Revision to Publication 557 – Tax Exempt Status for Your Organization

Directors, officers, and other persons responsible for ensuring an organization’s compliance with tax laws and maintaining exempt status should take note of new changes to Publication 557.  New organizations receive a copy of Publication 557 with their exemption letter.  Organization’s wishing to view the full version (revised October 2011) can view it electronically here on the IRS’ website. The below text is a summary of some of the areas to which organizations should particularly take note.

New Changes in Publication 557

Automatic revocation:  Most tax-exempt organizations, other than churches, are required to file an annual 990-series return (Forms 990/990-EZ/990-PF) or to submit an annual electronic notice (Form 990-N), to the IRS. Failure to submit one of the above for 3 consecutive years result in the automatic revocation of an organization’s tax-exempt status.

Form 990:  The Form 990 was redesigned in 2008. The new form consists of a 12 page core form required of all 990 filers, and 16 possible schedules applicable depending on the organization’s activities.

Elimination of the Advanced Ruling Process:  The advance ruling process, which previously allowed for an advance determination as to whether a section 501(c)(3) organization qualified as a publicly supported organization (as opposed to a private foundation), has been eliminated. New regulations state that a new section 501(c)(3) organization will be classified as a publicly supported organization if it can demonstrate on its exemption application (Form 1023) that it reasonably expected that it will be publicly supported. Organizations are no longer required to file Form 8734 after completing the first 5 tax years. 

Changes to an organization’s program services or organizational document should be reported on Form 990:  All significant changes to an organization’s to the type of programs or methods of conducting them, or organizational documents should be reported to the IRS on the Form 990 instead of via a letter to Exempt Organizations Determinations. 

Publication 78 provides a list of organizations whose tax exempt status has been revoked due to failure to file an annual return or notice: That list can be found here.


Other Areas of Which Organizations Should Take Note:

The Patient Protection and Affordable Care Act (ACA):  Several new laws were added, including a small business health care tax credit, additional requirements for tax-exempt hospitals, and the section 501(c)(29) CO-OP program.

Form 990 Electronic Filing Requirements for Large Organizations: Applies if the organization files 250 or more returns during the calendar year and that has total assets of $10 million or more.

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