Reinstatement of tax exempt status after automatic revocation
Thousand of charities have had their tax exempt status automatically revoked because they failed to file the IRS 990-N (e-postcard) for the past three years. Many of the these organizations, prior to 2007, were not subject to any IRS reporting requirement and were not aware of the new requirement. Many of these organizations will now be able to get their status reinstated for a reduced filing fee of $100, retroactive to the date of the automatic revocation. The IRS is implementing this transitional relief" program to assist small volunteer-managed nonprofits to get back their tax exempt status. For much more information and the details of eligibility and the required procedures, go to the IRS website.  Be sure to follow the links to Notice 2011-43, the IRS video and the information regarding retroactive reinstatement to get a full understanding of what an organization must do to reinstate its tax exempt status.

New Guidance from the IRS eliminates logging of cell phone use
The IRS has issued Notice 2011-72 regarding the tax treatment of employer-issued cell phones. The Independent Sector website offers information and links to help nonprofits understand and apply this new guidance. The new guidance was necessary after the President signed into law the Small Business Jobs Act of 2010 that removed cell phones from the list of property businesses must maintain and report. 

New IRS Form 8940 for Miscellaneous Determinations

Charities can use this one-page Form 8940 to obtain needed rulings on a number of issues such as an advance approval of voter registration activities, scholarship procedures, unusual grants or set-asides; reclassification or termination of foundation status; change in the determination of the type of 509(a)(3) organization; or exemption form 990 filing. Form 8940 and the Instructions are available on the IRS website. The Instructions also provide information regarding all supporting materials required to make the request. The form must be accompanied by the appropriate User Fee. To find out what User Fee must accompany the Form, go to Revenue Procedure 2011-8 or call the IRS Exempt Organizations toll-free number at 1-877-829-5500.

Note: This form should not be used to substitute for the Form 1023. Carefully read who is eligible to file this form on Page 1 of the Instructions.

New IRS Thresholds for charities filing the 990-N or 990-EZ

Beginning with the 2010 tax year, organizations with gross annual revenue of no more than $50,000 must file IRS Form 9990-N, also known as the e-Postcard. For prior tax years, organizations with gross revenue between $25,000 and $50,000 were required to file the longer 990-EZ.

 

Organizations with gross receipts more than $50,000, but less than $200,000 and total assets less than $500,000 must file either Form 990-EZ or Form 990. If either gross receipts for the year are $200,000 or more, or if total assets are $500,000 or more, then a full Form 990 is required.

 

Filing deadlines have not changed. Filings are due the fifteenth day of the fifth month following the end of the fiscal year. The IRS webpage offers much more information and additional resources.

U.S. Supreme Court Decision in Citizens United v Federal Election Commission
In January 2010 the Court issued a decision in a case that arose out of Michigan challenging corporate limitations on contributions to political campaigns. The Court decision has no immediate or significant impact on charitable organizations that are exempt under Section 501(c)(3) of the Internal Revenue Code. The prohibitions on political expenditures are unchanged. For a more detailed discussion of this case, see MNA's new Michigan Nonprofit Management Manual, 5th Edition, Chapter 16, Lobbying and Political Activity, available at MNA's online bookstore. The Web site for Independent Sector also discusses the opinion and its impacts.

IRS Reporting for Small Charities
All charities are now required to report annually to the IRS, regardless of size. While this requirement was implemented in 2008, it remains on this page because it is of such great significance to small nonprofits. The failure to file this form will result in revocation of the organization's tax exempt status. In the past, charities with gross annual receipts less than $25,000 had no annual reporting requirement and were asked to report only when they received a form from the IRS. This has changed. Charities that are not required to file the Form 990-EZ or the full Form 990 must file Form 990-N (e-Postcard). This requirement is in effect for fiscal years beginning on or after January 1, 2007. So the first 990-N filing requirements will be May 15, 2008. Read more at the IRS website or go to the Urban Institute website to file the new form.

Failure to File IRS Annual Reporting Form will result in revocation of exempt status

Under the provisions of the Pension Protection Act of 2006, charities that fail to file with the IRS for 3 years will automatically lose their tax exempt status, unless they fall under a specific exemption. For example, churches are exempt from filing requirements. Organizations that lose their exempt status must reapply and pay the required filing fees to reinstate tax exempt status. For more information see the IRS Web site.