In late July, the Internal Revenue Service announced that tax-exempt organizations that have not filed tax returns for 2007, 2008, and 2009 are at risk of losing their tax-exempt status on October 15 of this year. These organizations can preserve their status by filing returns by October 15 under a one-time relief program.
The Service has posted on a special page on its website (IRS.gov) the names and last known addresses of these at-risk organizations, along with guidance about how to get back into compliance. The organizations on the list have return due dates between May 17 and October 15, 2010, but the Service has no record that they filed the required returns for any of the past three years. The Service has organized this list by state. Users may download the state lists in either Adobe pdf format, or Microsoft Excel format. There are almost 24,000 such organizations in Texas, many of which are in North Texas. By downloading the Excel version of the list, users are able to sort the list by name or city to facilitate determining if a particular organization is at risk.
Two types of relief are available for small exempt organizations — filing an extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard), and a voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ (Short Form Return of Organization Exempt From Income Tax). Small organizations required to file Form 990-N may simply go to the IRS website, supply the eight information items called for on the form, and electronically file it by October 15. That will bring them back into compliance. Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by October 15 and pay a compliance fee.
The compliance fee is required for participation in the VCP. The compliance fee is in lieu of taxes, penalties, and interest that otherwise would be incurred because of not filing the annual information. Paying the compliance fee does not affect liability for any taxes that would be imposed even if the organization had filed the returns, including unrelated business income tax and employment taxes. The compliance fee ranges from $100 for organizations with gross receipts of $100,000 or less, to $500 for organizations with gross receipts over $200,000 but less than $500,000. Other details about the VCP are on the IRS website, along with frequently asked questions.
This relief is not available to larger organizations required to file Form 990 (Return of Organization Exempt from Income Tax) or to private foundations that file Form 990-PF (Return of a Private Foundation).
In early 2011, the IRS will publish a list of the organizations that had their exemption revoked. Donors who contribute to at-risk organizations are protected until the Service publishes the final revocation list. If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
In these taxing times, it is important to preserve the favorable status of our tax-exempt organizations. If you need help with your tax-exempt organization, contact me at 214.957.3366 or at response@phdcpa.com.
Ronnie
Copyright 2010
