Submitting the required information annually does not relieve the central organization or any of its subordinates of the duty to submit any other information that may be required by an EO area manager to determine whether the conditions for continued exemption are being met.

Events Causing Loss of Group Exemption

A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when:

1. The central organization notifies the IRS that it is going out of existence,
2. The central organization notifies the IRS, by its annual submission or otherwise, that any of its subordinates will no longer fulfill the conditions for continued effectiveness, explained earlier, or
3. The IRS notifies the central organization or the affected subordinate that the group exemption letter will no longer have effect for some or all of the group because the conditions for continued effectiveness of a group exemption letter have not been fulfilled.

When notice is given under any of these three conditions, the IRS will no longer recognize the exempt status of the affected subordinates until they file separate applications on their own behalf or the central organization files complete supporting information for their reinclusion in the group exemption at the time of its annual submission. However, when the notice is given by the IRS and the withdrawal of recognition is based on the failure of the organization to comply with the requirements for recognition of tax-exempt status under the particular subsection of section 501(c), the revocation will ordinarily take effect as of the date of that failure. The notice, however, will be given only after the appeal procedures described earlier in this chapter are completed.

Filing Requirements and Required Disclosures

Introduction

Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period.

Topics

This chapter discusses:

• Annual information returns that must be filed
• The unrelated business income tax return
• Employment tax returns
• A return to report taxable income from political organizations
• Reporting requirements for certain political organizations
• A return to report the sale of certain donated property
• Information to provide to donors
• A report of cash received
• Public inspection of certain documents
• Certain required disclosures and the penalties for not making them

Useful Items You may want to see:

Publication

• 15   Circular E, Employer's Tax Guide
• 598   Tax on Unrelated Business Income of Exempt Organizations

Form (and Instructions)

• 990   Return of Organization Exempt From Income Tax
• 990-EZ   Short Form Return of Organization Exempt From Income Tax
• Schedule A (Form 990 or 990-EZ)   Organization Exempt Under Section 501(c)(3)
• Schedule B (Form 990 or 990-EZ)   Schedule of Contributors
• 990-PF   Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation
• 990-T   Exempt Organization Business Income Tax Return
• 1120-POL   U.S. Income Tax Return for Certain Political Organizations
• 8300   Report of Cash Payments Over $10,000 Received in a Trade or Business
• 8868   Application for Extension of Time to File an Exempt Organization Return
• 8870   Information Return for Transfers Associated with Certain Personal Benefits Contracts
• 8871   Political Organization Notice of Section 527 Status
• 8872   Political Organization Report of Contributions and Expenditures

See chapter 5 for information about getting these publications and forms.

Annual Information Returns

Every organization exempt from federal income tax under section 501(a) must file an annual information return except:

1. A church, an interchurch organization of local units of a church, a convention or association of churches, or an integrated auxiliary of a church (as defined later under Religious Organizations in chapter 3),
2. A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs,
3. A school below college level affiliated with a church or operated by a religious order, even though it is not an integrated auxiliary of a church,
4. A mission society sponsored by or affiliated with one or more churches or church denominations, more than half of the society's activities are conducted in, or directed at, persons in foreign countries,
5. An exclusively religious activity of any religious order,
6. A state institution, the income of which is excluded from gross income under section 115,
7. A corporation described in section 501(c)(1) [a corporation that is organized under an Act of Congress and is:
   1. an instrumentality of the United States, and
   2. exempt from Federal income taxes],
8. A black lung benefit trust described in section 501(c)(21) [Required to file Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons. See chapter 4 for more information.],
9. A stock bonus, pension, or profit-sharing trust that qualifies under section 401. [required to file Form 5500, Annual Return/Report of Employee Benefit Plan],
10. A religious or apostolic organization described in section 501(d) [required to file Form 1065, U.S. Return of Partnership Income],
11. A foreign organization described in section 501(a) [other than a private foundation] that normally does not have more than $25,000 in annual gross receipts from sources within the United States and has no significant activity in the United States. For further information, see Revenue Procedure 94-17, 1994-1 C.B. 579,
12. A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C.B. 418,
13. An exempt organization (other than a private foundation, discussed in chapter 3) having gross receipts in each tax year that normally are not more than $25,000. (See the instructions for Form 990 for more information about what constitutes annual gross receipts that are normally not more than $25,000.), or
14. A private foundation exempt under section 501(c)(3) and described in section 509(a). (Required to file Form 990-PF).

