Tax-Exempt Status Could Hinge On Filing Deadline

I posted a blog earlier this week explaining how 200,000 charities and non-profits are at risk of losing their non-profit status if they do not file a return by this upcoming Monday. The deadline is quickly approaching; are you ready? While you would think this would prompt any organization at risk to act quickly, as this story from NRP asserts, many simply do not know about the looming deadline.

The requirement goes back to a 2006 law that says nonprofits with revenues of $25,000 or less have to start filing annual tax forms — something they never had to do before. The law also says that if they fail to do so for three years in a row, their tax-exempt status will be immediately revoked.

Since nonprofits have to file no later than four months and 15 days after the end of their fiscal year, the three-year deadline for many groups is May 17 (May 15 falls on a Saturday).

Tim Delaney, head of the National Council of Nonprofits, is worried that a lot of tax-exempt groups will miss the deadline. He notes that some of these organizations are run informally by volunteers.

"The concern that a lot of people have is that many smaller nonprofits — a PTA, a local Little League — will even be aware of this change in the law," he says.

Continue reading at NRP.org…

IRS Finds Possible Problems with How Colleges Report Business Income and Set Salaries

While many colleges might be tax-exempt on reported college enterprises such as facility rentals, bookstores, and food services, colleges are still supposed to report their profits and losses to the IRS on these services. Yet many small colleges, the IRS is finding out, have never even filed the appropriate tax forms for such activities. The IRS sent a 42-page survey to 400 private and public colleges in late 2008 asking the institutions to disclose financial details about their business ventures and executive compensation. The IRS began auditing 30 institutions of higher learning based on their responses, as well as thirteen that did not respond to the survey. The article in The Chronicle of Philanthropy website reads that the IRS is concerned with unreported business activities and questions the compensation of the most valuable university employees such as presidents and chancellors. Private colleges are supposed to follow IRS guidelines on compensation. The IRS also found that most of the institutions surveyed also are not seeking out expert advice to determine whether to report those activities.

Read the full article here.

Preserve Your Organization's Tax-Exempt Status with IRS

Does the IRS recognize your organization to be a non-profit or have tax-exempt status? The IRS has announced a critical deadline for many tax-exempt organizations. If you want to preserve your organization’s tax-exempt status, you will need to file Form 990 by May 17th or risk the revocation of your federal tax-exempt status. Usually the deadline for filing this form is May 15th, if using the calendar year or the 15th day of the fifth month after an organization’s fiscal year ends. Since May 15th falls on a Saturday this year, Monday, May 17th is this year’s deadline.

Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). Tax-exempt organizations with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on annual receipts. Any private foundations file form 990-PF.

Since 2007, The Pension Protection Act of 2006 mandates that all non-profit organizations (other than churches and other church related organizations) must file this form with the IRS. If your organization does not file for three consecutive years it will automatically lose its federal tax-exempt status. Don’t let that happen, because otherwise, you may be taxed on any income received between the revocation date and your renewed exemption. You will have to reapply with the IRS to regain tax-exempt status.

Nonprofits: Are You at Risk of Losing Your Tax-Exempt Status?

Last week, Gina M. Lavarda of Iowa published a new report titled “Nonprofits: Are You at Risk of Losing Your Tax-Exempt Status?” Check out the following clip of her abstract courtesy of the Tax Prof. Alternatively, you can download a PDF of the full report by clicking here.

In 2004, the IRS studied 110 § 501(c)(3) organizations and found that seventy-five percent of them had violated federal tax law by engaging in political-campaign activities during the 2004 campaign period. The IRS learned that many of these organizations did not understand the broad scope of the political-campaign prohibition and that organizations’ leaders mistakenly spoke on behalf of their organizations rather than in their personal capacities separate from their organizations. Following the study, the IRS stated that any § 501(c)(3) organization that did not comply with federal tax law’s statutory requirements and restrictions risked losing its tax-exempt status.

As the 2008 campaign was in full swing, the IRS promised to step up its enforcement of § 501(c)(3) requirements. As a result, courts likely will face increased litigation related to § 501(c)(3) organization violations. This Note reviews the requirements and restrictions that are placed on § 501(c)(3) organizations, including the political-campaign prohibition. In addition, this Note proposes a test to assist courts, § 501(c)(3) organizations, and leaders of § 501(c)(3) organizations in determining when organizations’ leaders are acting or speaking on behalf of their organizations and when they are speaking in their personal capacities, exercising their First Amendment free-speech rights.

IRS Reminds Small Tax-Exempt Organizations to File e-Postcards

The IRS recently put out a new press release reminding tax-exempt organizations to file “their annual electronic informational return with the IRS by the May 15 deadline.”

This is the second year of the new requirement for tax-exempt organizations whose gross annual receipts are normally $25,000 or less to file Form 990-N also known as e-Postcards. The process is fast and easy.

The May 15 deadline applies to all small organizations whose tax year ends on Dec. 31. Organizations whose tax year is different from the calendar year must file the e-Postcard by the 15th day of the 5th month after the close of their tax year.

“The leadership of these small organizations tends to change rather frequently, so it is important to remind everyone of this filing requirement,” said Lois Lerner, director of the IRS’s Exempt Organizations division. “It’s important for an organization to file. If it fails to do so for three consecutive years, it will automatically lose its tax-exempt status.”

The e-Postcard is a simple, Internet-based form that asks a few identifying questions about the organization. The e-Postcard must be filed online; there is no paper option.