If you are starting a 501(c)(3) nonprofit in Texas, you have come to the right place. After following the easy steps for Texas nonprofit formation, follow this guide to help keep your Texas nonprofit compliant and protected.
In this guide we cover:
How to Protect Your Texas Nonprofit
Get Business Insurance
As with any other business, there may be risks involved in running the nonprofit. Getting insurance for your nonprofit allows you to focus on your passion while minimizing your liability.
Here are some of the common types of insurance you may want to consider for your organization:
- General Liability Coverage
- Directors and Officers Coverage
- Social Service Professional Coverage
Your coverage needs will vary based on your organization and the work you do.
Properly Sign Legal Documents
There will be times when you will be signing a document on behalf of your nonprofit. It is important that these times are easily distinguishable from when you are signing a document as an individual. If a document isn’t properly signed, you might suddenly find yourself personally responsible for something the organization should have been liable for.
To avoid such confusion we recommend you and all the members of your organization follow the following format:
- The official name of your nonprofit
- Your signature
- Your full legal name
- Your position in the organization
How to Keep Your Texas Nonprofit Compliant
Maintain A Texas Registered Agent
Nonprofits that have incorporated in Texas are required to maintain a registered agent with an office address in Texas. If the agent or the office address changes, you must file Form 401 with the Secretary of State to effect a change to the Certificate of Formation.
NOTE: Failure to do so may result in termination of the corporation.
File Required Periodic Reports
The Texas secretary of state may require your organization to file a report, no more than once every four years. If a report is required, the Texas Secretary of State will send a notice to the registered office with instructions on when the report is due.
NOTE: Failure to file a requested report may result in the termination of the corporation.
Pay Your Texas State Franchise Tax
Every nonprofit corporation in Texas needs to pay a franchise tax unless the organization has received an exemption from the Texas Comptroller of Public Accounts. To determine whether your organization can apply for exemption from the franchise tax, check out the Texas Comptroller website.
NOTE: Even after applying for exemption, your organization must keep paying the franchise tax until the exemption has been approved.
For more information, you can call the Texas Comptroller at 1-(800)-252-1381 or email them at email@example.com
Determine Texas Business Permits and Licenses
As a nonprofit in the state of Texas, your organization will not need a general business license.
If your organization will be selling goods or services, you will need a Texas Sales Tax Permit from the Texas Comptroller’s Office. You can easily fill out this application online.
If your nonprofit is a charity, it is very likely that it is automatically exempt from registering with the Office of the Texas Attorney General. There are two main exceptions to this rule:
- If your organization will be raising money for veterans, you must register with the Texas Secretary of State using Form 3501, Veterans Organization Solicitation Registration Statement and Form 3502, Veterans Organization Solicitation Bond. The cost associated with this will depend on the nature of your organization and how many counties your organization plans to solicit. This status must be renewed every year, due on the date of registration.
- If your organization will be engaging in phone solicitation to raise money for law enforcement, you will need to go to the office of the attorney general and pay a $50 filing fee. In addition, a $50,000 surety bond will be required if your organization will be retaining the services of a commercial telephone solicitor.
You can read more about the Texas Law Enforcement Telephone Solicitation Act (LETSA) and how it affects your organization.
If your Texas organization will have employees you must register with the Texas Workforce Commission.
You can easily apply online or find the contact information for your local workforce commission.
Public Inspection Rules for all 501(c)(3) Organizations
All organizations that have been granted the 501(c)(3) status are required to disclose the following documents to the public when requested:
- Annual returns for 3 years after the due date (this includes returns like Form 990, 990-EZ, 990-PF, and any Forms 990-T)
- All Form 990 Schedules (except portions of Schedule B), attachments and supporting documents.
- Application of exemption and all supporting documents such as Form 1023
- The official paperwork from the IRS that shows that your organization has tax-exempt status.
The following do NOT need to be shared with the public
- Portions of schedule B of Form 990/990-EZ that identify the contributors. (You only need to disclose the amount contributed and the nature of the contributions)
- Any unfavorable rulings such as an earlier denial of tax-exempt status.
- Any information the IRS has said you can withhold. This may include things like sensitive patents and trade secrets.
How long do I have to produce these documents if requested?
Ideally within the same day. If your organization doesn’t have an office or maintains limited hours during parts of the year, the information should be made available within two weeks.
Do I need to provide copies of the documents?
If someone asks for copies in person or in writing you must provide them with copies.
Can I charge for copies?
You can charge a reasonable amount for making copies of the documents requested.
NOTE: It may be easiest to have the documents available on your website so that anyone who requests copies can be sent to the site. This allows you to stay compliant without having to spend a lot of time dealing with document requests.
Annual Returns for Tax-Exempt Organizations
Most tax-exempt nonprofit organizations are required to file an annual return with the IRS (Check the list of exceptions).
Which form you should use to file the annual returns depends on the annual gross receipt amounts for your organization.
"Gross receipt" is defined by the IRS as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses”
- For gross receipts ≤$50,000 --- File 990-N
- Gross receipts <$200,000 and total assets <$500,000 --- File 990- EZ
- Gross receipts >$200,000 or Total assets >$500,000 --- File 990
For any questions, you can call the IRS at
- (800) 829-3676 (Form-related questions)
- (800) 829-1040 (General information)
When is form 990 due?
You have a little over 4 months after your taxable year comes to an end to file Form 990. It is due on the 15th day of the 5th month. So if your taxable year ends on Dec 31st, your form 990 is due on May 15th.
NOTE: If your organization fails to file form 990 for 3 consecutive years, it will automatically lose its tax-exempt status.
Report Unrelated Business Income
If your Texas organization has a gross income of ≥$1000 from a trade or business that is not related to the stated purpose of the organization, then it must file Form 990-T to pay tax on that income.
If you expect to pay $500 or more for the year in taxes on unrelated business income, your organization must pay a quarterly estimated tax on the unrelated business income using Form 990-W.
State of Texas Nonprofit Quicklinks
IRS - Information for Charities & Nonprofits
IRS - Required Provisions for Organizing Documents
IRS - 990 Series for Tax-Exempt Organizations
IRS - Applying for Tax-Exempt Status
IRS - 501(c)(3) Compliance Guide
Small Business Administration - License and Permits