The Pension Protection Act of 2006 introduced a new notification requirement for small tax-exempt organizations that are not required to file an annual information return under IRC § 6033(a)(1). In July, the IRS released final regulations spelling out what small tax-exempt organizations must do to meet this requirement. Practitioners should also note a new provision, which comes 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.
Generally, tax-exempt organizations are required annually to file either Form 990, Return of Organization Exempt From Income Tax, or the shorter Form 990-EZ, but the IRS has exempted organizations with gross receipts that are normally $25,000 or less (Revenue Procedure 94-17). Such organizations are required to file the e-postcard instead.
Organizations subject to the e-postcard filing requirement must annually submit 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 some basic information, including legal name and any name under which the organization operates or does business; mailing address; taxpayer identification number; and evidence of the continuing basis for the organization’s exemption from annual filing (verification of continuing gross receipts of $25,000 or less). The filing date of the e-postcard is the fifteenth day of the fifth month after the close of the organization’s tax year. It should be submitted at epostcard.form990.org (note that this is not an IRS site). No filing fee is required.
PENALTY FOR FAILURE TO FILE
The 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 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 in the left rail). 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 section 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.
For a detailed discussion of the issues in this area, see “Small Tax-Exempt Organization E-Postcard Requirements Finalized,” by Sarah Lovinger, in the November 2009 issue of The Tax Adviser.
—Alistair M. Nevius, editor-in-chief
The Tax Adviser
Also look for articles on the following subjects in the November 2009 issue of The Tax Adviser:
Aggregating activities to avoid the hobby loss rules.
Recent developments affecting employee benefits and pensions.
An update on S corporation developments.
The Tax Adviser is the AICPA’s monthly journal of tax planning, trends and techniques. AICPA members can subscribe to The Tax Adviser for a discounted price of $85 per year. Tax Section members can subscribe for a discounted price of $30 per year. Call 800-513-3037 or e-mail firstname.lastname@example.org for a subscription to the magazine or to become a member of the Tax Section.