This E-Alert is a reminder to small tax-exempt organizations that the October 15 deadline to file tax returns under the IRS one-time relief program (the "Relief Program") is soon approaching. Under the Relief Program, small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for each of 2007, 2008 and 2009 can preserve their status by filing these returns by October 15, 2010. The Pension Protection Act of 2006 provides that tax-exempt organizations failing to file for three consecutive years will automatically lose federal tax-exempt status.
The Relief Program offers two types of relief for small exempt organizations:
- A filing extension is granted for organizations with annual receipts of $25,000 or less that are required to file Form 990-N, Electronic Notice (e-Postcard). These organizations can electronically file Form 990-N on the IRS Web site.
- A voluntary compliance program (VCP) is available for small organizations that were eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, for 2007, 2008 and 2009. Due to the phase-in of the new Form 990-EZ, the filing thresholds are different for each of these years: for tax year 2007, organizations whose gross receipts were less than $100,000 and whose total assets were less than $250,000 could file Form 990-EZ; for tax year 2008, organizations whose gross receipts were less than $1 million and whose total assets were less than $2.5 million and; for tax year 2009, organizations whose gross receipts were less than $500,000 and total assets were les than $1.25 million. Under the VCP, eligible tax-exempt organizations must file their delinquent annual information returns by October 15 and pay a compliance fee.
Unfortunately, larger organizations required to file the Form 990 or private foundations that file the Form 990-PF are not eligible for the Relief Program.
A list of at-risk organizations can be found on the IRS website. This list consists of over 300,000 organizations that have not filed the required information for 2007, 2008 or 2009 and will be available until October 15, 2010. The IRS will revoke the tax-exempt status of the listed organizations that have not filed delinquent returns by October 15 and will publish a list of these revoked organizations in early 2011.
We strongly encourage those small nonprofit organizations that are eligible for the one-time Relief Program to file their delinquent returns by October 15, 2010. Organizations that do not take advantage of this relief and subsequently lose their tax-exempt status will be required to reapply with the IRS to re-obtain its tax-exempt status. This means that any income received between the revocation date and renewed exemption may be taxable. Additional details on the Relief Program can be found on the IRS website in the Charities & Non-Profits Section.