How to Relocate a Non-Profit to Another State
Relocating a nonprofit to another state is a serious endeavor requiring multiple state and federal government filings. Since a nonprofit organization is first and foremost a corporation, it is entitled to incorporate in one state but operate in multiple states. This is a viable option for many nonprofits. There can be real estate and sales tax liabilities, though, so nonprofits must weigh the fundraising potential of multi-state operations against the potential tax burden of out-of-state incorporation.
Changing states of incorporation requires the nonprofit's board of directors to dissolve the corporation in one state and then incorporate it in another state. Each state has different reporting rules for dissolving and/or relocating a nonprofit. Similarly, there might be slightly different rules for applying for tax exempt incorporation from state to state. For example, some states require a filing that includes a charter and bylaws, while others only require articles of incorporation. Understanding the implications of these changes for your nonprofit will require both legal and accounting guidance from professionals. It is for this reason that many nonprofits elect to operate in multiple states rather than unincorporate and then reincorporate.
Instead of changing the state of incorporation, many nonprofit organizations elect to file as a nonprofit in multiple states. Each state has a reporting mechanism for nonprofits that do multi-state fundraising. Some may treat your nonprofit as if it were a foreign company, while others might only require additional paperwork. In addition to multi-state filing guidelines, there may be special rules about real estate and sales tax exemptions. Some states will allow multi-state nonprofits to apply for these tax benefits, while others may not. If the state you are considering has allowances for out-of-state nonprofits in these categories, reincorporating might not be necessary.
It is critical to notify your stakeholders when relocating your nonprofit to another state. People who support the nonprofit might have some contacts in the state to which you are moving. They might provide a letter of introduction or even material moving support. People who depend upon your nonprofit's work will need to make different arrangements after the move has been completed.
Federal tax exempt status does not vary by state. If you decided to change the state in which your nonprofit is incorporated, simply have your accountant notify the IRS of the address change. Depending upon when in your fiscal year the move occurs, this could be as simple as appropriately updating the corporation's information on the annual Form 990-N (also known as the e-Postcard). If the move occurs too close to your annual filing date, you might be required to file using the paper form. This should be done at the discretion of your tax professional.