By Gabrielle Lessard, Esq.
The IRS has published Notice 2011-43, which provides transitional relief for certain small organizations that lost their tax-exempt status because they failed to file an annual electronic notice for three consecutive tax years beginning in 2007. Qualifying organizations will be able to file for reinstatement of their tax-exempt status, retroactive to the date the status was lost, and pay a reduced filing fee of $100.
The relief applies to organizations that lost their exempt status because of their failure to comply with Sections 6033(i) and (j) of the Internal Revenue Code, which were added by the Pension Protection Act of 2006. Section 6033(i) applies to organizations that are exempt from filing annual information returns on Form 990 or 990 EZ because their gross receipts that are normally less than $25,000 (increased to $50,000 for the 2010 tax year). These organizations are required submit an annual electronic filing on Form 990-N, also called the e-postcard. Section 6033(j) provides that an organization’s exempt status will be revoked if it fails to file the 990-N or other required annual information return for three consecutive tax years. An organization’s annual gross receipts are “normally not more than” $25,000 or $50,000 in a taxable year if its average annual gross receipts for that taxable year and the two taxable years immediately preceding it are not more than $25,000 or $50,000, respectively.
An organization that had its tax-exempt status revoked under section 6033(j) must apply for reinstatement with the IRS, even if it was not originally required to file an application for recognition of exempt status (Form 1023). If the organization applying for reinstatement of tax-exempt status can show reasonable cause for its failure to file, its tax-exempt status may be reinstated retroactive to the date of the automatic revocation. Reinstatement is at the Secretary of the Treasury’s discretion, however, the IRS has set a very low bar for determining whether a small organization has established reasonable cause for its failure to file.
The IRS will treat an organization as having established reasonable cause if it meets each of the following criteria:
• The organization was not required to file Form 990 or Form 990-EZ for the taxable years beginning before 2007.
• The organization was eligible to file a Form 990-N in each of its taxable years beginning in 2007. Organizations (other than private foundations and most section 509(a)(3) supporting organizations) with annual gross receipts that were normally not more than $25,000 would generally have been eligible to file the Form 990-N.
• The organization submits its application for reinstatement to the IRS on or before December 31, 2012.
An organization must apply for reinstatement on the form used to apply for recognition of exempt status, even if it was not originally required to file. Thus, an organization seeking reinstatement under section 501(c)(3) would file Form 1023, and an organization seeking reinstatement under section 501(c)(4) would file Form 1024. The organization must write “Notice 2011-43” on the top of the form and on the envelope in which it is mailed. The organization must also attach the following statement to its application:
[Name of Organization] was not required to file annual information returns for taxable years beginning before 2007; was eligible in each of its taxable years beginning in 2007, 2008 and 2009 to file a Form 990-N e-Postcard; and had annual gross receipts of normally not more than $25,000 in each of its taxable years beginning in 2007, 2008 and 2009.
Organizations that had their exempt status revoked for failure to file under Section 6033(j), but do not qualify for the relief described above, must also file the application for recognition of tax exempt status and pay the normal user fee. The application must include a request for retroactive reinstatement that conforms to requirements set out in IRS Notice 2011-44.
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked. The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007. A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website. 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. Small non-profit organizations with annual receipts of $25,000 or less can file an electronic notice, Form 990-N (e-Postcard). They will need only a few basic pieces of information to file: the organization’s employer identification number, its tax year, legal name and mailing address, any other names used, an Internet address if one exists, the name and address of a principal officer and a statement confirming the organization’s annual gross receipts are normally $25,000 or less. Tax-exempt organizations with annual receipts above $25,000 are required to file the Form 990 or the Form 990-EZ annually. Private foundations file Form 990-PF. Churches and integrated auxiliaries of churches are not required to file Form 990-series returns or notices. Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.