The states, not the federal government, hold authority over the licensing, organization and governance of nonprofits. Some states require nonprofits to have a president. Federal law does not give the Internal Revenue Service authority over nonprofit governance, but the IRS requires nonprofit organizations to publicly disclose certain corporate governance matters, including whether the nonprofit has a president, on Form 990.
Board of Directors
The board of directors of a nonprofit organization is responsible for providing policies and direction to the organization, selecting and overseeing the chief executive and maintaining a fiscally sound organization. How they are chosen or elected, how many members make up the board and the titles and duties of officers are established in the organization's bylaws.
A nonprofit is formed according to state law and is typically led by its board of directors. Leaders of the board are called officers. The state can require that the board consist of a minimum number of directors and a minimum number or certain types of officers. Texas, for example, requires at least three directors; one must be the secretary and one must be the president. Under Texas law, the secretary and president cannot be the same person. This helps ensure the nonprofit is governed by a group, rather than a single person.
The Internal Revenue Code does not provide the IRS with any authority over corporate governance matters. However, in response to corporate governance disasters, such as Enron, the IRS began requiring public disclosure of governance matters on Form 990. The form requires disclosure of information about the number and independence of the officers and directors and whether certain policies have been adopted by the board.
By asking questions about corporate governance, the IRS implies that there are right and wrong answers to those questions. As the IRS has no oversight authority, it cannot penalize organizations that do not follow its suggestions, but, instead, pushes nonprofits to better governance by the public nature of the document. Nonprofits complete the forms knowing they may be reviewed by the public, ratings agencies, donors or state government regulators.
- American Bar Association Business Law Today: The IRS's New Regulation of Nonprofit Governance
- Texas Secretary of State: Nonprofit Organizations FAQs
- IRS: Form 990, Return of Organization Exempt from Income Tax
- New York Department of State: Not-For-Profit Corporations FAQs
- Learning To Give: Responsibilities of a Nonprofit Board (The)
- University of Wisconsin Cooperative Extension: Q & A with Faculty
- IRS: Instructions for Form 990
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