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Reader Question – Replacing Nonprofit Board Members Who Quit

Reader Question – Replacing Nonprofit Board Members Who Quit
Question

Maryann asks:

We are a board of directors of a +55 nonprofit adult community. We have had multiple board members quit and are down to the President & Vice-President. With only two sitting on the board, how do we make a motion to appoint new members to fill the remaining time left on the board chairs that have been vacated?

Answer

Greg McRay responds:

The first thing to do is to check you bylaws.  It could be that the solution is spelled out directly.  If not, it might be more challenging.

If the officers and/or directors you mentioned resigned prior to the end of their terms, they may still technically be considered on the board.  It is not uncommon to see bylaws that state that even in resignation, the effective date of the resignation is when the position is replaced.  If you know who you would wish to serve in their stead, you could call a board meeting, extending notice even to those resigned, and hold a meeting to nominate and elect the replacement board members.

If your bylaws don’t have such an effective date verbiage, and/or you know they won’t show, the issue is really one of quorum.  With only two board members, you technically do not have a sufficient number of board members to conduct business.  But, the IRS doesn’t really get involved in that, so you don’t have a federal issue.  Fortunately, most states will allow the two of you to proceed without a proper quorum, mainly because you don’t have any other choice.  You can always check with your state’s AG’s office to make sure.

From time to time, we highlight a reader question that was submitted in response to another article. We try to pick questions that will resonate with a broad audience. In other words, if the asker is wondering about this issue, many others probably are, as well!

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 8 Comments
  1. We lost our tax exemption status as of 2018 due to failure to file 990s 3 consecutive years. my accountant is bringing us up to date on our filing but what other documents need to be filed?

    1. Sorry to hear about that. At a minimum, you will have to reapply for 501(c)(3) status by filing a new Form 1023 and everything that usually accompanies that. In addition, depending on the version of Form 990 you should have filed during those three years, you may have to complete and include those returns for each year you missed. When applying for reinstatement, it absolutely critical that your service provider has a lot of experience with lost status cases. If not, your journey may get worse before it gets better.

  2. If one of the board members resigned, then accepted his resignation by returning all materials to the board. Two years later the former board member wants to appeal the resignation. Can he appeal or did he forfeited the right to appeal his resignation??

    1. This is tricky. On the surface, it would seem like a resignation is a done deal…and usually it is. However, there are situations in which your bylaws provide a strict procedure necessary for board member removal. I was personally a witness to a court case where several former board members verbally resigned at a contentious board meeting, but the board never followed through with their bylaws procedure to remove them officially. Long story short…the court reinstated their board seats.

      For granted, this was an unusual situation and truly judicial overreach by the presiding judge. Nevertheless, it happened and I was there. In your case, given the letter of resignation, it sounds like a done deal. I recommend you review your bylaws to make sure something doesn’t jump out at you. Plus, you can always seek the advice of attorney, if you are unsure.

      Good luck with it!

      1. I had an employer that did not pay their Social Security for two years. They have been asked by other employees to rectify this, but it took them two years to put this in our accounts. What does somebody do or say to a government office? This happens to be a nonprofit, as well as government funded place of employment.

        1. Without understanding more particulars about the situation, it’s hard to say. Did they withhold the employee portion, but not pay it to the Social Security Administration? Or, did they neither withhold the employee portion, nor match it as required. If you ever have questions about the way you are being treated for tax purposes, you can always contact your state Department of Labor. That’s often your best place to start.

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