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Pension Protection Act imposed "NEW" (2006) BURDENS on SMALL NONPROFITS! *
Revocation
of Exempt Status if Returns/Notices Not Filed. Under prior law,
once an organization received its determination from the IRS,
determining that it has been found exempt
from tax under section 501(c)(3) of the Code, that status was FINAL --
it remained in effect in perpetuity unless affirmatively revoked by the
IRS. Under section 1223(b) of the Pension Protection Act, tax
status is REVOKED if the organization fails for three successive years
to file Form 990, the informational return required of non-church
organizations with annual revenues of $50,000, or for all
other non-church organizations, fails to file for three successive
years a new NOTICE proving to the IRS that
Form 990 is not required. New Notice
Requirement for Small Organizations: 990N. "Notice?" you say. "I
thought little organizations didn't have to file anything?" That
had been true for over 40 years. The tiny local charity with
annual revenues of $2,000 from bake sales and fund-drives was not
expected to navigate the requirements of the Internal Revenue
Service. NO MORE. Section 1223 of the Pension Protection
Act requires all 501(c)(3) organizations exempt from filing Form 990 by
virtue of
revenues under $50,000, "(1) to furnish annually, in electronic form,
and at such time and in such manner as the Secretary may by regulations
prescribe, information setting forth—(A) the legal name of the organization,
(B) any name under which such organization operates or does business,
(C) the organization’s mailing address and Internet web site address (if any),
(D) the organization’s taxpayer identification number,
(E) the name and address of a principal officer, and
(F) evidence of the continuing basis for the organization’s exemption from the filing requirements under subsection (a)(1), and
(2) upon the termination of the existence of the organization, [to] furnish notice of such termination."
The form is known as 990N and doesn't require much information -- so send it in! or rather, go online and click file!
What is the
effect of a loss of
exempt status for failure to file either the Return (990) or the 990N? The IRS publishes a list of
the organizations that have
had status revoked. The organization will have to reapply -- take a look at the
current Form 1023
to see how much fun that will be! If the
organization can show "reasonable cause" for failure to file the
return/notice, and reapplies,
exemption may be granted
retroactively to the date of loss of exemption, so that there is no
break in tax exempt status. And guess what -- the IRS will
also notify the appropriate state charity officials of the change in
status. The law doesn't say this, but since the IRS will publish
notice that a charity's exemption is revoked, we can assume that a
donor who makes a gift after this happens is not entitled to a
charitable deduction. This was written in 2007. In 2011, the
first list was published, but fortunately there is some relief for
smaller organizations that file their reinstatement 1023s by
12/31/2012. In 2014, the IRS issued instructions on how to get
reinstated. READ REV. PROC. 2014-11
online or in PDF What else
in this bill affected charities? All of Title XII of the
Pension Protection Act -- that means 45 pages -- affects
charities. Some changes:- Tax-free distributions up to $100,000 from IRAs made directly to "publicly supported" charities if made by those over 70 1/2 (this was originalyly temporary, but was made permanent in 2015);
- New requirements for "donor-advised funds";
- New provisions on supporting organizations that incorporate into the statute some of the nightmarishly confusing language already in regulations
- Other new provisions for supporting organizations prohibiting certain connections with private donors and requiring more reporting about who is being supported;
- New rules that may limit or eliminate deductions for gifts of clothing and household items;
- New rules for gifts of "tangible personal property" where the charity sells the property later on
- New rules for appraisals............
DISCLAIMER:
THIS INFORMATION IS NOT PROVIDED AS LEGAL ADVICE AND CREATES NO ATTORNEY-CLIENT RELATIONSHIP.
PLEASE CONSULT YOUR OWN LEGAL AND FINANCIAL ADVISORS.