Small Nonprofit Filing Requirements with the IRS and FTB
The Internal Revenue service issued new guidance January 13, 2011 that allows for additional small nonprofits to file a simpler tax form that contains far less information than was previously required. Small nonprofits may be able to file Form 990-N also known as an e-Postcard for their 2010 annual information reporting as long as they receive less than $50,000 per year.
Revenue Procedure 2011-15 allows more nonprofits to file the e-Postcard for the 2010 annual information reporting. For tax years beginning on or after January 1, 2010, nonprofit organizations whose gross annual receipts are normally $50,000 or less can file the e-Postcard. Normally not more than $50,000 is defined as follows:
| In Existence for.. | And Gross Receipts/Pledges Not to Exceed |
| 1 year or less | $75,000 |
| More than 1 year, but less than 3 years | $60,000 (average for current year and immediately preceding) |
| Three years or more | $50,000 (average for current year and 2 immediately preceding years) |
Supporting organizations of any size must file the standard Form 990 or, if eligible, Form 990-EZ, the IRS noted. Finally, the law specifies that any nonprofit organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.
Any nonprofit organization that has not yet complied with these new requirements should do so immediately. 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.
Beginning with the 2010 taxable year, California conforms to the 2006 federal law that requires small nonprofit organizations to e-file an annual information return. It is important to note that California has not conformed to the federal threshold increase, so nonprofits with gross receipts that are normally $25,000 or less are eligible to file 199N also known as the California e-Postcard. There is no paper form 199N, so it must be completed electronically. If the organization does not want to file electronically, then a paper Form 199 will be required.
Due dates are the same for state and federal purposes, by the 15th day of the fifth month after an organizations’ fiscal year end. For a calendar year organization, the due date is May 15th. Under existing law, the FTB may revoke an organization’s state tax exemption if the IRS suspends or revokes the organization’s tax exemption. This means that an organization could lose both its federal and state exemption status for failing to file the federal notice for three consecutive years. In addition, the FTB and/or the SOS may suspend an exempt organization for:
- Failure to file a return;
- Nonpayment of balance due; or
- Failure to file a Statement of Information with the SOS.
Although there is no monetary penalty for failure to file Form199N, any organization that fails to file for three consecutive years automatically loses its tax-exempt status. The federal e-filing requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year for purposes of determining automatic federal revocations.
However, the FTB stated that they will not revoke any exemptions until May 15, 2013. So, if a nonprofit failed to file the California e-Postcard for the 2010, 2011, and 2012 taxable years, the FTB would revoke their tax-exempt status in 2013 if the nonprofit fails to file.
Please contact LMGW if you have any questions or need assistance filing your nonprofit’s annual information returns.
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