Tax-exempt groups face new IRS e-filing rules under TFA
On June 13, the Senate voted to approve the Taxpayer First Act (TFA), H.R. 3151. Previously approved by the House, the bill now awaits President Trump’s signature. The main focus of the TFA has been to improve overall customer service by the IRS through changes within the agency’s management and oversight.
The TFA will require all tax-exempt organizations to e-file the Form 990 Series returns or Form 8872 (Political Organization Report of Contributions and Expenditures). Under current law, the tax-exempt organizations that are required to e-file are those that are either very small (gross receipts of less than $50,000) through the filing of Form 990-N Postcard, or those that are very large (gross receipts of $10 million or more and have at least 250 returns filed within a calendar year). Generally, this requirement would be put into effect for the tax year beginning after the date of enactment; however, there will be transition relief provided to certain organizations. This transition relief will apply to organizations if the IRS determines that this new e-filing requirement would cause undue hardship. The IRS can postpone the effective date of this new mandate to not later than two tax years after the enactment for the filing of Form 990-T (Unrelated Business Taxable Income).
Additionally, the TFA will also require that the IRS notify organizations that are on the verge of losing their tax-exempt status. For organizations that have not filed a Form 990 Series return for two consecutive years, the IRS will be required to state that they have no record of receiving returns for two years and that the organization’s tax-exempt status will be revoked if the organization fails to file a Form 990 Series return by the due date of the next return or postcard. The new law will also require that the IRS provide information to the organization about how to comply with the requirements for filing the annual information return and postcard. Tax-exempt organizations will automatically lose their tax-exempt status for failure to file their annual information return for three consecutive years, including those that are required to file an e-postcard (Form 990-N).
For more information, please contact:
Lori Yokobosky, Tax Partner, CohnReznick Not-for-Profit and Education Practice
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InsightIRS Releases Interim Guidance on Unrelated Business Income Tax (UBIT): Notice 2018-67New Internal Revenue Code Section 512(a)(6), enacted by Congress as part of The Tax Cuts and Jobs Act of 2017, now requires a tax-exempt organization to determine if it has more than one “unrelated trade or business,” and to calculate its unrelated business income tax (UBIT) separately with respect to each of its unrelated trade or business.