03/10/2010

Nonprofit Tax Exempt Alert: Small Not-for-Profits Need to File Form 990-N to Keep Exempt Status

The Pension Protection Act of 2006 (PPA) made several significant changes to the reporting requirements for tax-exempt organizations. While these changes have been the subject of prior e-alerts, we wanted to inform small not-for-profit organizations of one of these changes again, as it has particular importance in 2010. An exempt organization having less than $25,000 of gross receipts that is not otherwise required to file a Form 990 with the Internal Revenue Service must nevertheless file an electronic notice, or an "e-Postcard," with the IRS that sets forth basic information. The electronic filing has been labeled Form 990-N by the IRS. A provision of the Internal Revenue Code added by the PPA states that if an exempt organization does not file the required annual return within the Form 990 series or the e-Postcard for three consecutive years, then that organization's exempt status is revoked as of the due date of the applicable filling for the third consecutive year. Reapplication with the IRS, with consequent user fees and time spent preparing tedious forms and attachments, would be necessary for reinstatement. 

The reason this is particularly timely in the spring of 2010 is that the third consecutive year of the required filings of a Form 990 or e-Postcard since enactment of the PPA applies to returns for years beginning in 2009. For calendar-year exempt organizations, the due date for the required filing of a 2009 Form 990 or the e-Postcard is May 15, 2010. A tax-exempt organization can file its e-Postcard by visiting the IRS Web site (click on Charities & Non-Profits from the ribbon on the top of the site and then click on Annual Electronic Filing Requirement), or by accessing the privately maintained http://epostcard.form990.org/. 

Many organizations may not be aware of the need to maintain contacts with the IRS in order to retain tax exempt status. For more information about the PPA or tax-exempt status, contact any of the attorneys in our Nonprofit Tax-Exempt Organizations Group.