Auxiliaries are often volunteer or non-profit entities that are put up to complement the activities of the main organization. Usually, they support the non-core functions of an organization or a department while adhering to the policies and rules of the founding body. State laws dictate how the auxiliaries are incorporated and governed, and how funds are raised and managed. All these are important aspects of any auxiliary’s bylaws.
Every state has different regulations with regard to auxiliaries be they for profit or non-profit. The bylaws of an auxiliary are required to reflect the state laws stipulated as concerns the governance of these organizations. To avoid legal liabilities and contradictions in their bylaws, auxiliaries should take time to understand the regulations in place. Using the service of a non-profit law attorney is an effective way to abide by state laws.
Auxiliary bylaws should indicate whether it is separated with its own tax-exempt status from the main organization. If it is, then its activities must be limited to non-profit and charitable ones as per federal regulations section 501(c)(3) of the IRS Code. This regulation provides tax-exempt status for an organization operated exclusively for non-profit purposes. Breaching of tax-regulations results in an auxiliary losing its exemption and will be subject to tax penalties.
The Internal Revenue Service requires that changes to auxiliary bylaws be reported for purposes of tax accountability. Auxiliaries that are established as tax-exempt entities are required to file IRS Form 990 in case their functions change being profitable. Those that are established as for-profits file their tax and income returns as a business entity would.