California Nonprofit Law
In California, nonprofit organizations are governed by sections 5000 through 10841 of the California Corporations Act. California law imposes certain rules and regulations regarding how such corporations are formed, organized and overseen by the state's government.
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Types
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California law recognizes three main types of nonprofit public benefit corporations: 1) religious corporations, which are organized to operate a church or otherwise provide primarily religious services; 2) nonprofit public benefit corporations, which are public charities that plan to receive or have received tax-exempt status from the U.S. Internal Revenue Service (IRS) under sections 501(c)(3) or 501(c)(4) of the federal tax code; and 3) nonprofit mutual benefit corporations, which are organized for purposes other than a public charity and which do not plan to seek tax exemption from the IRS, or plan to seek tax exemption under a 501(c) subheading other than 501(c)(3) or 501(c)(4).
Tax Laws
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Exemption from state taxes for California nonprofits is governed by sections 23701d and 23701f of California's Revenue and Taxation Code. In addition, a nonprofit corporation that has filed its Articles of Incorporation with the state is subject to California franchise tax requirements until it dissolves, or until it files for an exemption from the franchise tax. The exemption is requested by filing form FTB 3500 with the Franchise Tax Board.
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Articles of Incorporation
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In addition to including such information as the name and purpose of the nonprofit and contact information for the nonprofit's registered agent, California law requires a nonprofit's Articles of Incorporation to state specifically whether the nonprofit is a "religious corporation," "public benefit corporation" or "mutual benefit corporation." The phrase that most accurately describes the company must appear in the Articles of Incorporation, in the exact words.
Bylaws
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California law requires each nonprofit to file a copy of its bylaws with the state. Although California law does not require that any particular information be included in the bylaws, most nonprofit organizations describe the basic internal rules by which the nonprofit will conduct its business.
Statement of Information
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Within 90 days of filing a copy of the bylaws with the state, a nonprofit must also file a Statement of Information with the California Secretary of State. This statement is a public disclosure of the nonprofit's existence and business. It must include a general description of the nonprofit's activities, the names and addresses of the nonprofit's officers, the address of the nonprofit's principal office and the name and address of the nonprofit's registered agent. The Statement of Information must be re-filed with the California Secretary of State every 2 years as long as the nonprofit exists.
Nonprofit Integrity Act
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The Nonprofit Integrity Act, passed in 2005, covers the governance of nonprofits and their charitable activities. It requires regular financial audits of the nonprofit, which must be disclosed yearly. It also requires the board of directors to approve the chief executive officer's and chief financial officer's salary each year. It also requires nonprofits to enter written contracts for each commercial fundraising activity it participates in. Nonprofits are also forbidden from misrepresenting their charitable activities, particularly when seeking donations.
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References
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