FILING REQUIREMENTS FOR EXEMPT ENTITIES NOT CURRENTLY REQUIRED TO FILE FORM 990

Barbara Schwartz Bromberg, Esq, Dinsmore & Shohl

Smaller organizations (those normally having no more than $25,000 of gross receipts each year), churches and some other organizations did not have to file annual information returns (Form 990) prior to the passage of the Pension Protection Act of 2006 (“PPA”). The PPA requires all such organizations to electronically provide certain information annually (apparently on a calendar year basis), including name of an officer and “evidence of its continued exemption” from filing the annual return. This information will be subject to the exempt organization disclosure requirements, so that all such organizations will have to make this information publicly available upon request.  An organization that fails to file this information for three consecutive years loses its tax exemption. This provision applies to annual periods beginning after 2006.

In July, 2007, the Internal Revenue Service began mailing educational letters to more than 650,000 small tax-exempt organizations that may be required to submit the annual notice required under the PPA. The annual notice has been designated “Form 990-N Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ.” IRS expects to mail the letters over a period of several months, finishing in December, 2007.

According to its news release, the IRS calls the new form an “e-Postcard” because “it is short, easy and electronic.” Organizations will be able to submit it free of charge. The e-Postcard requires small organizations to provide a legal name and mailing address, any other names used, a Web address if one exists, the name and address of a principal officer and a statement confirming that the organization’s annual gross receipts are normally $25,000 or less.

The IRS continues to develop a free reporting system for the e-Postcard and an application to make the information available to the public on IRS.gov. The IRS says that information about these systems will be announced as soon as it becomes available.

There are many small fraternity organizations that have not been previously required to file Form 990.  This includes fraternal chapters, alumni(ae) associations and even some house corporations.  All national organizations should immediately inform all of their affiliates and subordinates of this new requirement and the penalty of loss of exempt status for noncompliance.