Frequently Asked Questions

What is a nonprofit corporation and what are its characteristics?

A nonprofit corporation is a corporation in which no part of the income or profit is distributable to its members, directors or officers, except under limited circumstances. Iowa Code 504.1301-1302

Typical characteristics of a nonprofit corporation:

  • The entity is designated as a "nonprofit" when organized.
  • Profits or assets may not be divided among corporate members, officers or directors in the manner of corporate share dividends.
  • The entity may lawfully pursue such purposes as are permitted for such organization under state law.

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Are there different types of nonprofit corporations?

Yes, nonprofits fall into one of the following categories:

  1. Public Benefit nonprofits provide a service or product to the public that is generally not offered by for-profit corporations. It does not have a membership that would limit its accessibility to the non-membership public. Examples include schools, libraries and hospitals.
  2. Mutual Benefit nonprofits are formed to serve the members of the organization. Attributes of organization and conduct are usually associated with for-profit entities. Examples are cooperatives, day care centers, nursing homes and trade associations.
  3. Religious nonprofits are organized primarily or exclusively for religious purposes. Churches are an example.

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What is the role and purpose of a nonprofit corporation?

Charitable nonprofits play important roles in public service delivery as nongovernmental, flexible organizations. The purposes of nonprofits vary, but they generally are categorized within the areas of:

  • Arts & Humanities
  • Environment
  • Human Services
  • Education
  • Health
  • International Affairs

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How do I determine if I need to form a nonprofit corporation?

Contact legal counsel to determine if you should form the corporation as a nonprofit.

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How do I obtain an Employer Identification Number (EIN) for a nonprofit corporation?

The Internal Revenue Service assigns EIN numbers. In many cases, the IRS can electronically assign numbers on the IRS Online Application web page. For further information, contact the IRS at www.irs.gov or at one of the Iowa offices.

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What is charitable gambling?

Charitable gambling is when a charity engages in "games of skill, games of chance and raffles" as a fundraiser to bring in revenue for the nonprofit. Bingo is a common form of charitable gambling.

The Social and Charitable Gambling Unit of the Department of Inspections and Appeals has administrative control for amusement games, contests, casino nights, and commercial promotions operated in the state of Iowa. In addition, the Unit regulates and licenses all games of skill and chance, bingo operations, raffles, and social gambling activities. You may obtain more information by visiting the Social & Charitable web page of the Department of Inspections and Appeals or by calling 515-281-6848.

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What if the charity itself does not do fundraising, but instead hires an organization to raise funds?

"Professional commercial fund-raiser" means any person, who for compensation, solicits contributions in Iowa for a charitable organization other than the person. A person whose sole responsibility is to mail fund-raising literature is not a professional commercial fund-raiser. A lawyer, investment counselor, or banker who advises a person to make a charitable contribution is not, as a result of such advice, a professional commercial fund-raiser. A bona fide salaried officer, employee, or volunteer of a charitable organization is not a professional commercial fund-raiser.

Professional commercial fund-raisers have a more extensive form of regulation when hired by charities to raise funds on their behalf. Professional commercial fund-raisers must register with the Iowa Attorney General. You may obtain more information by visiting the Iowa Attorney General's Office website or by calling 515-281-5926.

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What information do I need to know regarding the nonprofit's tax status?

The Internal Revenue Service has developed several helpful publications relating to nonprofit organizations and corporations. Visit the IRS website for information on all types of nonprofits. Please review the IRS's requirements for qualifying as a 501(c)(3) organization. You may also contact your local IRS office for more information.

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Does a nonprofit need a sales tax permit?

The Iowa Department of Revenue is responsible for the administration of sales tax in Iowa. Visit the Iowa Department of Revenue website for guidelines to determine whether or not a specific nonprofit must pay and/or collect sales taxes. You may also contact the Department of Revenue and Finance at 515-281-3114.

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Is a nonprofit required to file a Biennial Report with the Secretary of State?

All nonprofit corporations organized within the State of Iowa or authorized to do business within the State of Iowa must file a Biennial Report with the Secretary of State between January 1 and April 1 of each odd-numbered year. Each corporation's registered agent will receive a Biennial Report notice in early January. There is no fee for filing a Nonprofit Corporation Biennial Report.

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What are the grounds for administrative dissolution of a nonprofit?

A nonprofit corporation may be administratively dissolved for several reasons:

  • Failure to deliver the Biennial Report within sixty days of the due date,
  • Failure to appoint a registered agent or designate a registered office for sixty days or more,
  • Failure to notify the Secretary of State of a change of registered agent or office within sixty days of the change, or
  • The corporation's duration has expired. (Iowa Code Section 504.1421)

A corporation that has been administratively dissolved may be reinstated by the Secretary of State if the corporation makes an application to the Secretary for reinstatement, has corrected the reason for dissolution, and does not owe any back taxes to the Iowa Department of Revenue. (Iowa Code Section 504.1423)

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