Exempt Organizations Update

 

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The EO Update is a periodic newsletter with information for tax-exempt organizations and tax practitioners who represent them, from Exempt Organizations (Tax-Exempt and Government Entities Division) at the IRS.

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November 20, 2020

IRS is revising Form 1024-A to allow for electronic submission

As part of an ongoing effort to improve service for the tax-exempt community, the IRS is revising Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4), and its instructions to allow electronic filing for the first time.
 
The IRS expects electronic filing to be available early in 2021, at which point applications for recognition of exemption on Form 1024-A must be submitted electronically online at www.pay.gov. The IRS will provide a grace period during which it will continue to accept paper versions of Form 1024-A.

Stay tuned to irs.gov for more details regarding the release of the revised Form 1024-A.

New Issue Snapshots

Visit IRS.gov for a complete listing of available Issue Snapshots.

Online training for small and mid-size 501(c)(3) organizations

The IRS provides interactive online training to help your organization maintain its exemption at StayExempt.irs.gov. Its Virtual Tax Exempt Organization Workshop helps organizational leadership and volunteers understand the benefits, limitations and expectations for exempt organizations.

October 26, 2020

Information about Automatic Revocation and Filing Extensions Provided by Notices 2020-23 and 2020-35

The charity reform subtitle of the Pension Protection Act of 2006 revokes the exempt status of an organization that fails to file the required Form 990 for three consecutive years ("auto-revocation"). Under the pandemic, this year the IRS extended filing dates from April 1 through July 14 to July 15, 2020, by Notices 2020-23 PDF and 2020-35 PDF. Due to systemic limitations, we were unable to update this deadline in the program that automatically issues notices of revocation. This caused some revocation notices to be issued prematurely. Nevertheless, the IRS prevented eligible organizations that attempted to file electronically by July 15 from being listed as automatically revoked on IRS.gov, where they are still shown as tax exempt. At the same time, we are processing paper filings which allow the reversal of auto-revocation for those filers. The IRS is reviewing the cases and corresponding with organizations that received the premature notice. Additionally, we have dedicated fax number (855) 247-6123 to receive correspondence from organizations in this situation that wish to present documentation of their applicable filings.

2020 Form 990-T, Exempt Organization Business Income Tax Return

The Form 990-T is being revised for tax year 2020 to allow for e-filing in calendar year 2021 (reporting on tax year 2020), as required by the Taxpayer First Act. Revisions are also being made to improve its utility for reporting unrelated business taxable income consistent with the 'siloing' rules of Section 512(a)(6) as put in place by the Tax Cuts and Jobs Act. The 2020 Form 990-T separates the tax computation (which will be on Form 990-T) from reporting of separate unrelated trades or businesses, which will be on as many Schedules A (Form 990-T) as the organization needs. Both Form 990-T and Schedule A (Form 990-T) are now available for preview on the Draft Forms webpage at IRS.gov/DraftForms.

New Technical Advice Memorandum (TAM): Royalty or Service?

Newly released TAM 202039018 PDF contemplates whether the Section 512(b)(2) royalty exclusion applies to an online job placement service. The TAM concludes based on the facts and circumstances of that case that the income was not excluded as royalty income under IRC Section 512(b)(2). The operation of an online job placement service constituted income from an unrelated trade or business subject to tax under IRC Section 511.

Issue Snapshot

IRC Section 4945(g) Individual Grants

October 5, 2020

New Navigating the Charities and Nonprofits website video

To help people visiting the Charities and Nonprofits section of IRS.gov, the IRS has created a special video to help you navigate the web page regardless of whether you are a first-time visitor or know exactly what you are looking for but just can't find it.

Worker Classification Webinar

The Tax Exempt and Government Entities Division would like to invite you to register to watch the free Worker Classification Webinar on October 7, 2020 at 1:00 p.m. (ET).

This webinar is designed to help government and private sector entities understand the definition of an employee and determine whether a worker is an employee or independent contractor. It will also cover Form SS-8, Classification Settlement Agreements and what to do if an individual is an employee.

