Page 91 - Washington Nonprofit Handbook 2018 Edition

y Where will the organization be based? Where will the organization
obtain its funding?

y How will members, clients or patrons hear about the organization’s
activities?

y How many members, clients or patrons does the organization expect
to serve?

y How is the organization distinguishable from for-profit entities, if any,
with similar activities?

If your organization plans to engage in activities or operate in a manner that
may raise concerns for the IRS, it is best to address these issues head-on. For
example, explain that “The organization accepts paid advertising in its newsletter

and will file Form 990-T, and pay any tax due,” or “Although the organization
performed referral services for members in the past, this activity never constituted
more than 1% of the organization’s overall activities, and the board voted to
discontinue this activity on [insert date].”

Part V. Compensation and Other Financial Arrangements

y Line 1b & 1c

Line 1b asks for compensation and other information regarding any
employee who will receive more than $50,000 per year from the organization. If no
employee is expected to receive more than $50,000 per year, simply state this fact.
Line 1c asks whether any independent contractor is expected to receive more than
$50,000.

y Line 2b

Line 2b asks whether the organization has a business relationship with any of
its officers, directors or trustees, other than through their position as an officer,
director or trustee. Answer “yes” to this question if, for example, the organization
plans to contract with one of its directors to provide services to the organization.

y Lines 4a-4g

Form 1023 indicates that practices regarding compensation for officers,
directors, trustees and highly compensated employees and independent
contractors reflected in this question are recommended, but not required.

WASHINGTON NONPROFIT HANDBOOK -80- 2018