Resources like this one make a meaningful difference in the nonprofit sector and beyond.

Jodi Nishioka Executive Director

Wayfind

Cautionary Note

This handbook contains information about the laws impacting nonprofit organizations in Washington. Legal information is not the same as legal advice (which involves applying laws to particular individuals and organizations and their unique circumstances). It is always a good idea to consult with an attorney to obtain advice as to how the law should be interpreted in light of the particularities of you, your organization and your situation. You should be aware that the laws impacting nonprofit organizations change over time. The information contained in

this handbook may become out of date.

This handbook is only partially revised. All chapters involving the Washington Nonprofit Corporation Act (RCW 24.03) have not been materially revised because the statute has not changed since the 2009 edition. We do expect the Washington Nonprofit Corporation Act to be revised by the Washington State Legislature in the near future and we will revise those chapters at that time. All other chapters have

been revised.

Copyright ? 2018 Wayfind. All rights reserved.

This handbook is available for personal use by downloading and printing from the websites of Wayfind (), Washington Nonprofits

() and Washington State Office of the Secretary of State (.

TABLE OF CONTENTS

Page

PART 1. THERE ARE MANY WAYS TO DO GOOD IN THE WORLD................................... 2

CHAPTER 1. What is a Nonprofit? ................................................................... 2

CHAPTER 2. Are You Sure You Want to Do This?........................................... 3

CHAPTER 3. Alternatives to Incorporating ..................................................... 4

CHAPTER 4. Importance of Formality ............................................................. 5

CHAPTER 5. Early Decisions............................................................................. 6

PART 2. HOW TO FORM A NONPROFIT ............................................................................ 9

CHAPTER 6. Common Nonprofit Organizational Structures........................ 9

CHAPTER 7.

The Washington Nonprofit Corporation Act (RCW 24.03) .......................................................................................... 11

CHAPTER 8. Pre-Incorporation Issues .......................................................... 12

CHAPTER 9. Nuts and Bolts of Incorporating ..............................................14

CHAPTER 10. The Organizational Meeting and Post-Incorporation Tasks ........................................................................................... 27

PART 3. GOVERNANCE AND OPERATIONS.....................................................................32

CHAPTER 11. Importance of Acting Like a Corporation................................32

CHAPTER 12. Function and Authority of the Board of Directors ................. 34

CHAPTER 13. Duties and Obligations of Board Members to the Corporation ............................................................................... 40

CHAPTER 14. The Role of the Executive Director .......................................... 45

CHAPTER 15. Board Development..................................................................48

CHAPTER 16. Annual Reporting Requirements ............................................. 50

CHAPTER 17. Entities to Report as Charitable Trusts ................................... 51

CHAPTER 18. Amending Governing Documents ........................................... 52

CHAPTER 19. Sarbanes-Oxley ? Document Retention and Protections for Whistleblowers ............................................... 54

CHAPTER 20. Exposure and Risks of Directors and Officers ........................ 56

CHAPTER 21. Directors' and Officers' Insurance ........................................... 59

WASHINGTON NONPROFIT HANDBOOK

-i-

2018

TABLE OF CONTENTS (continued)

Page

PART 4. OBTAINING RECOGNITION AS A CODE SECTION 501(C)(3) ORGANIZATION ............................................................................................... 62

CHAPTER 22. Considerations in Determining Whether (and When) to Seek Code Section 501(c)(3) Status ......................................... 62

CHAPTER 23. Applying with the Form 1023EZ ............................................... 70

CHAPTER 24. Assembling Your Form 1023 Application................................72

CHAPTER 25. Obtaining Recognition for a Publicly Supported Charity ...... 89

CHAPTER 26. IRS Processing of Exemption Applications ............................. 89

PART 5. MAINTAINING FEDERAL TAX-EXEMPT STATUS FOR YOUR 501(C)(3) ORGANIZATION ............................................................................................... 93

CHAPTER 27. Continuing Obligations Under Federal Tax Law..................... 93

CHAPTER 28. Charitable Purposes..................................................................94

CHAPTER 29. Private Inurement ..................................................................... 95

CHAPTER 30. Intermediate Sanctions ............................................................ 97

CHAPTER 31. Political Activity........................................................................100

CHAPTER 32. Legislative Activity ("Lobbying")..............................................101

CHAPTER 33. Unrelated Business Income ("UBI") .......................................105

CHAPTER 34. Federal Filing Requirements ..................................................108

CHAPTER 35. Public Disclosure of Exemption Application and Form 990 Returns..............................................................................111

CHAPTER 36. Documentation of Contributions ..........................................112

PART 6. INTERNATIONAL ACTIVITIES AND GRANTMAKING .......................................116

CHAPTER 37.

Ability Of 501(C)(3) Organizations To Carry On Foreign Activities--Non-U.S. Charitable Activities Qualify As 501(C)(3) Activities ...................................................................116

CHAPTER 38. Indirect Contributions Of Gifts To Be Used Outside The United States--Earmarking....................................................116

CHAPTER 39. Grants By U.S. Public Charities To Non-U.S. Organizations ..........................................................................120

WASHINGTON NONPROFIT HANDBOOK

-ii-

2018

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download