A Reprieve for Small Nonprofits?

Revocation of Exemption

Monday was the deadline for small nonprofits to file overdue Form 990s or face automatic revocation of tax-exempt status. Notwithstanding Monday’s deadline, Internal Revenue Service (IRS) Commissioner Doug Shulman said the agency will do what it can for small charities to keep their exemptions in a statement released on Tuesday.

Commissioner Shulman said the IRS will be providing additional guidance in the near future on how it will help these organizations maintain their tax-exempt status – even if they missed the May 17 deadline.  According to the statement, the IRS will offer relief to these small nonprofits and provide them with the opportunity to retain their tax-exempt status.

The issue is due to provisions in the Pension Protection Act of 2006 that require nonprofits to start filing at least a Form 990-N (e-Postcard), even if their annual receipts were less than $50,000, and requiring the IRS to revoke the tax-exempt status nonprofits that fail to file their Form 990 for 3 consecutive years. This is the third year since the law took effect. Now, hundreds of thousands of small nonprofits — which have likely not tracked filing requirements since there were none until recently, are facing automatic revocation of tax-exempt status.

Related post: Small Change Could Spell the Big Difference for Small Arizona Nonprofits

Organizations with more than $50,000 in annual receipts must file Form 990 or Form 990-EZ annually. Private foundations file Form 990-PF. The tax forms are generally due four and a half months after the end of an organization’s fiscal year which is May 15 for a calendar year taxpayer. This year, May 15 fell on a Saturday, making May 17 the key deadline. The Urban Institute’s National Center for Charitable Statistics (NCCS) estimates that of the 1,592,810 nonprofit organizations in the United States, more than 21 percent — or 340,834 — had not yet filed the required tax returns.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form

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