Author: Robin Noah
Executive Coaches of Orange County
Is your nonprofit organization complying with the annual filing of Forms 990, 990-EZ, or 990- PF each year with the IRS? If not, your organization may be one of the many nonprofits subject to a loss of your tax exempt status. GuideStar – a leading source of nonprofit information – estimates that 350,000 to 400,000 nonprofits are in danger of losing their exemptions. If that happens to your nonprofit, you will no longer be able to accept tax-deductible contributions.
A large number of these organizations are smaller nonprofits that previously were not required to file an annual return because their gross revenues were $25,000 or less; however that changed in 2008. Starting January 2008 these nonprofits were required to file Form 990-N each year. (Source www.IRS.gov)
The Pension Protection Act of 2006 requires almost all exempt organizations, except churches and religious groups, to file an annual report with the Internal Revenue Service. Under that act, the IRS is required to revoke the tax exemption of organizations that do not file the required report for three consecutive years. As that act took effect in 2007, those three years are now up.
Nonprofits that lose their tax-exempt status and wish to have their exemptions reinstated will be required to re-apply to the IRS for tax-exempt status, a process that can take several months with no assurance that the status will be granted again.
According to the IRS Filing Relief/Voluntary Compliance Program – 990-EZ Filers:: the smallest organizations, those eligible to file Form 990-N (e-Postcard) , and whose e-Postcards are due on or after May 17 and on or before October 15 – can maintain their tax-exempt status by filing the required electronic notice by October 15, 2010.
Other small organizations – those eligible to file Form 990-EZ for all three years – can use the one-time voluntary compliance program (VCP) to come back into compliance. Go to www.IRS.gov for more information.
The IRS began sending revoking exemptions notices on May 17, 2010. The May 17 deadline applies to exempt organizations whose fiscal year ends on December 31, 2009. The IRS is essentially giving delinquent nonprofits a six-month grace period in which to file their annual returns. The actual revocation notices will be mailed January 2011.
Should your tax-exemption be revoked you will need to notify your donors and clients –AND – you will have to address the negative impact on your mission.