Private Client Services Update – Important Reminder for “Small” Charitable Organizations
Certain small charitable organizations subject to the Form 990-N filing requirement that fail to submit the form by May 15, 2010, will have their tax exempt status automatically revoked.
Until enactment of the Pension Protection Act of 2006 (‘PPA’), small charitable organizations (other than those classified as private foundations) were not subject to any information reporting requirements if their annual gross receipts were normall $25,000 or less. This changed with the PPA. Under the PPA, such organizations (other than churches and certain other religious organizations) must submit to the IRS an annual electronic notification (an electronic postcard). This is the Form 990-N, Electronic Notice for Tax Exempt Organizations Not Required to File Form 990 or 990-EZ. The following basic information is provided on the Form 990-N: (i) the legal name of the organization; (ii) any other name under which the organization operates or does business (a d/b/a name); (iii) the organizations mailing address and website address, if any; (iv) the organizations employer identification number; (v) the name and address of a principal officer; and (vi) confirmation that gross receipts are normally $25,000 or less.
The PPA also calls for revocation of the tax exempt status of any organization that fails for three consecutive years to file a Form 990, Form 990-EZ, Form 990-PF, or Form 990-N, as the case may be, if the organization is otherwise required to file. This provision of the PPA became effective for notices and returns with respect to annual periods beginning after 2006. So, calendar year charitable organizations with a May 15, 2010, filing deadline are the first to potentially feel the effect of this legislation.
The IRS has no discretion with respect to revocation for failure to file. Regardless of how reasonable the cause may be, revocation is automatic. Any organization whose tax exempt status is automatically revoked must apply to the IRS for reinstatement of tax exempt status even if the organization was not originally required to file an application for recognition of its exempt status.
Recognizing that small organizations unaccustomed to any filing requirements are the most likely to inadvertently neglect to submit the Form 990-N, the IRS has invested substantial effort in getting the word out about the Form 990-N and automatic revocation — through letters to exempt organizations listed in its records, postings on its website, disseminating information through public libraries, and the like. Nevertheless, there is concern in the exempt organizations community that some small charitable organizations might slip through the cracks.
David Kamer is a partner in the firm’s Norfolk office. David advises a wide array of non-profit organizations on compliance, governance and operational matters. He also maintains a trusts & estates practice with particular focus on charitable giving, and planning for professionals and executives. David can be reached at (757) 624.3175 or firstname.lastname@example.org.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.