Compliance for North Carolina Nonprofits

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James Gilmer Head ShotSpecial to the Philanthropy Journal

By James Gilmer

Nonprofits are held to a high standard of government scrutiny. And that is for good reason! 501(c) nonprofits are exempt from federal income tax, access public funds, and provide donors with a tax deduction on their contributions. To maintain accountability and transparency, and to protect the public, nonprofits must meet various initial and ongoing reporting requirements. Starting with the 501(c) application process, nonprofits must demonstrate that they support a public good and do so in a way that is free from conflicts of interest. In addition to the IRS, various state agencies regulate nonprofits.

Each state has different requirements for nonprofits. This post is part of a series on nonprofit compliance. Our first post in the series will focus on the rules and regulations governing nonprofits in North Carolina.

Disclaimer: This focus of this post is 501(c)(3) nonprofits, which includes public charities and private foundations. This information is general in nature and will not apply to every organization.

yesStarting a Compliant 501(c)(3) Nonprofit in North Carolina

If you want to start a nonprofit in North Carolina, you should first research nonprofits already serving your community. With approximately 44,000 nonprofit organizations in North Carolina, an organization may very well already serve the mission you have in mind. Public resources are limited, so you should consider aligning your efforts with an existing organization if at all possible.

If you discover that there is in fact an unmet need in your community and you decide to create a new nonprofit, your goal should be to set up the nonprofit correctly. Prioritizing compliance from the start will help you set up the nonprofit for success. Establishing a 501(c)(3) nonprofit in North Carolina includes the following key steps:

  1. Incorporate a nonprofit corporation with the North Carolina Secretary of State. The nonprofit corporation is the legal entity that is recognized by the IRS. As part of the incorporation, you will appoint a registered agent, which is responsible for handling legal documents for the organization. The North Carolina filing fee for incorporation is $125. The North Carolina Secretary of State’s office is relatively friendly and accessible by phone. You can file your nonprofit online by uploading a .PDF file. Keep in mind that the IRS will review your articles of incorporation when you apply for your 501(c)(3) tax exemption. The IRS requires certain provisions on the articles of incorporation, so make sure to include those.
  2. Obtain a Federal EIN from the IRS. Wait until North Carolina has processed the articles of incorporation. You can file online with the IRS. As long as you have a Social Security Number (SSN), and there is no duplicate business or nonprofit name in the IRS database, you can get the EIN instantly online. If you get an error, you will have to fax in Form SS-4 and wait about a week.
  3. Prepare Bylaws and a Conflict of Interest Policy. These are internal records that govern the nonprofit organization. They must be consistent with North Carolina and IRS requirements. The IRS will review these documents as part of your application for federal tax exemption. Once you have state-approved articles of incorporation, an EIN, and bylaws, you can open a bank account for the organization.
  4. File Form 1023 or Form 1023-EZ with the IRS. This is your application for federal exemption. Form 1023 is a long, arduous form, and also requires you to submit each of the three items above. The filing fee is either $400 or $850, depending on your projected revenue. For years, this was the only form you could file. Form 1023-EZ is a streamlined application that was released in 2014, and can be filed online. The danger with Form 1023-EZ is that many organizations are not eligible to file, or they lack certain requirements, including the 501(c)(3) provisions in their articles of incorporation. The best way to ensure that you are eligible and can obtain a tax exemption is to follow the instructions carefully, or find an expert to manage the process for you. Once your organization receives its 501(c)(3) determination letter, your nonprofit is also exempt from paying North Carolina income tax.
  5. Apply for a Charitable Solicitation License from the North Carolina Secretary of State. Once you have your 501(c)(3) determination letter, you are exempt from paying federal and state income tax, but you aren’t done yet. Before you solicit any funds, you must register with the Charities Division of the North Carolina Secretary of State. North Carolina is quite strict and imposes penalties on charities that fail to register. The registration fee ranges from $0 to $200, based on your contributions. The state will mail you acceptance of this registration, or may request additional information. You will be able to call and email the examiner of your application directly should you need assistance.

North Carolina Nonprofit Compliance

Nonprofits incorporated in North Carolina have several ongoing filing requirements. Paying close attention to these requirements will help avoid penalties for noncompliance.

