In April, we circulated an article addressing automatic revocation of the tax-exempt status of organizations that fail for three consecutive years to file the required Form 990. Last week, the Internal Revenue Service (“IRS”) announced a one-time relief program, whereby certain noncompliant organizations can preserve their tax-exempt status by filing returns by October 15, 2010. The relief program applies only to tax-exempt entities that are eligible to file a Form 990-N (Electronic Notice, or e-Postcard) or a Form 990-EZ (Short Form Return of Organization Exempt from Income Tax).
The Pension Protection Act of 2006 generally revokes the tax-exempt status of any organization that fails for three consecutive years to file an annual return. These automatic revocations were scheduled to commence as early as May 15, 2010. However, under the filing relief program, certain smaller organizations have until October 15 to remedy their failure to file, and thus to retain their tax-exempt status.
The one-time program offers two types of relief: (1) a filing extension for organizations that file the Form 990-N (e-Postcard), and (2) a voluntary compliance program for organizations that are eligible to file the Form 990-EZ. Larger organizations that are required to file the Form 990 and private foundations that are required to file the Form 990-PF are not eligible for the filing relief program.
Filing extension for organizations that file the Form 990-N (e-Postcard)
Tax-exempt organizations that file the Form 990-N (gross receipts normally less than or equal to $25,000) can come back into compliance by visiting the IRS website (www.irs.gov) and electronically filing the e-Postcard by October 15. The form calls for eight pieces of information about the organization:
- Employer identification number (EIN), also known as a Taxpayer Identification Number (TIN)
- The organization’s tax year (calendar or fiscal)
- Legal name and mailing address
- Any other names the organization uses
- Name and address of a principal officer
- Website address if the organization has one
- Confirmation that the organization’s annual gross receipts are normally $25,000 or less
- If applicable, a statement that the organization has gone or is going out of business
Voluntary compliance program for organizations that file the Form 990-EZ
Organizations eligible to file the Form 990-EZ can participate in the voluntary compliance program (“VCP”) by filing their delinquent annual information returns (i.e., returns for tax years 2007, 2008, and 2009) and by paying a compliance fee. To participate in the VCP, the organization must have been eligible to file a Form 990-EZ each of the past three years under the following limits:
- For the 2007 tax year: gross receipts less than $100,000 and total assets less than $250,000
- For the 2008 tax year: gross receipts less than $1 million and total assets less than $2.5 million
- For the 2009 tax year: gross receipts less than $500,000 and total assets less than $1.25 million
The required compliance fee under the VCP varies depending on the organization’s gross receipts as reported on the 2009 return:
- $100 for organizations with gross receipts of $100,000 or less
- $200 for organizations with gross receipts between $100,001 and $200,000
- $500 for organizations with gross receipts between $200,001 and $499,999
List of organizations at risk of revocation
The IRS has published on its website a list of organizations at risk of automatic revocation of their tax-exempt status. You can click here to follow a link directly to the list. Please note, however, that the list may be incomplete—the following types of organizations may not appear on the list, even though they are not in compliance with the annual filing requirements:
- Subordinates in group rulings for which the parent has not filed a required group return
- Very small section 501(c)(3) public charities not required to file an application for exemption (e.g., organizations with gross receipts normally less than $5,000 per taxable year)
- Other section 501(c) organizations not required to file an application for exemption
In addition, the list may contain the names of organizations that are ineligible for relief because they are required to file the Form 990 or Form 990-PF.
An organization that loses its tax-exempt status must reapply with the IRS to regain its tax-exempt status. If you believe your organization is at risk, you should discuss the matter with your tax advisor.
If you have any questions or require our assistance, please do not hesitate to contact Diannne Chipps Bailey at (704) 377-8323, or Ty E. Shaffer at (704) 377-8142.