If you serve on a nonprofit’s board, you should be aware of a recent law change that could put the organization’s tax exempt status at risk. Prior to this change, most exempt organizations other than churches and their affiliated entities, were required to file an annual return with the IRS. However, entities whose average gross receipts are no more than $25,000 annually have traditionally been exempt from this requirement. Beginning in 2008, that’s no longer true.
Small tax-exempt organizations must now electronically file a notice with the IRS called Form 990-N. This new form must be completed by organizations that are exempt from filing the more complex annual returns (Forms 990, 990-EZ, 990-PF, or 990-BL) because their gross income is below the filing threshold for these returns.
Although the Form 990-N should be very easy to file (the IRS refers to it as an e-postcard because it is so short), organizations that fail to file it for three consecutive years will lose their tax exempt status. The only way to regain a tax-exemption at that point will be to spend the time and expense of reapplying to the IRS—obviously not something that anyone will want to do.
The electronic form can be accessed through the IRS website (www.irs.gov/eo, which reroutes you to a third-party vendor, Urban Institute, who handles the filings for the IRS) or by going directly to the filing website: http://epostcard.form990.org. As with the information filed by large organizations, the information reported on Form 990-N will be available for the public to see. The public can view an organization’s Form 990-Ns at http://www.irs.gov/app/ePostcard/, as well as download the entire database of Form 990-Ns.
The deadline for filing Form 990-N is the 15th day of the fifth month after an organization’s year-end. Thus, for organizations using a calendar-year, the deadline for reporting 2007 information has already come and gone. However, there are no penalties for filing late as long as you don’t miss three years in a row and jeopardize the organization’s exemption. Nonetheless, it’s important to set up procedures within the organization to make sure the annual Form 990-N is filed on a regular basis as each year’s accounting is concluded. In addition, it is now more critical than ever to adequately record the organization’s gross receipts to aid in determining whether the Form 990-N or the more robust Form 990 or 990-EZ must be filed.