  1. IRS Form 990. This is a federal return due to the IRS four months and fifteen days after the end of your fiscal year. For organizations whose year ends December 31, your due date is May 15th. If you fail to file this return in three consecutive years, the IRS will revoke your tax exemption. However, if you do not file in a single year, you will not be able to renew your Charitable Solicitation License, or show proof to foundations and donors, who may expect to see this return before they make a gift. There are several versions of the 990, and the form you file depends on your revenue. Small organizations making less than $50,000 in a year can file the 990-N postcard online, which takes just a few minutes. Many organizations file this after their first year, which is dedicated primarily towards initial setup. Medium-sized organizations file a still streamlined 990-EZ, and large organizations prepare the full-length 990.
  2. Renew your Charitable Solicitation License, which is also due four months and fifteen days after the close of your fiscal year. The state fee will again be $0 to $200, based on your contributions. North Carolina grants you an automatic 60-day extension, but after that period, you must file or you will face late fees. Charities fundraising in North Carolina must submit either a 990 or a financial audit, not both, as is commonly believed. You should also prepare for the cost of obtaining and submitting a certificate of good standing from your home state, which is required annually.
  3. File North Carolina Sales Tax Returns. In North Carolina, nonprofits cannot file to become exempt from state sales and use tax, but they can file for semiannual refunds for qualified purchases by filing Form E-585 with the North Carolina Department of Revenue. The due dates are April 15th and October 15th.
  4. Meet Ongoing Secretary of State Obligations. Currently, nonprofit corporations do not file an annual report with the North Carolina Secretary of State but are required to maintain a registered agent located within the state. If you have a corporate registered agent, be sure to renew the service and update any contact information that may have changed. If you use an individual, make sure they are aware of the duties of a registered agent, and if they have moved addresses, file to update the state’s records.

North Carolina Compliance for Out-of-State Nonprofits

North Carolina is one of the forty-one states that requires charities to register prior to soliciting donations from its residents. That’s right, prior to soliciting donations. This requirement applies whether or not donations are actually received!

Before you ask for contributions from North Carolina citizens, make sure you register with the North Carolina Secretary of State. You will have to renew this registration annually. North Carolina is particularly strict when it comes to the use of professional fundraisers and fundraising consultants. You will have to disclose that information fully as part of your annual registration.

If you fundraise in multiple states, tracking due dates and filing on time are the keys to success. Each state has a unique renewal process and different renewal dates, so be sure to keep good records (and plenty of calendar reminders), or consider using a service company to manage the renewals for you.

Depending on your activities in the state, you may have to obtain a North Carolina certificate of authority for the nonprofit corporation (foreign qualify) and appoint an in-state registered agent. North Carolina does not currently require all out-of-state nonprofits that fundraise in North Carolina to apply for authority, however certain specific activities may trigger requirement. Organizations that have employees who are residents or open a physical location within the state are common reasons that can create the need to foreign qualify.

The Importance of Compliance

While this all seems like a lot of work, and it is, remember that these requirements exist for a reason. Periodically reporting to the IRS and state agencies demonstrates that the organization has not deviated from its mission and that its funds are used responsibly. Staying compliant also demonstrates credibility to your donors and grant makers. In conclusion, compliance plays an integral part to the sustained success of your organization.

James Gilmer is a Compliance Specialist for Harbor Compliance, a company that establishes 501(c) nonprofits and helps them manage compliance nationwide. Harbor Compliance assists charities in every state and several countries abroad. James serves on the Board for two nonprofits in Lancaster, Pennsylvania.

23 responses on “Compliance for North Carolina Nonprofits

  1. Key H Stage says:

    Are non profit 501c3 corporations required to report changes in by-laws to the Secretary of State whenever they are modified or changed? And, required to have current by-laws on file with the Secretary of State?
    Many thanks

    1. James Gilmer says:

      In North Carolina, bylaws are generally not submitted to the Secretary of State’s Charities Division or Corporations Division. However, it is important to keep updated bylaws in your records, and keep minutes of the board meeting at which the bylaws were approved. Good record keeping is important, as the IRS, many grant makers, and other authorities may request copies of your bylaws.

