In the latest series of changes prompted by the Pension Protection Act of 2006, The IRS has recently announced new electronic filing requirements for small tax-exempt organizations that do not normally file. Beginning in 2008, small tax-exempt organizations that were not previously required to file returns may be required to file an annual Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ.
Under previous standards, small tax-exempt organizations with incomes of $25,000 or less, were not required to file Form 990, Return of Organization Exempt from Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. However, under new legislation, small tax-exempt organizations are now required to file an electronic Form 990-N, or the "e-Postcard", with the IRS annually.
Applicable to tax periods beginning after December 31, 2006, Form 990-N return will be due on the 15th day of the 5th month after the organization's fiscal year ends. Exceptions to the new filing requirement include organizations that are included in a group return, private foundations required to file Form 990-PF, and section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ.
These changes come in response to the passage of the Pension Protection Act of 2006 (PPA), which was established in an effort to improve transparency within the nonprofit sector. The new filing requirements are meant to ensure that the IRS, as well as donors and other potential contributors to a nonprofit organization have access to the organization's current information.
The IRS will mail educational letters starting in July 2007 notifying small tax-exempt organizations that they may be required to file the e-Postcard. The IRS is developing an electronic filing system (there will be no paper form) for the e-Postcard and will publicize filing procedures when the system is completed and ready for use.
Below is a list of highlights regarding the new filing requirement. Complete information and additional resources can be found on the IRS Web site:
According to the PPA, the IRS is required to revoke the tax exemption of any nonprofit that fails to file a return for three years in a row for tax years beginning January 1, 2007. For example, in May 2010, nonprofits that have failed to file Form 990, 990-EZ, 990-PF, or 990-N for three consecutive years will begin losing their tax-exempt status. Organizations whose tax-exempt status is revoked for failing to file Form 990-N may have their tax-exempt status reinstated, and must reapply for tax-exempt status via Form 1023, "Application for Recognition of Exemption," or Form 1024, "Application for Exemption under Section 501(a)."