What Documents Should Your Organization be Keeping?

Sponsor Insight by Blue & Co., LLC

A nonprofit entity is required to maintain proper records to ensure the organization complies with tax rules and regulations. If an organization is unable to provide supporting documentation proving qualification for tax-exempt status, it is possible the organization will be subject to penalties or revocation of its tax-exempt status under Section 6033(j) of the Internal Revenue Code (IRC). To ensure your nonprofit has adequate documentation, a best practice is to adopt a document retention policy that outlines what records must be retained and for how long.

There is no document retention guideline that covers all nonprofits. Each organization should tailor its document retention policy to the specific state law requirements in which it operates (statute of limitations vary from state to state) and determine what records are relevant to its activities.

The following are common recommendations from the National Council of Nonprofits and the American Institute of Certified Public Accountants relating to the length of time certain records should be maintained. Please note that this is not an all-inclusive list and is given only as a starting point for guidelines.

Document Retention Period
Articles of incorporation Permanent
Bylaws Permanent
Board meeting minutes Permanent
Board policies and resolutions Permanent
IRS determination letter Permanent
IRS Form 990 tax returns Permanent
IRS Form 1023, application for tax-exempt status Permanent
Annual audits and year-end financial statements Permanent
Depreciation schedules Permanent
Real estate deeds, mortgages, and bills of sale   Permanent
Retirement and pension plan documents Permanent
Insurance policies Permanent
Contracts and leases 7 years after termination
General ledgers 7 years
Invoices and expense records 7 years
Bank statements and reconciliations 3 to 7 years
Payroll records and summaries   7 years

Categories that are state specific include laws relating to employment, payroll, and state tax-exempt certifications, which can frequently have varying implications for document retention requirements.

In preparation for a potential Internal Revenue Service (IRS) audit, if you are uncertain as to what documentation supporting your nonprofit’s returns should be retained and the length of that retainage, please contact Nancy Orben or Clay Deye for guidance.

When the retention period of any particular document has ended, be sure to consider if there is a need for non-tax purposes, such as for grants, insurance purposes, creditor requirements or state agency obligations that may require the nonprofit to retain records longer than IRS requirements. Furthermore, consider if there are specific documents that should be retained which may hold historical value or valuable institutional memories that are specific to the organization. If the organization does determine a document can be disposed, be sure to erase, shred or destroy the document to ensure any confidential information cannot be reconstructed.

Additional Resource:

Compliance Guide for 501(c)(3) Public Charities