Are we required to renew our nonprofit (501(c)(3)) status? With the state? With the IRS?
Not with the IRS. But under the new provisions of the Pension Protection Act of 2006, a small charity that is not required to file a Form 990 because its gross receipts are below the threshold for filing will be required to file a new statement that it continues to exist. Any charity required to file the new report or a tax information return will lose its exempt status if it fails to do so for three consecutive years. The report is not so much a renewal as a confirmation of continued activity. (See Ready Reference Page: “Small Nonprofits Must File E-Postcard to Retain Exemption.”)
Several years ago many organizations received an “advance ruling” that they qualify as public charities rather than private foundations when they received their original letter of recognition of exemption. Those organizations had to subsequently prove to the IRS that they have sufficiently broad sources of support to qualify as public charities on the basis of their first five years of income. But the question was whether they are public charities or private foundations, not whether they are 501(c)(3) exempts. (See Ready Reference Page: ‘Calculating Public Support.”) The IRS abolished the advance ruling policy several years ago, even though the form is still in the Form 1023 application for recognition of exemption.
Some states require periodic reports to maintain corporate status within the state and failure to do so can cause loss of corporate status. Some require periodic renewal of charitable exemption for sales or other taxes. Check with a knowledgeable attorney in your state.
Monday, June 25, 2007