Questions emailed to: tege.outreach@irs.gov with subject line "Pre-submitted questions for the Workers Classification webinar (October 7)" will be answered as time permits.

For further details, see Webinars for Tax Exempt & Government Entities.

Help Improve the Tax Exempt Organization Search (TEOS) Experience

Take a 2-minute survey to help us improve the Tax Exempt Organization Search webpage. Visit Tax Exempt Organization Search and look for the blue "Feedback" tab on the right side of the webpage. Your response to the survey will help us improve your experience.

Enrolled Agent (EA) Inactivation/Termination Letters

The annual clean-up of EAs with SSNs ending in 4, 5, or 6 who did not renew during this year's renewal cycle was completed in July and letters were sent late August. If you did not renew during the 2017 and 2020 cycles, go to the Enrolled Agent News for how to reactivate.

New form for businesses and other entities to report identity theft

If you think someone is using your business name or Employer Identification Number (EIN) to submit fraudulent tax returns or Forms W-2, complete and submit Form 14039-B, Business Identity Theft Affidavit PDF), to report identity theft to the IRS. This form is for use by businesses, trusts, estates and tax-exempt organizations. To prevent processing delays, make sure to submit all the requested documents and sign Form 14039-B.

For information on identity theft and when to file Form 14039-B, go to Report Identity Theft for a Business and the Identity Theft Central webpages.

Reminder: Most small organizations can file Form 990-N

Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less can satisfy their annual reporting requirement by electronically submitting Form 990-N.

Visit Form 990 Series Which Forms Do Exempt Organizations File Filing Phase In and the Interactive Form 990 Overview Training on StayExempt.irs.gov to learn more.

Did you know?

The Freedom of Information Act Library on IRS.gov contains publicly available information such as IRS instruction manuals and links to common publications and notices.

August 14, 2020

Church Waivers for Refund Claims and Abatement Requests

On July 15, 2020, the IRS issued interim guidance (IG) PDF providing instructions to examiners on how to inform churches of the option to authorize the Service to consider church claims for refund or requests for abatement without following the otherwise applicable procedures of Internal Revenue Code (IRC) Section 7611. The IRS generally must follow several procedural steps under Section 7611 before it can commence an inquiry or examination of a church.

Section 7611 and the related regulations permit a church to waive the application of these procedures by submitting a written waiver. Absent a waiver, the IRS follows these procedures even if the church initiated the contact. For example, if the IRS is requesting information to verify and process a church's claim for refund or request for abatement.

As described in the IG, the IRS developed a voluntary written waiver process to allow more expeditious processing of these claims or requests. The process is applicable only in the case of claims for refund or requests for abatement. Where applicable, the IRS will contact a church in writing to offer the option to execute a written waiver allowing the IRS to consider its claim or request without following the procedures contained in Section 7611. The church is under no obligation to agree to a waiver.

If the organization doesn't respond by the response due date or indicates they are not authorizing a waiver, the IRS will continue processing the claim by following Section 7611 procedures and issuing a Notice of Church Tax Inquiry.

Additional Relief for deadlines under Section 501(r)(3) Applicable to Hospital Organizations Affected by COVID-19

Notice 2020-56 postpones until December 31, 2020, the due date for any Community Health Needs Assessment (CHNA) that was due to be conducted and for any implementation strategy that was due to be adopted on or after April 1, 2020, and before December 31, 2020.

Hospitals using the relief in the Notice that file Form 990 prior to December 31, 2020, should state in the narrative of Part V, Section C of Schedule H (Form 990) that they are eligible for and are relying on the relief provided in the notice, and should not be treated as failing to meet the requirements of Section 501(r)(3) prior to December 31, 2020. See the Notice and IR-2020-156 for more information.

Survey: Help Improve the Tax Exempt Organization Search (TEOS) Experience

Take a 2-minute survey to help us improve the Tax Exempt Organization Search webpage. Visit Tax Exempt Organization Search and look for the blue "Feedback" tab on the right side of the webpage. Your response to the survey will help us improve your experience.