  2. ed hara says:

    A private foundation administered by a trustee in NC & does not solicit any public funds required to file with NC. A copy of 990PF to NC charitable division sufficient?

  3. Joy says:

    Must a nonprofit register for a charitable solicitation license if they are not going to be soliciting funds from individuals or organizations in NC? (Say they will be completely funded by organizations based in another state)

    1. James Gilmer says:


      It is the act of soliciting in a state that generally triggers state charitable registration requirements. Organizations that don’t solicit directly in a given state generally do not have to register or may qualify for an exemption. However, because forty-one states maintain separate registration requirements, it’s likely the organization may be faced with a requirement to register somewhere else.

      It’s also important to know that “solicitation” can take many forms: grants, phone calls, emails, online “Donate Now” buttons, and many more. Many organizations use one or more of these methods, often in conjunction, which in turn triggers the need to register in several states, not just a single state like North Carolina.

  4. Joseph B Henninger, atty says:

    If separate NC 501C(3)’s want to affiliate, whereby one will be the “parent” of the other (subsidiary) by having the sole voting member be the parent require AG approval. There is not intended a formal merger, but control of the Board of Directors will change as a result of the new sole voting member. Is this a sale or disposition of assets thus requiring AG approval?

    1. James Gilmer says:

      Thanks for the question. For this matter, I would suggest you contact the NC Attorney General directly or consult an attorney who specializes in nonprofits.

  5. Lyn Thomas says:

    Do you know if a non-profit can force donations from an affiliated member group? (Example: a kids sports team, say soccer, requires its registrants to give $200 to a non-profit created to build a soccer field when they register for the team.)

  6. Clark Pennell says:

    The non-profit I work with has almost $12,000 in restricted funds. The fund was started in March 2008 and the last deposit was made in Oct 2008. Only interest has been collected since that time. Can the board of directors close that fund and move the money to our general account, or designate it for another use?

  7. Lilly Maney says:

    How can you find out if a non profit really is a non profit?

    1. Andy says:

      Start with sites like – that will give you a nice start.

  8. Nelson says:

    What if you ask for a copy of bylaws and they want let you see them

  9. Andy says:

    Are non-profits (religious organization) in North Carolina under any statutes that limit what types of investments they may get involved with? i.e. a church is able to invest in anything they want or is it limited to more conservative investment (MM, CD, Bonds, etc…).

  10. Joe Toong says:

    After read your web, and can’t find the related information. There are a few questions might need your guide and help:

    Where is the NC agency who are in charge Church, non profit organization business, I am trying to find the regulation by law for the following issue:

    1. Does Church annual financial plan need to be approved from congregation members? Once approved, where have to report or does not need report?
    2. Does church elder has right in annual congregation meeting taking away all member’s voting right and extend his authority power to one or two more years?
    3. Does church elder action can against current constitution without members voting? Once it against, is any regulation can be used to justify?
    If you can give me a direction where is department or phone number, It will be helpful for me to follow. Thanks.

  11. Tony Anton says:

    If I should win a state lottery and want to tithe 90 percent to religious causes, taking 10 percent of proceeds for family and personal distribution, what type of organization should I create?

  12. Reed Elliott says:

    I am a member of a non-profit garden club in North Carolina. Are minutes from Board meetings of such a club barred from being openly distributed (e.g., on a club website)?

  13. Sean Schenck says:

    Dose a nonprofit org have to make it’s meeting minutes aviable to the public by NC law? If I am not a member can I request the meeting minutes?

  14. lee thames says:

    I am very impresed with the questions and answers present in thfor. However,
    I am a member of a NC state board or commission where I; I want know if the public along with my self are entitlled to see financial reports and where does reasonable accommadation to public access at meetings and accessible documents apply

    1. James Gilmer says:

      Hi Lee,

      Yes, generally there is a reasonable expectation of transparency. North Carolina has a disclosure requirement for organizations soliciting its residents, which directs donors and the public to find more information when deciding to give. You can find more information and the relavant statutes here:

      Thank you!

  15. John Gilmore says:

    Does a nonprofit in North Carolina have to make public its governing board to the public?

  16. Ronald Thompson Jr says:

    Does a non profit in NC need to file changes to it’s by-laws with the state and/or federal govt?

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