Nonprofit Policies Required Template

The IRS considers the policies Form 990 asks about to generally improve tax compliance¹, even though the tax code doesn't demand them. Answer Yes only if your board, or a committee it authorized, adopted the policy by year end and it applies to the whole organization.

Part VI also asks how you set top pay (line 15) and about joint venture safeguards (line 16). Forms 990-EZ and 990-N ask none of these questions.

State law can go further. New York, for example, requires its nonprofit corporations to adopt a conflict of interest policy³. It also requires a whistleblower policy at those with 20 or more employees⁴ and more than $1 million in revenue the year before. Check your own state's nonprofit corporation law.

Start from the IRS's sample conflict of interest policy⁵ in the Form 1023 instructions. An interested person discloses the interest and leaves the room while the rest of the board decides, and the minutes record who disclosed what and any votes taken. Its yearly statement only asks directors, principal officers and members of committees with board powers to confirm they've read the policy and will follow it.

Form 990 asks for more. Line 12b asks whether officers, directors, trustees and key employees must disclose their interests, and their families', every year. Your executive director and top finance person count as officers on the return, whatever their titles. A key employee is anyone else on staff who passes three tests, in order¹:

• The $150,000 test: over $150,000 in reportable pay, counting related organizations, for the calendar year that ends in your tax year.
• The responsibility test: officer-level influence, or managing a part of the organization (or controlling a share of its budget, capital spending or pay) worth 10% or more of the whole.
• The top 20 test: being among the 20 highest-paid employees who pass the first two.

The Form 990 instructions describe a whistleblower policy as one that encourages staff and volunteers to come forward¹ with credible information on illegal practices or violations of your policies. It also promises protection from retaliation and names who takes the reports. Choose someone outside the reporter's chain of command, such as the audit committee chair, and put the policy in every staff and volunteer handbook.

A document retention and destruction policy sets how long you keep each kind of record, who stores it and who destroys it. Base the periods on real obligations. Federal grant records, for example, must be kept three years from your final financial report⁶, and longer if an audit, claim or lawsuit starts before then. Add a hold that stops destruction as soon as a lawsuit or investigation looks likely.

Your gift acceptance policy lists the gifts you take without review, such as cash and publicly traded stock. It also lists those that need a decision first: real estate, private company shares, vehicles, art and gifts with conditions. Schedule M asks whether it requires review of nonstandard contributions². Those are items with no ready market and a value that's hard to pin down, which you don't expect to use for your mission.

Decide before you accept property whether you'll keep it or sell it. If you sell it within three years and the donor valued it at more than $5,000, you must report the sale on Form 8282⁷ within 125 days. Whatever you accept, send the donor a donation acknowledgment letter.

1. 1

   Send the drafts ahead

   Put all four policies in the board meeting packet, so members can raise questions before the vote.

2. 2

   Vote on each one

   Adopt each policy by a recorded vote of the board or a committee it authorized.

3. 3

   Write the minutes promptly

   Form 990 counts minutes as contemporaneous if they are written by the next meeting or within 60 days¹, whichever is later.

4. 4

   Hand them out

   Give each policy to the people it covers and collect the first round of conflict disclosures.

5. 5

   Log the dates

   Take the adoption date from the minutes, not the document, and set each policy's review cycle.

Nothing on Form 990 asks when you last reviewed a policy, so one adopted 10 years ago still earns a Yes. Set a cycle and keep to it: yearly for conflict of interest, alongside the disclosures, and every two or three years for the rest. A review is a recorded board decision, not a passing mention.

Track two dates per policy: adopted and last reviewed. Review early when something changes, such as a first gift of real estate, a new federal grant, a raise that creates a key employee or a whistleblower report.

The template on this page gives you all four policies and the sheets that track them. Open it with Edit with AI and River builds the Policy Register from your minutes and checks your payroll for key employees before it updates the policies.