IRS News Releases

IRS Operations During COVID-19: Mission-critical functions continue

The IRS has updated its operations page on IRS.gov with several items related to the status of IRS operations, including several items related to compliance activity.

July 15, 2020

Subject: Annual filings, user fees and electronic filing mandates

Annual filings and tax returns/payments due July 15, 2020

The extended deadline for a variety of information and tax returns and many tax payments is July 15, 2020. If you are unable to meet the July 15 deadline, you may want to review the extension procedures for exempt organization returns and information on the penalties for not filing.

EO user fee changes effective July 1, 2020

Revenue Procedure 2020-5 included user fee changes for certain miscellaneous determination requests submitted on Form 8940 that are effective July 1st. See Appendix A of Rev. Proc. 2020-5 for a schedule of user fees.

Electronic filing mandate for Forms 990 and 990-PF

Effective for tax years beginning after July 1, 2019, the Taxpayer First Act requires organizations exempt from taxation under section 501(a) to file their annual Form 990 and Form 990-PF returns electronically, unless covered by one of the exceptions listed in the form instructions. Form 990-EZ filers are required to file electronically for tax years ending July 31, 2021, and later. This IRS News Release contains a summary of e-filing requirements.

IRS will be sending an educational letter (Letter 6194) to organizations that filed paper Forms 990 or 990-PF prior to 2019. There is no need to reply to the letter.

IRS Nationwide Virtual Tax Forums for 2020

The 2020 IRS Nationwide Tax Forums series of live-streamed webinars begins July 21, 2020. Registration information is available at www.irstaxforum.com. You may review the webinar schedule, session descriptions and FAQs. The Charities & Tax-Exempt Organizations Update will be held on Wednesday, July 22 at 2 p.m. - 3 p.m. ET.

June 12, 2020

IRS solicits public comments on proposed changes to group exemption letter program; will temporarily stop accepting requests for group exemption letters on June 17, 2020

Notice 2020-36  PDF contains a proposed revenue procedure that sets forth updated procedures under which recognition of exemption from federal income tax for organizations described in Section 501(c) of the Internal Revenue Code may be obtained on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization. The IRS requests comments on all aspects of the proposed revenue procedure, including applicable grandfather and transition rules. Comments should be submitted on or before August 16, 2020.

Pending publication of the final revenue procedure in the Internal Revenue Bulletin, Rev. Proc. 80-27 PDF continues to apply. However, the IRS will not accept any requests for group exemption letters beginning June 17, 2020, until publication of the final revenue procedure or other guidance.

IRS, Treasury issue guidance for applying UBTI 'silo' rules for tax-exempt organizations by identifying separate trades or businesses

The Treasury Department and IRS announced proposed regulations under the Tax Cuts and Jobs Act (TCJA) that provide guidance for tax-exempt organizations with more than one unrelated trade or business on how to calculate their unrelated business taxable income (UBTI).

Changes under the TCJA require tax-exempt organizations subject to the UBTI tax to compute UBTI, including any net operating loss deduction, separately for each trade or business (referred to as a "silo") for tax years beginning after December 31, 2017. The proposed regulations provide guidance on identifying separate trades or businesses, including investment activities, as well as certain other amounts included in UBTI.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

Common errors to avoid when filing for advance payment of employer credits

Employers filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, should read the instructions carefully and take their time when completing the form to avoid mistakes and prevent processing delays.

The following are some common errors to avoid when filling out Form 7200:

  • Missing or inaccurate Employer Identification Number. Each EIN should be exact. Taxpayers must complete this box.
  • Check only one box for the applicable calendar quarter. Only one box should be checked for the correct quarter. 
  • Check only one box for Part 1, Line A. 
  • Make sure to complete Part 1, Line B. In Part 1, Line B check either Yes or No.
  • Complete Part II, Lines 1-8 using actual dollar amounts. Part II should be completed using dollar amounts, not the number of eligible employees. All lines in Part II should be completed with an actual dollar amount.
  • Check the math. Taxpayers should make sure they check the math on lines 4, 7 and 8.
  • Sign the form. Taxpayers should remember to sign the form. Failure to sign the form will result in an automatic rejection.

