We are a nonprofit organization that normally receives under $50,000 annually, and as a result files the 990-N electronic post card. We are considering the acceptance of a non-cash asset to sell whose fair market value is appraised at $40,000. Will that cause us to have to file a Form 990 in the future?
That depends. A nonprofit organization that is required to file some version of the Form 990 (other than a 501(c)(3) private foundation that has to file a Form 990-PF), may file a Form 990-N, the so-called electronic post card, if its annual gross receipts are “normally” not more than $50,000. The 990-N is a simple form filed on line that shows that the organization continues to exist, but does not require specific reporting of the amounts received. If an organization required to file a Form 990 doesn’t file some version of the form for three consecutive years, it will automatically lose its exempt status. (These rules apply to all organizations required to file a Form 990, including (c)(4) social welfare organizations, (c)(6) trade associations and (c)(7) social clubs, in addition to (c)(3) public charities.)
As usual, the IRS has defined “normally” with a certain flexibility. “Gross receipts” includes the total amount that the organization has received from all sources, without subtracting any costs or expenses.
If you are reporting on your first year of existence, you can file the 990-N if the organization has received, “or donors have pledged to give,” $75,000 or less. According to this explanation from the Instructions for the Form 990-EZ, pledges count against the limit whether or not received in the first year of existence.
If your organization is between 1 and 3 years old (i.e. two years old), you can file the 990-N if you have “averaged $60,000 or less in gross receipts during each of the first two tax years.” This calculation no longer includes pending pledges.
If your organization is three years old or more, you can file the 990-N if you averaged $50,000 or less in gross receipts for the year for which you are filing and the two preceding years all combined, or not more than $150,000 in total gross receipts over the three year period.
If you exceed any of these benchmarks, you must file the 990-EZ or the full Form 990. If you received $40,000 each year without the special $40,000 gift, and receipt of the additional $40,000 gift put you over the average for a three year period (a total of $160,000 in gross receipts), you would have to file a 990-EZ or full 990 for the year of receipt of the $40,000 gift. But you could go back to the 990-EZ if you received less than $30,000 in the following year (representing a total of $40,000, $80,000, and less $30,000 or less than $150,000 for the new three year period).