New Filing Requirement for Small Tax Exempt Organizations for 2007 Returns

By Joyce Underwood

Tax-exempt organizations that previously were not required to file Form 990 returns because their gross receipts were normally less than $25,000 will now be required to electronically submit an annual return or face revocation of exemption. Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not required To File Form 990 or 990-EZ applies to tax years beginning in 2007.

The filing requirement does not apply to churches or their integrated auxiliaries or conventions or associations of churches, organizations that are included in a group return or to an organization that files Form 990-PF, Form 990 or Form 990-EZ. Note that an organization may be filing Form 990 (or Form 990-EZ) even if it does not meet the filing threshold in order to qualify for a grant or for other purposes. Just because the organization is not required to file the Form 990 for Federal purposes does not excuse the organization from completing the return with accurate information and filing on a timely basis.

Exempt organizations with smaller affiliates should be mindful of this new requirement. If an organization fails to file the e-Postcard for three consecutive years, the organization’s exempt status will be revoked as of the filing due date of the third year. The organization must then reapply for exempt status using Form 1023 or Form 1024 and paying the user fee.

Additionally, small, local organizations may be particularly vulnerable to missing this filing requirement since officers often rotate on a yearly basis and institutional knowledge is somewhat random. Anyone serving on the board of such an organization should be sure that the organization is aware of the new requirement and has taken measures to assure that the requirement is passed along to subsequent responsible officers.

Joyce Underwood is a senior manager in the Nonprofit Tax practice in BDO Seidman’s Greater Washington, D.C. office. She can be reached at junderwood@bdo.com.

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