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.