How Nonprofits Can Work With For-Profit Partners Without Losing Exemption
Most nonprofit boards assume they are in “good standing.”
They filed their 990.
They haven’t heard from the IRS.
No one has complained.
That does not automatically mean your organization is in good standing in Massachusetts.
If you operate in the Commonwealth, you answer to both the IRS and the Massachusetts Attorney General’s Non-Profit Organizations / Public Charities Division.
And good standing at the state level matters.
What “Good Standing” Actually Means
In plain terms, good standing means your nonprofit:
- Has filed all required state reports
- Is current with mandatory disclosures
- Has not ignored compliance notices
- Is meeting its governance and reporting obligations
It is not just about whether you have a federal determination letter from the IRS.
Good standing is an ongoing status — not a one-time approval.
Why Nonprofits Lose Good Standing Without Realizing It
Most nonprofits do not intentionally violate the rules.
They lose good standing because:
- Annual state filings were missed or filed late
- Leadership changes were never reported
- Required disclosures were incomplete
- Recordkeeping was inconsistent
- The board assumed the accountant was “handling everything”
Why Good Standing Matters for Massachusetts Tax Exemption
Here is what many nonprofits don’t realize:
State tax-exempt recognition is not automatic just because the IRS granted exemption.
In Massachusetts, your standing with the Attorney General’s office plays a role in whether the Department of Revenue recognizes or maintains your state-level tax exemption.
If the Attorney General considers your organization out of compliance, that can affect your status at the state level.
That is where problems begin to compound.
Federal Compliance Is Not Enough
You can be:
- Current with the IRS
- Fully up to date on Form 990
- Completely unaware that you are out of compliance at the state level
What Boards Should Be Asking Right Now
If you are on the board of a Massachusetts nonprofit, ask:
- Are we current with all required state filings?
- Have we documented governance decisions properly?
- Are we confident we are in good standing with the Attorney General?
- Would we be prepared if the state requested records tomorrow?
If the answers are unclear, that’s a signal — not something to ignore.
Don’t Assume. Verify.
Good standing is not automatic.
It is not permanent.
And it is not limited to federal compliance.
If you are unsure about your nonprofit’s current standing, now is the time to find out — before a routine oversight becomes a bigger problem.
Concerned about your nonprofit’s standing? ontact Laura Brown.