IRS Offers One-Time Form 990 Filing Relief for Small Organization Non-Filers

September 8, 2010

Independent colleges and universities are keenly aware of their obligation to file Form 990 on an annual basis. However that may not be the case for small tax-exempt organizations associated with the institution, such as student organizations.

Revocation Penalty for Non-Filers Regardless of Size. Some of the small organizations on campus may have received their tax-exemption prior to 2007, when IRS did not require tax-exempt organizations with annual gross receipts of $25,000 or less to file Form 990. The Pension Protection Act of 2006 (PPA) imposed a Form 990 filing requirement on all tax-exempt organizations (except certain religious organizations), regardless of the amount of the organization's gross receipts. The IRS created a special "e-postcard" form, Form 990-N, for these small organizations, which requires a minimal amount of information and can be filed electronically. Along with the new reporting requirement on all tax-exempt organizations, the PPA further requires IRS to revoke the tax exemption of any nonprofit, regardless of size, that failed to file a return in the Form 990 series for three consecutive years. May 17, 2010 was the first third-year filing deadline that, if missed, would trigger revocation.

Realizing that thousands of small exempt organizations were still unaware of the new requirements and the loss of exemption penalty, the Service has announced a one-time filing relief program for organizations with gross revenues of $25,000 or less.

Under this program, an organization that was eligible and required to file Form 990-N for 2007, 2008, and 2009, but failed to do so, can preserve its tax-exempt status by filing the e-postcard form for these three years by October 15. The IRS has set up a home page for small organizations seeking relief, which provides links to resources and forms. The form can be completed and filed electronically on the IRS Web site.

The IRS has posted two helpful sets of frequently asked questions addressing details related to the program, addressing filing relief and automatic revocation.

While higher education institutions are not responsible for student organization filings, it is advisable to contact student and other related organizations on your campus to make sure they are informed about Form 990 filing obligations.

Form 990-EZ Relief. The IRS also announced a filing relief program for another category of small tax-exempts--those eligible to file Form 990-EZ. Currently, these are organizations that have annual gross receipts of less than $500,000 and total assets of less than $1,250,000. These amounts were different in 2007 and 2008; see the thresholds in effect for those years.