The Pension Protection Act of 2006, P.L. 109-280, made various modifications to the provisions governing tax-exempt organizations. Among the changes was the addition of a new notification requirement under Sec. 6033(i) for small taxexempt organizations that are not required to file an annual information return under Sec. 6033(a)(1). While the final regulations under Regs. Sec. 1.6033-6 (T.D. 9454), which were released on July 23, 2009, did not materially change the temporary regulations that they replaced, it is prudent to note a provision, which will come into play for the first time in tax year 2009, that may jeopardize the tax-exempt status of some small organizations that fail to comply with the notification requirement.
Notification RequirementAs described in Sec. 6033(i), the notification requirement is an electronic form that must be submitted annually. The form to be submitted is Form 990-N, Electronic Notice (e-Postcard) for Tax- Exempt Organizations Not Required to File Form 990 or 990-EZ.
The form asks organizations to provide the following basic information:
- Legal name;
- Any name under which the organization operates or does business;
- Mailing address;
- Internet address (if any);
- Taxpayer identification number;
- Name and address of a principal officer;
- Evidence of the continuing basis for the organization’s exemption from annual filing (verification of continuing gross receipts of $25,000 or less); and
- Notification if the organization has terminated.
Organization Required to FileGenerally, tax-exempt organizations are required to file either a Form 990, Return of Organization Exempt from Income Tax, or the shorter Form 990-EZ annually. However, two provisions of Sec. 6033 serve to reduce the filing burden placed on smaller exempt organizations.
The first of these provisions, Sec. 6033(a)(3)(A)(ii), specifically exempts various described organizations, with gross receipts generally not more than $5,000, from the requirement to file a Form 990. However, the second provision, a discretionary exemption set by the IRS under the authority allotted to it under Sec. 6033(a)(3)(B), is more inclusive, providing an exemption to organizations with gross receipts that are normally $25,000 or less (Rev. Proc. 94-17). The organizations that benefit from the $25,000 minimum gross receipts exemption are required to file the e-postcard.
If an organization is required to file an annual Form 990, Form 990-EZ, or Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation, it is not required to also file an e-postcard. Churches and organizations that are included in a group return are also not required to file an e-postcard. If an organization is required to file an epostcard, it may choose to file a complete Form 990 or Form 990-EZ instead and thereby will be deemed to have fulfilled its filing requirement. This provision of the regulations provides organizations uncomfortable with the statutorily required electronic submission a means by which to file in a paper format.
Penalty for Failure to FileThe e-postcard requirement appears to be a way of ensuring that IRS records of contact information for tax-exempt organizations remain current and of providing public access to the information. Limited information for organizations eligible to receive tax-deductible charitable contributions, such as name, city, and state, is made available to the public via Publication 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code of 1986, located at www.irs.gov/eo (under the “Search for Charities” link). However, e-postcards in their entirety may be searched for and viewed at www.irs.gov/app/ePostcard.
There is no monetary penalty for late filing or failing to file an e-postcard. However, under Sec. 6033(j), an organization that fails to file for three consecutive years will have its tax-exempt status revoked as of the due date of the third missed filing. Therefore, because the e-postcard requirement became effective starting with tax years beginning after 2006, organizations that have been in existence since at least that time and have failed to file to date will find that their tax-exempt status will be revoked during 2010 if they do not timely submit their e-postcard for the 2009 tax year.
Mark Cook is a partner at Singer Lewak LLP in Irvine, CA.
Unless otherwise noted, contributors are members of or associated with Singer Lewak LLP.The editor would like to offer a special thanks to Jennifer Allison, J.D., for her assistance with this column.
For additional information about these items, contact Mr. Cook at (949) 261-8600, ext. 2143, or email@example.com.