Thursday, May 20, 2010

IRS Reaches Out to Small Nonprofits

Notwithstanding Monday's deadline that potentially stripped over 300,000 nonprofit organizations of their tax-exempt status, 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 important tax-exempt status -- even if they missed the May 17 deadline.”  According to the statement, the IRS will offer “relief to these small organizations and provide them with the opportunity to keep their critical tax-exempt status intact.”

The current problem stems from the provisions of the little-known Pension Protection Act of 2006.  The statute required nonprofits to start filing at least a Form 990-N (“e-Postcard”), even if their annual receipts were less than $25,000. Tax-exempt status would be revoked if annual paperwork was not filed for three consecutive years.  This being the third year since the statute took effect, several small nonprofits -- which had never heard of the statute -- now face automatic revocation of their tax-exempt status.  

Organizations with more than $25,000 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.

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.


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