Small not-for-profit organizations at risk of losing their tax exemption because of their failure to file the Form 990-N or Form 990-EZ for the 2007, 2008, and 2009 taxable years can preserve their status by filing these returns by October 15, 2010.  The IRS announced yesterday a one-time relief program for these organizations that will give them a “pass” until October 15, 2010.

On July 26, 2010, the IRS also posted a list of the organizations at-risk of losing their tax-exempt status because, according to the IRS, they have not filed their returns for 2007, 2008, and 2009.  Organizations should confirm whether or not they are listed on this list.  And even if an organization does not appear on this list, it should still check its records and determine whether it is at risk of automatic revocation because of not satisfying annual filing requirements.  In fact, the IRS acknowledges that the list may be incomplete and certain organizations at risk of automatic revocation may not be listed.

Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N and a voluntary compliance program (“VCP”) for small organizations eligible to file Form 990-EZ.

To become compliant, small organizations required to file Form 990-N can go to the IRS website, supply the eight information items called for on the form, and electronically file it by October 15.  On the other hand, under the VCP, tax-exempt organizations eligible to file Form 990-EZ must not only file their delinquent information returns by October 15, but must also pay a compliance fee.

Importantly, the relief announced by the IRS is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.

Organizations that have not filed the required information returns by October 15 will have their tax-exempt status revoked, and the IRS will publish a list of these revoked organizations in early 2011. Donors who contribute to at-risk organizations are protected until the IRS publishes the final revocation list.  At that point, donations to these organizations will no longer be tax deductible.

This one-time relief is extremely helpful to many small organizations that are at risk of automatic revocation.  As IRS Commissioner Douglas Shulman stated, “…[I]f you do not have your filings up to date, now’s the time to take action and get back on track.”

For additional information about losing tax exemption because of failure to file, please see our April 5, 2010 blog entry.  For additional information about the VCP, please visit the IRS website and frequently asked questions about the VCP.

Posted in IRS Filings
Tags: Form 990
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Photo of A. Nicole Campbell A. Nicole Campbell

A. Nicole Campbell is Associate General Counsel at the Open Society Institute (“OSI”), a private operating and grantmaking foundation in New York City. As Associate General Counsel, Nic works on a wide range of exempt organization matters at the foundation, including tax compliance…

A. Nicole Campbell is Associate General Counsel at the Open Society Institute (“OSI”), a private operating and grantmaking foundation in New York City. As Associate General Counsel, Nic works on a wide range of exempt organization matters at the foundation, including tax compliance and grantmaking, as well as other corporate, compliance, and governance matters. Prior to joining OSI, Nic was an associate in Proskauer’s Tax Department and a member of its Not-for-Profit/Exempt Organizations Practice Group where she advised not-for-profit clients on a variety of matters, including applying for and maintaining exemption from federal income tax, structuring joint ventures and partnerships with taxable entities, and excise tax issues. In 2009, while at Proskauer, Nic went on leave to The New York Community Trust as its Associate General Counsel and was responsible for handling a range of legal matters, including charitable contributions, donor-advised funds, and corporate and governance issues. From 2007 to 2009, she was recognized by the New York State Bar Association for her pro bono service, earning her the title of “Empire State Counsel.” In 2008 and 2009, she was honored by The Legal Aid Society as one of the recipients of the Society’s Pro Bono Publico Awards for outstanding service to the Society and its clients. She is also a past recipient of the Proskauer Rose Golden Gavel Award for her commitment to pro bono service.
Nic is an Editor of and contributor to the Not-For-Profit/Exempt Organizations Blog and she has also been a presenter at Proskauer’s annual “Trick or Treat Seminar,” where she discusses recent developments affecting tax-exempt entities.
At Northeastern University School of Law, Nic was a Teaching Assistant for the Legal Practice Writing Program and a Teaching Facilitator for the Law Skills in Social Context Program.
As an Educational Counselor for Massachusetts Institute of Technology, Nic interviews high school students who are interested in attending. Nic is also a member of the Board of Directors of Ardea Arts, Inc., a not-for-profit organization dedicated to developing and producing new American opera and music theater works for multi-generational audiences. Nic is also founding Director of Access Caribbean Assistance Fund, a not-for-profit organization that provides health and education assistance to needy individuals in the Caribbean.

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