This page updated 5/7/2010
Under IRS regulations that took effect in 2010, organizations that are required to file Form 990, Form 990-EZ, Form 990-N (E-postcard) or Form 990-PF (private foundations) and have failed to do so for 3 consecutive years will have their exempt status revoked by the IRS. MOST NON-PROFITS ARE SUBJECT TO THESE REQUIREMENTS. If exempt status is revoked, the only way to reinstate it will be to reapply for tax exemption.
DON'T THROW AWAY YOUR TAX EXEMPTION!
Non-profits that haven't already done so should take steps to familiarize themselves with the Form 990 exempt organization information return as revised by the IRS in late 2007. The first round of filings with the revised Form 990 were for tax years beginning in 2008 (filings due in 2009), although the IRS established a phase-in period depending on the size of the organization (see below). The other Forms 990, such as the Form 990-EZ and Form 990-T, are not affected by the revision, but the IRS is considering raising the dollar thresholds for some of the forms.
Among other things, the release of the new Form 990 is a response to calls for increased non-profit transparency and accountability from leaders in Congress and elsewhere. Consequently, the new Form 990 features a summary page providing key organizational, governance and financial information; and requests additional information on board composition and governance practices, programs and accomplishments, compensation and other items.
The redesigned Form 990 contains an 11-page core plus 17 schedules that may or not may require completion depending upon the activities and practices of a particular organization. Some of the schedules are clearly aimed at requiring more detailed information from organizations with larger or more complex structures, particularly universities and hospitals, or those with activities outside the U.S.
Beginning in May, 2009, organizations with gross annual receipts over $1 million or total assets over $2.5 million were required to file the new Form 990 for fiscal year 2008 activities. However, the IRS also announced a phased-in implementation period for the new form to allow smaller organizations time to prepare for the new requirements. At its option, an organization may file the simpler Form 990-EZ instead of the new form if it meets the following size criteria:
|2008||gross annual receipts between $25,000 and $1 million, and total assets below $2.5 million|
|2009||gross annual receipts between $25,000 and $500,000 and total assets below $1.25 million|
|2010 onward||gross annual receipts between $50,000 and $200,000 and total assets below $500,000|
The new Form 990 represents a significant departure from previous versions in many ways. In addition to requiring changes in the way certain data are gathered and reported, the new Form also asks a series of questions aimed at changing internal and governance practices at non-profits -- even though they may not be legally required. For this reason, non-profits should start early to familiarize themselves with the new Form 990 and prepare for compliance.
For More Information:
More information about the new Form 990, including copies of the new form, implementation schedules and filing tips, can be found on the IRS Web site at http://www.irs.gov/charities/article/0,,id=201398,00.html .
An overview of Form 990 filing requirements based on organization size is available on the IRS Web site at http://www.irs.gov/charities/article/0,,id=217087,00.html .
The IRS also has developed online, self-directed training modules on the new Form 990 and other common exempt organization topics at https://www.stayexempt.irs.gov/.
Beginning in 2008, the IRS began requiring many tax-exempt organizations with gross revenues of less than $25,000 to file an annual electronic notice in order to retain their tax-exempt status. Prior to the passage of the federal Pension Protection Act (PPA) in 2006, organizations with gross revenues of less than $25,000 were exempt from filing annual information returns (Form 990 or 990-EZ) with the IRS. Pursuant to the PPA, the IRS has developed a Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ, to be used by small organizations to satisfy the requirement. Religious entities will continue to be exempt from this requirement.
The annual e-postcard deadline is 5 months after the close of the organization's fiscal year (e.g., postcards were due May 15, 2008, for small organizations whose fiscal year ended December 31, 2007). The Form 990-N is an online electronic filing process administered by the Urban Institute, which also operates a Web site by which organizations of all sizes can file their Form 990 online. The e-Postcard must be filed electronically; there is no paper form.
Organizations that are required to file Form 990-N and fail to do so for three consecutive years will have their tax-exempt status revoked by the IRS as of the filing due date of the third year. In order to reinstate its tax-exempt status, the organization will have to reapply for recognition of tax exemption using Form 1023.
Note: Starting with the 2010 tax year, organizations with gross revenues of less than $50,000 (rather than $25,000) will be permitted to file the Form 990-N to satisfy their annual IRS Form 990 filing requirement.
For more information:
As part of its ongoing Political Activities Compliance Initiative (PACI), the IRS has released updated guidance regarding election-year activities of 501(c)(3) organizations. Pursuant to federal law, 501(c)(3) organizations are not permitted to “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” However, there are a number of activities that charities may conduct safely, provided certain safeguards are followed.
Revenue Ruling 2007-41 provides 21 examples of election-year behavior, along with the IRS’ guidance as to whether each is permissible for 501(c)(3) organizations. Types of situations covered in the Revenue Ruling include voter registration booths; get-out-the-vote phone drives; protected activities of individuals as distinguished from prohibited electioneering activities by organizations; candidate forums; appearances by candidates in non-candidate capacities; Web links; and more. In many cases, the facts and circumstances of a particular situation will determine whether an activity is permissible or prohibited.
The IRS has placed heightened emphasis on enforcement of this area of the law in recent years. Revenue Ruling 2007-41 is available from the IRS Web site at www.irs.gov/pub/irs-drop/rr-07-41.pdf . See also IRS Publication 1828, Tax Guide For Churches and Religious Organizations, which contains useful information for religious and non-religious organizations alike, available online at www.irs.gov/pub/irs-pdf/p1828.pdf .
IRS Gift Substantiation Requirement
Non-profits should be aware of important rules governing deductibility of charitable gifts. more information
IRS Disclosure Regulations for Non-Profits - A summary of IRS rules that require public charities to mail copies of their Form 990 and 1023 upon request or make them widely available by posting them on the Internet. It is important for non-profits to familiarize themselves with these regulations and adopt internal policies and procedures to ensure compliance.