(researched and drafted by Christopher L. Jackson, UK law student and summer clerk)
Under recent changes in federal law, tax-exempt organizations — with only a few, select exceptions — must annually file information (known as a Form 990) with the IRS. (Note: "tax-exempt" means that the organization itself does not have to pay taxes, not that contributions to the organization may be deducted from the donor's taxable income.) While this “reporting” requirement burdens many tax-exempt organizations, its effect may be most significant among small nonprofits which qualify as charitable organizations under §501(c)(3) of the Internal Revenue Code.
A charitable organization that normally has less than $5000 per year in gross receipts is generally not required to request formal recognition from the IRS of its §501(c)(3) status in order to be tax-exempt. (See 26 U.S.C. §508(c)(1)(B).) Most of these organizations, however, are required to make a Form 990 filing with the IRS; failure to file the requisite report for three (3) consecutive years results in automatic loss of an organization's tax-exempt status — which may result in liability for paying taxes. Organizations that did not request formal recognition of tax-exempt status did not receive individual notice of the Form 990 filing requirement because the IRS did not know that they were (or claimed to be) tax-exempt.
IRS Commissioner Doug Shulman, in an official statement, urges that organizations go ahead and file the report even if they missed the deadline. Any tax-exempt organization whose gross receipts are normally less than $25,000 per year may file an abbreviated report via the web known as an e-postcard (Form 990-N). Before attempting to submit an e-postcard, those organizations which have not requested recognition of their tax-exempt status (like those 501(c)(3) organizations that normally have less than $5000 in annual gross receipts) should call the IRS customer service hotline at 1-877-829-5500 to be set up to allow reporting through the e-postcard system. It appears that because many small organizations did not file on time (and may not have known that they were required to file), the IRS is working on a way to resolve the problem.