It is very important for you as a nonprofit organization to adhere to all applicable tax laws. It’s important that you understand these laws so you can properly apply them to the activities of your organization.

In the United States, nonprofits are generally exempt from paying federal, state, and local taxes. However, they must still comply with many tax-related regulations in order to maintain their tax-exempt status.

Federal Tax Law Requirements

The Internal Revenue Service (IRS) is the main governing body for federal tax-related regulations. To be eligible for tax-exempt status, a nonprofit organization must be founded and run exclusively for one or more exempt purposes. These exempt reasons may include philanthropic, religious, educational, literary or scientific pursuits, or other activities that benefit the public.

Nonprofits must also comply with IRS regulations on filing requirements, recordkeeping, and reporting obligations. Additionally, nonprofit organizations are expected to declare their income, expenses, and other financial information on an annual basis.

Read more: How to Handle an IRS Audit

State Tax Law Requirements

In addition to federal tax rules, nonprofits must also comply with the tax requirements of the state in which they are incorporated. Each state has its ownn rules for tax-exempt organizations, so it’s vital to check with the state’s taxing body for precise instructions.

Most states require nonprofits to register with the state and may require them to file a yearly report or renewal. Additionally, certain states may charge NGOs extra fees or taxes, like property taxes or sales and use taxes.

Requirements of Local Tax Law

Depending on the types of activities they engage in, nonprofit organizations may also be subject to local tax regulations. For instance, local property taxes can apply to a nonprofit engaged in real estate transactions. Similar to this, if a nonprofit engages in the selling of goods or services, local sales taxes might apply.

Nonprofits should get familiar with the local tax regulations that apply to their operations. To make sure they are in conformity with all relevant laws, they should also speak with an experienced tax specialist.

Obey all applicable tax laws

Since tax laws can be intricate and perplexing, it’s critical for charity organizations to stay updated on the most recent rules. Nonprofits can maintain their good standing and carry out their objective to serve the public by being aware of and abiding by tax rules.