What You’ll Learn
If you’re a nonprofit in Iowa, or you’re a nonprofit considering fundraising or other activities in Iowa, you must understand the requirements that Iowa has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Iowa.
Getting to Know the State Nonprofit Corporation Law
*Important primarily for nonprofits incorporated in Iowa
The rural opinion about the new young ladies, even among the cottagers, was generally in favour of Celia, as being so amiable and innocent-looking, while Miss Brooke’s large eyes seemed, like her religion, too unusual and striking. Poor Dorothea! Compared with her, the innocent-looking Celia was knowing and worldly-wise.
- Middlemarch, George Eliot
When reading a novel, we get to know a fictional character by the author’s description. The author tells us about the character’s appearance, purpose, actions, mannerisms, and values.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us the organization’s name, purpose, way of acting, and method of making decisions.
To get to know your own nonprofit, be sure to review the sections below.
State Nonprofit Corporation Law
For Religious Nonprofits
Nonprofit Religious Corporation Act: Iowa’s nonprofit corporation law includes a designated law governing the formation and operations of nonprofit religious corporations and specific provisions to protect their right to self-government in internal affairs. Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Iowa law permits a director to rely on guidance from religious figures within his or her faith tradition in the fulfillment of the director’s fiduciary duties. Iowa Code § 504.831
Understanding Religious Liberty in this State
*Important for all nonprofits doing business in Iowa, whether incorporated in Iowa or elsewhere
The religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.
- Our Lady of Guadalupe School v. Morrisey-Berru, 140 S. Ct. 2049 (2020).
Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Iowa has not enacted a RFRA and has enacted nondiscrimination laws that conflict with the beliefs of many religious organizations. Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
Constitutional Protections for Free Exercise: The Iowa Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. State Const. art. I, §§ 3, 4
State Blaine Amendment: The Iowa Constitution does not contain a Blaine Amendment but also does not expressly protect faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Iowa currently has a statewide public accommodation law, which limits certain organizations’ freedom to make distinctions on the basis of biological sex. In some cases, this limitation may conflict with religious organizations’ sincerely-held beliefs on matters of human sexuality. Some exemptions are available in these circumstances. Be aware of this law and applicable exemptions.
Religious Freedom and Public Accommodation Laws: Iowa’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities but provide accommodations or exemptions for the vast majority of religious organizations. Iowa Code § 216.7; Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Sexual Orientation and Gender Identity Laws and Regulations: Iowa Code § 216.7
Protections for Religious Exercise in State of Emergency: Iowa law has no explicit constitutional or statutory protections for religious exercise during a time of emergency.
Key Employment Laws and Regulations
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Iowa but incorporated elsewhere
Depending on the type and volume of activities an organization has in this state, the corporation or organization may need to register as an out-of-state business (sometimes called a “foreign corporation”) with the secretary of state or another state agency (see Iowa Code § 504.141(18)). Not every out-of-state corporation or organization needs to register. An attorney can assist the organization in determining whether its connections with this state are significant enough to trigger the foreign corporation registration requirement. Examples of activities that might trigger this requirement include having employees physically located in the state, conducting programs in the state, and having an office in the state.
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Iowa and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
In this state, charitable solicitation registration for religious organizations is no longer required. Be sure to review other state registration and tax requirements, and stay apprised of updates by visiting the applicable state agency’s website.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
Evaluate Whether You'll Need a Registered Agent
Some states require organizations to appoint a “registered agent” in the state as part of the organization’s charitable registration. Iowa does not currently have this requirement.
Follow the Rules About Communicating with the Public
This state does not require organizations to post specific language when conducting charitable solicitations. However, if donors request financial information about a soliciting organization, the organization should provide the financial information within five days of the request (see Iowa Code § 13C.2(2)).
Charitable Registration Statute
Charitable Registration Exemption Statute
Annual Report Requirement
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Iowa, whether incorporated in Iowa or elsewhere
In this state, organizations that have received recognition of federal income tax exemption under IRC Sec. 501(c)(3) are automatically exempt from state income tax. Some organizations may choose to send a copy of their IRS determination letter to the state department of revenue to indicate the organization’s position that it qualifies for the exemption. Note that, although an organization may be exempt, if it has unrelated business taxable income (“UBTI”) that is subject to federal taxation, that UBTI may be subject to state income tax (see Iowa Code § 422.34).
It is also important to consider whether applying for sales and use tax and property tax exemptions would be appropriate for your organization. Iowa does not have a blanket sales and use tax exemption for nonprofits or exempt organizations, but some specific exemptions are available. The Iowa Department of Revenue website provides a guide to exemptions which may be helpful. Information regarding Iowa’s Religious, Educational, and Charitable property tax exemption is also available through the Iowa Department of Revenue. An accountant or attorney can provide specific answers to questions about your organization’s eligibility for exemption.
Corporate Income Tax Statute
Corporate Franchise Tax Statute
This state does not have a corporate franchise tax.
What You Need to Know About Sales Tax
Sales and Use Tax: Iowa imposes a sales and use tax on religious organizations’ sales but generally provides a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ sales upon application. Iowa imposes a sales and use tax on religious organizations’ purchases and only provides limited exemptions for certain items. Iowa Code § 423.3
State Tax Treatment of Unrelated Business Income: Iowa Code § 422.34
State-Specific Special Requirements
An volunteer attorney in Iowa
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
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**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington