Small Tax-Exempt Organizations Have Second Chance to File Before Automatic Revocation

As a result of the passage of the Pension Protection Act of 2006, an organization’s exempt status will automatically be revoked if it fails, for three consecutive years, to comply with the annual filing requirements applicable to it. The first three year time period for many organizations ended December 31, 2009, with the annual filing being due May 15, 2010. 

On July 26, 2010, the IRS has announced that it will provide a one-time relief for small exempt organizations to come back into compliance and retain their tax-exempt status even though they failed to file for three consecutive years.   The one-time relief applies only to organizations eligible to file Form 990-N (gross receipts normally under $25,000) or Form 990-EZ (gross receipts less than $500,000 and total assets less than $1.25 million).  Organizations required to file Form 990 or Form 990-PF are not eligible to take advantage of this relief to come into compliance.  

The IRS has posted a list of organizations (http://www.irs.gov/charities/article/0,,id=225889,00.html) for which the IRS does not have a record of a required annual filing for 2007 and 2008, and whose 2009 return, due on or after May 17 and before October 15, 2010, has not yet been received.  Organizations should check the list to see if they are at risk of revocation and should follow the IRS guidance under the one-time relief to avoid such consequence.

Two types of relief are available for small exempt organizations.  For organizations eligible to file Form 990-N, they can make the filing by October 15, 2010 to bring them back into compliance.  Go to http://www.irs.gov/charities/article/0,,id=225703,00.html to file Form 990-N and for additional information.  For organizations eligible to file Form 990-EZ, they must file their delinquent return by October 15, 2010, submit the Voluntary Compliance Program checklist, and pay a compliance fee to bring them back into compliance. Go to http://www.irs.gov/charities/article/0,,id=225704,00.html for additional information. 

Organizations that have not filed the required information returns by their due dates will have their tax-exempt status revoked.  The IRS intends to publish a list of these revoked organizations in early 2011.   If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.  Donors to section 501(c)(3) organizations may rely on the organization’s determination letter or listing in Publication 78 (http://www.irs.gov/charities/article/0,,id=96136,00.html) to deduct contributions until the IRS publishes notice that the organization’s 501(c)(3) exempt status has been automatically revoked.

Frequently asked questions and the IRS answers regarding the one-time relief may be found at http://www.irs.gov/charities/article/0,,id=225954,00.html.

Posted by Laura Lo Bianco at 12:01 PM | Email Post
Categories: Tax Exempt | IRS

Reminder: Failure to file Form 990 may result in revocation of Exempt Status

Most tax-exempt organizations are required to file an informational return on an annual basis with the Internal Revenue Service on Form 990, Form 990-EZ or Form 990-PF. Limited exceptions to this filing requirement apply to churches and certain religious organizations and state and local instrumentalities. In addition, certain smaller organizations that had $25,000 or less in revenues in 2009 are not required to file a full informational return, but may be required to file an annual electronic notice or "e-Postcard" (Form 990-N), in which the organization provides its legal name and any other name under which it does business, a mailing and web address, taxpayer identification number, address of a principal officer, and evidence of the continuing basis for the organization’s exemption from the filing requirements.

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Posted by Chris Olson at 1:23 PM | Email Post
Categories: Tax Exempt | IRS

Failure to file Form 990 may result in revocation of Exempt Status

Most tax-exempt organizations are required to file an informational return on an annual basis with the Internal Revenue Service on Form 990, Form 990-EZ or Form 990-PF. Limited exceptions to this filing requirement apply to churches and certain religious organizations and state and local instrumentalities. In addition, certain smaller organizations that had $25,000 or less in revenues in 2009 are not required to file a full informational return, but may be required to file an annual electronic notice or "e-Postcard" (Form 990-N), in which the organization provides its legal name and any other name under which it does business, a mailing and web address, taxpayer identification number, address of a principal officer, and evidence of the continuing basis for the organization’s exemption from the filing requirements.

Read more...

Posted by Chris Olson at 2:02 PM | Email Post
Categories: Tax Exempt | IRS

Court Ruling Opens Door For Greater Campaign Activities

In a 5-4 decision, in Citizens United v. Federal Election Commission, the United States Supreme Court invalidated decades-old federal prohibitions on organizations making independent expenditures to expressly advocate for or against federal candidates.  This decision does not impact the Internal Revenue Code's strict prohibition on Section 501(c)(3) organizations in conducting political campaign intervention activities.  It does, however, provide greater opportunities for Section 501(c)(4), 501(c)(5) and 501(c)(6) to spend general treasury funds to conduct political campaign activities at both the federal and state levels, provided such activities are independent from the candidate they support and are not in any way coordinated with the candidate.  Such organizations are still prohibited from contributing directly to candidates' campaigns.  This ruling also did not change the Internal Revenue Code and regulations regarding obtaining and maintaining tax-exempt status and the taxation or other treatment of political campaign intervention activities and expenses. 

Posted by Laura Lo Bianco at 1:53 PM | Email Post
Categories: Default

Nonprofit Update: Timing Asset Valuations for Private Non-Operating Foundations

In light of substantial recent declines in real estate values in this county, now may be an opportune time for private non-operating foundations ("foundations") to reappraise the value of their real property holdings. By doing so, such foundations may reduce the amount of their minimum required annual distributions, which amount is directly tied to the aggregate fair market value of their assets. Foundations that reappraise their real estate holdings in accordance with federal regulations will not be required to reappraise such holdings for another five years, thus locking in current values for several years. If foundations wait to reappraise their real estate holdings, the real estate market may improve, and the foundations may thereby miss the opportunity to lock in current values and reduce distribution obligations.

To read the entire Update, please click on the link below.

http://www.fclaw.com/newsletter/materials/NonprofitUpdate11-23-09.pdf

Posted by Laura Lo Bianco at 11:04 AM | Email Post
Categories: IRS