Forms 990 and 990-EZ.    Exempt organizations, other than private foundations, must file their annual information returns on Form 990, or Form 990-EZ.

Political organizations that are required to file Form 1120-POL (discussed later under Political Organization Income Tax Return) are also required to file Form 990 or 990-EZ and Schedule B (Form 990 or 990-EZ) for tax years beginning after June 30, 2000. Organizations with gross receipts of less than $25,000 are not required to file Form 990 or 990-EZ and Schedule B (Form 990 or 990-EZ).

Form 990-EZ.    This is a shortened version of Form 990. It is designed for use by small exempt organizations and nonexempt charitable trusts.

An organization may file Form 990-EZ, instead of Form 990, if it meets both of the following requirements.

1. Its gross receipts during the year were less than $100,000.
2. Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year were less than $250,000.

If your organization does not meet either of these conditions, you cannot file Form 990-EZ. Instead you must file Form 990.

Group return.   A group return on Form 990 may be filed by a central, parent, or like organization for two or more local organizations, none of which is a private foundation. This return is in addition to the central organization's separate annual return if it must file a return. It cannot be included in the group return. See the instructions for Form 990 for the conditions under which this procedure may be used.

In any year that an organization is properly included as a subordinate organization on a group return, it should not file its own Form 990.

Schedule A (Form 990 or 990-EZ).   Organizations, other than private foundations, that are described in section 501(c)(3) and that are otherwise required to file Form 990 or 990-EZ must also complete Schedule A of that form.

Schedule B (Form 990 or 990-EZ).   Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors.

Form 990-PF.    All private foundations exempt under section 501(c)(3) must file Form 990-PF. These organizations are discussed in chapter 3.

Due date.   Form 990, 990-EZ, or 990-PF must be filed by the 15th day of the 5th month after the end of your organization's accounting period. Thus, for a calendar year taxpayer, Form 990, 990-EZ, or 990-PF is due May 15 of the following year.

Beginning in 2001, use Form 8868 to request an automatic 3-month extension of time to file Form 990, 990-EZ, or 990-PF and also to apply for an additional (not automatic) 3-month extension if needed.

Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. Also, do not use Form 2758, Application for Extension of Time to File Certain Excise, Income, Information, and Other Returns, to get an extension once Form 8868 becomes available. For more information, see Form 8868 and its instructions.

Application for exemption pending.   An organization that claims to be exempt under section 501(a) of the Code but has not established its exempt status by the due date for filing an information return should complete and file Form 990 or 990-EZ (or Form 990-PF if it considers itself a private foundation). If the organization's application is pending with the IRS, it must so indicate on Form 990, 990-EZ, or 990-PF (whichever applies) by checking the application pending block at the top of page 1 of the return.

For more information on the filing requirements, see the instructions for Forms 990, 990-EZ, and 990-PF.

State reporting requirements.   Copies of Form 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. See the instructions for those forms.

Form 8870.   Organizations that filed a Form 990, 990-EZ, or 990-PF, and paid premiums or received transfers on certain life insurance, annuity, and endowment contracts (personal benefit contracts), must file Form 8870. For more information, see Form 8870 and its instructions.

Penalties for failure to file.    An exempt organization that fails to file a required return must pay a penalty of $20 a day for each day the failure continues. The same penalty will apply if the organization does not give all the information required on the return or does not give the correct information.

Maximum penalty.   The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year.

Organization with gross receipts over $1 million.   For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.

Managers.   If the organization is subject to this penalty, the IRS may specify a date by which the return or correct information must be supplied by the organization. Failure to comply with this demand will result in a penalty imposed upon the manager of the organization, or upon any other person responsible for filing a correct return. The penalty is $10 a day for each day that a return is not filed after the period given for filing. The maximum penalty imposed on all persons with respect to any one return is $5,000.

Exception for reasonable cause.   No penalty will be imposed if reasonable cause for failure to file timely can be shown.

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