Home
Services
About
Articles
Legal Notices
Contact
|
<< Return to Articles Index
Nonprofits: Did your organization lose its tax-exempt status?
June 2010 — On May 17, 2010, a critical deadline passed for many smaller tax-exempt organizations. As of that date, many nonprofits that did not file a Form 990 information return with the IRS for the prior three tax years — and that had not requested an extension — were to have their tax-exempt status automatically revoked. For organizations using the calendar year as their fiscal year, May 17, 2010 was the due date for their 2009 returns.
Prior to the 2007 tax year, tax-exempt organizations with annual receipts less than $25,000 were not required by the IRS to file Form 990 information returns. A provision within the Pension Protection Act of 2006, however, imposed new reporting requirements on such organizations, and — critically — mandated that organizations failing to meet their filing requirements for three consecutive years would have their tax-exempt status automatically revoked.
All nonprofit organizations — other than churches and church-related organizations — are now required to file Form 990-series information returns with the IRS unless they are included in a group return. Small tax-exempt organizations whose gross receipts are normally less than $25,000 may file Form 990-N — an e-postcard that requests a few items of basic information. Tax-exempt organizations with receipts greater than $25,000 must file Form 990 or 990-EZ. Private foundations must file Form 990-PF. A nonprofit with more than $1,000 in unrelated business income must also file Form 990-T.
Though the IRS made significant efforts to inform all nonprofit organizations of their new filing obligations, it is feared that the notification did not reach many smaller groups. Moreover, the IRS has no discretion under the Pension Protection Act to extend the filing date requirement or to postpone revocation of tax-exempt status. The IRS has announced, however, that it probably will not begin to mail revocation notices until January 2011.
Nonprofits that did not file Form 990 returns for the past three years may now face the prospect of having to reapply with the IRS to regain their tax-exempt status. If so, any income received by such organizations between the revocation date and their renewed exemption may be taxable. Donors to those organizations, however, may still be able to take a deduction until a formal revocation notice is received by the organization, or while a renewed application for tax-exemption is pending.
The IRS Commissioner has nonetheless encouraged all organizations to file their Form 990 returns, even if they missed the May 17 deadline. The IRS has announced that it will provide additional guidance on how it will help these organizations.
Organizations that do need to re-apply for tax-exempt status will need to supply a variety of information to the IRS, including financial data and organizing documents, and will need to pay filing fees of either $400 or $850, depending upon gross receipts.
The re-application process provides an excellent opportunity for affected organizations to review their operations, policies, governance, and leadership.
This information is not intended to constitute, and should not be considered, legal advice. This article is provided as general information that may or may not reflect the most current legal developments.
|
