Document Retention Policy

I know it’s here somewhere!

Although not required by tax law, the IRS increasingly views such policies and good governance practices as a means to establishing transparency and ensuring compliance.  Specifically, Part VI of the revised Form 990 includes several questions regarding corporate governance, including questions about board structure and organizational policies. In particular, in Question 14, the IRS now asks exempt organizations whether they have a written document retention policy in place. Furthermore, exempt organizations should be aware of certain requirements of the Sarbanes-Oxley Act of 2002 (the “Act”) that apply to nonprofits: specifically, the imposition of criminal liability on exempt organizations that destroy records with the intent to obstruct a federal investigation.  While the Act does not explicitly require the adoption of a document retention policy, it is recommended that exempt organizations adopt and abide by a document retention policy as a “best practice.”

Policy Elements

1. A list of Document Categories.
2. A timeline for how long each type of document should be retained.
3. Provisions that restrict employees, officers, and directors of the organization from destroying documents in anticipation of litigation.

Public Inspection

There are two types of documents which must be retained and made available for public inspection:

1. The organization’s original IRS Form 1023 – application for exempt status. This must be retained permanently.
2. The organization’s Form 990 or 990 EZ – annual information return.  This should be kept for a minimum of seven years.  Part C of Section VI of the revised Form 990 asks each organization whether it makes these and other organizational documents available to the public through its website, a third-party website, or upon request.

Resources

Redesigned Form 990, Schedules and Instructions