Most nonprofit leaders know that filing the federal Form 990 is part of maintaining tax-exempt status. What many do not realize—until a letter arrives—is that Illinois has its own parallel system of oversight that operates alongside the IRS.
At the center of that system is the AG 990-IL, which functions as Illinois’ state-level counterpart to the federal Form 990. While the federal return is expansive and governance-heavy, the AG 990-IL is more concise and financially focused. Its purpose is straightforward: to give the Illinois Attorney General a clear snapshot of how charitable funds are being handled.
The state is looking at what money came in, where it came from, how it was spent, and whether anything raises concerns about conflicts of interest, commingling, or misuse of assets. The form does not ask the Attorney General to understand your mission narrative or leadership philosophy. It asks whether your financial story makes sense—and whether it matches the story you are telling everywhere else.
This is where many new nonprofits get caught off guard. Early seed money placed into a bank account can appear to be fundraising revenue if it is not explained. Personal funds used to cover startup costs can look like improper commingling if there is no documentation. An organization that spent months incorporating and organizing internally can look “late” if the state is never told when real operations actually began.
Illinois does not infer intent. It relies on paperwork.
Before the AG 990-IL ever comes into play, the state expects charitable organizations to register their existence through Form CO-1. This filing puts the Attorney General on notice that an organization exists and intends to solicit funds. Contrary to popular belief, nonprofits do not need to wait until their federal 501(c)(3) status is approved to file. Registering while tax exemption is pending establishes a clear timeline and helps prevent future compliance confusion.
For organizations that are less than a year old, Illinois may also require Form CO-2, which reports financial activity from inception. This form allows the state to assess whether the organization’s financial footprint aligns with its stated age and level of activity. When numbers are modest and clearly documented, CO-2 reinforces credibility rather than undermining it.
Religious organizations operate under different rules, but even exemptions require documentation. Churches and synagogues are generally exempt from filing annual AG financial reports, yet Illinois still expects formal notice through Form CO-3. Many religious organizations never realize this step exists, which can lead to unnecessary questions later.
Across all of these filings, one issue consistently raises red flags: commingling. Using personal funds to support a nonprofit is common, especially in the early stages. The risk arises when those transactions are not formally recorded. Personal contributions must be documented, acknowledged by the organization, and tracked consistently. Without that paper trail, regulators cannot distinguish generosity from misuse—and they will always default to caution.
The AG 990-IL, as Illinois’ state-level counterpart to Form 990, is not a punishment tool. It is a transparency tool. When filed at the right time, with the right context, it protects the organization rather than exposing it.
Compliance is not an administrative burden. It is infrastructure. And for nonprofits that intend to last, credibility always comes before cash.