New Issue Snapshot

403(b) Plans - Catch-Up Contributions discusses catch-up contributions under a 403(b) plan, which is a retirement plan maintained by a 501(c)(3) organization, minister, or public educational institution.

Visit IRS.gov for a complete listing of available Issue Snapshots.

Recent IRS News Releases

Visit IRS.gov for a complete listing of news releases for the current month.

IRS videos

April 30, 2020

Form 1023 Paper Submission Transition Period Expires April 30

As of January 31, 2020, organizations are required to submit Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, electronically online at Pay.gov. The IRS provided a 90-day transition period during which time applicants can continue to submit paper Form 1023 applications. The transition period expires April 30, 2020. The IRS will not accept paper Form 1023 applications postmarked after that date.

The user fee for Form 1023 remains at $600 for 2020. Applicants must pay the user fee through Pay.gov when submitting the form. Payment can be made directly from a bank account or by credit/debit card.

Updated information on Signing Electronically Submitted Form 1023

An applicant may satisfy the electronic signature requirement for an electronically submitted Form 1023 by including, in the PDF file it uploads as part of its application, a copy of the handwritten signature of the officer, director, trustee, or other authorized official whose name is typed into Part X of the Form 1023 on Pay.gov.

To sign in this way, the signer should sign above their typewritten name on a copy of Part X of the completed application or on a separate sheet of paper that includes the same information as in Part X (name of signer, title or authority of signer, date, and penalties of perjury statement as set out in Part X).

Social media reminder during COVID-19 

For the latest information related to COVID-19, taxpayers can visit IRS.gov and follow IRS on various social media platforms, including:

  • YouTube: The IRS has video channels that provide short, informative videos on various tax related topics in English, American Sign Language (ASL) and a variety of foreign languages.
  • Twitter: IRS tweets include various tax-related announcements, news for tax professionals and hiring initiatives.
  • Facebook: The IRS posts valuable tax information for tax professionals and those needing help to resolve issues with the IRS on Facebook. 
  • LinkedIn: The IRS posts important tax information, updates and announcements from the IRS on LinkedIn.
  • Instagram: The IRS shares taxpayer-friendly information to help filers prepare for the tax season and navigate tax law changes on Instagram. It also provides the latest tax scam information.

Visit the Charities and Nonprofits page on IRS.gov for information, news and educational resources about charities and other tax-exempt organizations.

IRS updates on COVID-19 related issues are posted on IRS.gov/coronavirus.

New Notices 

  • Notice 2020-18 PDF details special federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.
  • Notice 2020-21 PDF announces the effective date for employment tax credits under the Families First Coronavirus Response Act.
  • Notice 2020-22 PDF provides relief from the penalty for failure to deposit employment taxes.
  • Notice 2020-23 PDF amplifies the relief provided in Notice 2020-18 and Notice 2020-20, extending additional key tax deadlines for taxpayers.

IRS launches Taxpayer First Act webpage and email account

The Taxpayer First Act of 2019 requires the IRS to develop a comprehensive customer service strategy, modernize its technology and enhance its cyber security. Do you have feedback you'd like to share as we continue to implement the Taxpayer First Act? Send it to TFAO@irs.gov. Visit IRS.gov/taxpayer-first-act for more information.

Revised Form W-4 and new Income Tax Withholding Assistant 

The IRS revised Form W-4 and launched the Income Tax Withholding Assistant for Employers, which is a spreadsheet designed to help employers transition to the new Form W-4. Watch our webinar on the 2020 Form W-4.

In connection with the redesigned Form W-4, the IRS updated the Tax Withholding Estimator. We encourage taxpayers to perform a Paycheck Checkup now to avoid tax filing surprises at the end of the year. Watch the video on the IRS Tax Withholding Estimator.

EO Issue Snapshots 

Visit IRS.gov for a complete listing of available Issue Snapshots.

IRS seeks nominations for the Internal Revenue Service Advisory Council 

The IRS seeks applicants with experience in exempt organizations for the Internal Revenue Service Advisory Council (IRSAC). Applications will be accepted through June 12, 2020, for approximately 14 appointments that will begin in January 2021.

