Who Regulates Nonprofits in Illinois?

Nonprofit organizations play a vital role in advancing charitable, educational, religious, and civic missions throughout Illinois. Unlike for-profit corporations, nonprofits operate under a blend of state and federal oversight, with several government agencies and statutes shaping how they are governed, registered, and monitored. Understanding who regulates these entities and how is essential for compliance, accountability, and public trust. The Chicago church & non-profit lawyers at MacDonald, Lee & Senechalle, Ltd., explore this topic below. Contact our offices in Hoffman Estates and Des Plaines for a tailored discussion.

Federal and State Regulatory Framework

At the most fundamental level, nonprofit organizations are regulated both federally and at the state level. At the federal level, the Internal Revenue Service (IRS) administers tax-exempt status under the Internal Revenue Code (such as 501(c)(3) classification). Federally recognized tax-exempt status allows qualified organizations to receive tax-deductible donations and be exempt from certain federal taxes. While important, this federal regulation chiefly concerns taxation and specific reporting requirements (e.g., IRS Form 990). It does not, by itself, authorize an organization to operate in Illinois or address many state-specific compliance obligations.

At the state level, several Illinois authorities have regulatory roles over nonprofit operations, reporting, and governance practices.

Illinois Attorney General: Primary State Regulator

The Illinois Attorney General’s Office is the principal state regulator for nonprofit organizations that operate within the state, particularly those that solicit charitable contributions or hold charitable assets. Oversight is exercised through the Charitable Trust Bureau, a division of the Attorney General’s office responsible for administering and enforcing state charity laws.

Under Illinois law, all charities that solicit donations from Illinois residents or are located in Illinois must register with the Attorney General’s Charitable Trust Bureau before soliciting or receiving contributions unless an exemption applies under the Solicitation for Charity Act (225 ILCS 460). Separately, the Charitable Trust Act (760 ILCS 55) covers any person or entity, including not-for-profit corporations, that holds property for a charitable purpose, and such organizations may be required to register and file annual financial reports even if they do not solicit. In practice, many Illinois nonprofits comply with both laws by registering once with the Charitable Trust Bureau and then keeping up with required annual financial reports. The Attorney General enforces those key statutes, which include registration and reporting requirements designed to protect donors and beneficiaries.

The Attorney General’s oversight includes enforcement actions, compliance reviews, and the authority to investigate allegations of mismanagement, misuse of charitable funds, or fraud. Importantly, the Attorney General also maintains an online filing portal and searchable public database where the public can look up registered charities and access certain financial reports, increasing transparency and accountability.

In addition to regulatory enforcement, the Attorney General provides guidance and resources for nonprofits on compliance, best practices, and prudent governance. This includes materials aimed at helping organizations understand reporting obligations and legal requirements.

The state’s Charitable Advisory Council, sponsored by the Attorney General under the Solicitation for Charity Act, also plays an advisory role. This council studies issues concerning charitable giving and fundraising in Illinois and makes recommendations intended to improve compliance and governance practices for nonprofits.

Illinois Secretary of State: Corporate Formation Oversight

Another crucial state regulator is the Illinois Secretary of State, which oversees the incorporation of nonprofit corporations. Any nonprofit that chooses to incorporate as a not-for-profit corporation under Illinois law must file Articles of Incorporation with the Secretary of State and comply with the General Not For Profit Corporation Act of 1986 (805 ILCS 105). This statutory framework sets out eligible nonprofit purposes (such as charitable, educational, civic, religious, and other public benefit purposes) and foundational governance rules for nonprofit corporations.

The Secretary of State does not generally regulate the conduct of solicitations or financial reporting; its role is mainly corporate in nature — approving formation documents, maintaining public records of nonprofit corporations, and overseeing annual corporate reporting obligations.

Not-for-profit corporations must also file the Secretary of State’s annual corporate report; failure to do so can lead to administrative dissolution.

Illinois Department of Revenue

Although not a regulator of corporate governance or solicitation activities, the Illinois Department of Revenue (IDOR) plays a regulatory role related to tax treatment at the state level. Nonprofits that seek exemption from state sales tax or other state tax categories must file appropriate applications with IDOR to obtain such exemptions. Many nonprofits qualified for federal 501(c)(3) status must separately apply for state tax exemptions.

IDOR also administers licensing for certain gaming and fundraising activities (such as bingo, pull tabs and jar games, and other charitable games subject to licensing statutes) that nonprofits may conduct under state law, adding an additional compliance layer for organizations engaged in those activities.

Local and Federal Regulatory Considerations

In addition to state oversight, nonprofits may be subject to local regulations depending on the city, village or county where they operate, particularly when conducting business, fundraising events, or licensed activities such as raffles. For example, municipalities may require local business permits or zoning compliance for nonprofit facilities.

Raffles and local poker runs are licensed at the local level in Illinois. Before selling tickets, a nonprofit must obtain a raffle license from the city or village where the raffle will take place or, for events in unincorporated areas, from the county. Local governments issue licenses and set limits (e.g., prize caps, ticket prices, sales periods) under the Raffles and Poker Runs Act. Some communities adopt more restrictive rules, so always check the ordinance where the event will be held.

At the federal level, the IRS continues to regulate tax-exempt organizations by reviewing annual returns (such as Form 990 series) and enforcing rules on political activity, private benefit, and unrelated business income. While the IRS does not police charities at the state level directly, its tax rules and audit authority form a critical part of the regulatory environment for nonprofits nationwide.

Enforcement and Accountability

If a nonprofit fails to comply with applicable state laws, such as registration requirements with the Attorney General, financial reporting obligations, or proper use of charitable funds, the Attorney General’s office has authority to investigate, enforce compliance, and pursue legal action where appropriate. This may include administrative enforcement, injunctions, revocation of registration, or other remedies to protect public interests. A nonprofit corporation’s failure to file annual reports with the Secretary of State may result in administrative dissolution.

Donors, volunteers, and members of the public can also file complaints with the Attorney General’s Charitable Trust Bureau if they suspect fraud, financial impropriety, or other misconduct by a nonprofit.

Contact MacDonald, Lee & Senechalle, Ltd. for Help With Nonprofit and Church Law in Chicago

In Illinois, regulation of nonprofit organizations involves a coordinated system of federal, state and local authorities, each with distinct roles. Nonprofits operating in Illinois need to understand their obligations to these authorities and maintain compliance with statutory requirements to protect their mission and the public trust. Consulting with experienced nonprofit counsel can help ensure that registration, reporting, and regulatory compliance are managed effectively.

In Chicago, contact MacDonald, Lee & Senechalle, Ltd. at our offices in Hoffman Estates and Des Plaines.