26 USC § 6033: Returns by Exempt Organizations

Internal Revenue Code Section 6033 requires most tax-exempt organizations to file an annual information return with the IRS. The purpose of this reporting is to foster transparency and confirm that organizations are adhering to the terms of their tax-exempt status. This filing provides the IRS and the public with access to an organization’s financial data and operational details.

Organizations Subject to Annual Reporting

The general rule under the tax code is that all organizations granted tax-exempt status under Section 501(a) must file an annual information return. This broad requirement covers a wide array of entities, including charities, educational institutions, and business leagues. The filing obligation is a fundamental aspect of maintaining tax-exempt status.

There are specific statutory exceptions to this filing requirement. The most prominent exceptions include churches, their integrated auxiliaries, and conventions or associations of churches. These religious entities are not mandated to file an annual return, though they must still maintain records to substantiate their exempt status if questioned by the IRS.

Other organizations may also be excused from the annual filing, including certain state institutions whose income is excluded under Section 115 and some U.S. instrumentalities organized by Congress. The Secretary of the Treasury can also relieve organizations from filing. For instance, organizations with gross receipts normally $50,000 or less do not file a Form 990 or 990-EZ, but must instead file an electronic notice known as Form 990-N, the e-Postcard.

Required Forms and Disclosures

The specific annual return an organization must file is determined by its financial activity, primarily its gross receipts and total assets. For organizations with gross receipts of $50,000 or less, Form 990-N, the e-Postcard, is required. This is a simple electronic notice that confirms the organization’s existence and basic information.

Form 990-EZ is for organizations with gross receipts of less than $200,000 and total assets of less than $500,000. This simplified return requires reporting on revenue, expenses, assets, liabilities, and program service accomplishments.

Organizations with gross receipts of $200,000 or more, or total assets of $500,000 or more, must file the comprehensive Form 990. This return requires extensive disclosures, including detailed financial statements, a breakdown of functional expenses, and information on governance and compensation for key personnel.

Private foundations, regardless of financial size, must file Form 990-PF, which details grant-making activities and investments. All Form 990 versions may also require attaching schedules based on an organization’s activities. For example, Schedule A is used by public charities for public support tests, while Schedule B lists significant contributors.

The Annual Filing Process

An organization’s annual information return is due by the 15th day of the 5th month after its accounting period concludes. For an organization that follows the calendar year, the deadline is May 15 of the following year.

If an organization cannot meet the filing deadline, it can request an automatic six-month extension by submitting Form 8868 on or before the original due date. This extension applies to the Form 990 series but does not extend the time to pay taxes that might be due, such as unrelated business income tax on Form 990-T.

The Taxpayer First Act of 2019 mandates that most exempt organizations file their information returns electronically. This requirement applies to the entire Form 990 series, and organizations can use IRS-approved e-file providers to submit their returns.

Penalties for Non-Compliance

Failure to file on time or submitting an incomplete return can result in monetary penalties. For organizations with gross receipts under a certain threshold, the penalty is $20 per day, with a maximum of $12,000 or 5% of the organization’s gross receipts. For organizations with gross receipts exceeding that threshold, the penalty increases to $120 per day, with a maximum of $60,000.

The IRS can also impose penalties on responsible individuals within the organization, such as a president or treasurer. If the IRS sends a written demand for the return and the responsible persons do not comply, a separate penalty can be assessed against them personally.

The most severe consequence is the automatic revocation of an organization’s tax-exempt status. This occurs if an organization fails to file its required return or notice for three consecutive years. Once revoked, the organization is no longer exempt from federal income tax and must reapply to the IRS to have its status reinstated.

Public Inspection Rules

Once filed, an organization’s annual information return is a public document. The law requires this information be accessible to anyone who requests it, promoting accountability and allowing the public to scrutinize the operations and finances of these entities.

Organizations must provide copies of their three most recent annual information returns to anyone who makes a request. They must also make their approved application for recognition of exemption, such as Form 1023 or 1024, permanently available for public inspection. The IRS also makes annual returns publicly available through its website.

While most of the return is public, certain information is protected from disclosure. The names and addresses of contributors listed on Schedule B are not subject to public inspection for most public charities, which safeguards donor privacy.