The IRSAC serves as an advisory body to the IRS Commissioner and provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public.

IRSAC members are appointed to three-year terms by the IRS Commissioner and submit a report to the Commissioner annually at a public meeting. Visit IRS.gov for more information.

Recent IRS News Releases

Visit IRS.gov for a complete listing of news releases for the current month.

IRS videos

April 14, 2020

IRS extends more tax deadlines, including Form 990-series returns and notices

Last month, the IRS announced that certain taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. The IRS has extended this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. The extensions apply to many forms and tax payments made by tax-exempt organizations, including:

  • Form 990-series annual information returns or notices (Forms 990, 990-EZ, 990-PF, 990-BL, 990-N (e-postcard))
  • Forms 8871 and 8872
  • Form 5227
  • Form 990-T
  • Form 1120-POL
  • Form 4720
  • Form 8976

See Notice 2020-23 and Rev. Proc. 2018-58 for more information, including a complete list of affected forms, tax payments and other time-sensitive actions.

IRS operations during COVID-19: mission-critical functions continue

In response to the coronavirus (COVID-19) crisis, the IRS is continuing with mission-critical activities for the nation but is limiting some operations. To protect the public and employees, and in compliance with orders of local health authorities around the country, certain IRS services such as live assistance on telephones, processing paper tax returns and responding to correspondence are extremely limited or suspended until further notice. As a result, the following services related to Tax Exempt and Government Entities are suspended until further notice:

The IRS strongly urges taxpayers applying for recognition of exempt status under IRC Section 501(c)(3) to use the electronically-submitted Form 1023 or, if eligible, the Form 1023-EZ.

IRS.gov remains the best source for tax law questions. Continue to visit IRS.gov and our Charities and Nonprofits page for information, news, and educational resources about charities and other tax-exempt organizations. Refer to Revenue Procedure 2018-32 for more information for grantors and contributors to tax-exempt organizations on deductibility and reliance issues.

IRS updates on COVID-19 related issues are posted on IRS.gov/coronavirus.

The Families First Coronavirus Response Act (Families First Act) and The Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Families First Act and the CARES Act provide considerable relief for exempt organizations, including grants, loans, tax credits, and other assistance.

Visit IRS.gov/coronavirus for the latest information about eligibility details and other requirements for the tax provisions under these Acts.

Acceptance of imaged and digital signatures and the electronic transmission of documents

As part of the response to the COVID-19 emergency, the IRS will temporarily allow employees to accept:

  • Images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of tax liability
  • Documents via email and to transmit documents to taxpayers using SecureZip or other established secured messaging systems

This change expires July 15, 2020. Visit IRS.gov for details PDF.

Annual revenue procedures

Notable updates:

  • Added Section 2.04, which announced the electronic Form 1023.
  • Amended Section 6.08(2) to add that an organization applying for recognition of tax-exempt status after 27 months from formation under Section 501(c)(3) can't use Form 1023-EZ if it seeks an effective date earlier than the submission date, but instead must file a Form 1023.
  • Amended Appendix A to reflect determination letter user fees as of July 1, 2020.
  • 2020-0

Notable update:

  • Modified Rev. Proc. 2020-5 to provide that Form 1023 must be submitted electronically online at pay.gov PDF. However, paper submissions of Form 1023 will be accepted if postmarked on or before April 30, 2020.

New mailing addresses for Form 941

The mailing addresses for paper Form 941 have changed. Avoid delays by checking pre-printed envelopes to ensure the address is correct. You can also file and pay electronically for faster processing.

EO Internal Revenue Manual revisions

IRS recently obsoleted 57 Exempt Organization Internal Revenue Manual (IRM) sections, which are being converting to Technical Resource Guides. Information from these IRM sections can still be found on IRS.gov using the "Search" feature.

Recent IRS News Releases

Visit IRS.gov for a complete listing of news releases for the current month.

IRS videos

Helpful tax tips

Review these helpful tax tips.

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Page Last Reviewed or Updated: 20-Nov-2020