For Nonprofits, May 17 Tax Deadline Prompts a ‘Start of the Year’ Review – Part IApril 20, 2021
The IRS Form 990/990-PF deadline is fast approaching for most nonprofit organizations. This deadline should also prompt nonprofits to engage in a start-of-the-year review of its state filings, insurance coverage, donor letters, bylaws and corporate records to determine whether any changes should be made for the coming year.
Part I of this two-part Alert will review Form 990/Form 990-PF requirements, Solicitation of Funds registration requirements, and Change in Officer/Director notification requirements, and will discuss appropriate insurance coverage.
Part II of the Alert will discuss written acknowledgements, quid pro quo disclosures, potential bylaw amendments and potential modifications to corporate records.
Form 990/990-PF Return
For nonprofit organizations, the IRS Form 990/Form 990-PF return must be filed on or before the 15th day of the fifth month following the fiscal year-end, unless a proper extension is filed. So for calendar year-end nonprofits, the applicable Form 990/990-PF return ordinarily must be filed on or before May 15. However, in 2021, this date occurs on a Saturday, so the filing deadline this year is Monday, May 17. There are significant penalties for failure to timely file a Form 990/990-PF return, and a failure to file it for three consecutive years will result in the automatic revocation of the nonprofit organization’s tax-exempt status.
There are several different types of Form 990 Returns, and the return required of your nonprofit organization will depend on its tax classification and its annual gross receipts and total assets. To determine which Form 990 Return your nonprofit organization is required to file, visit the IRS website for a helpful breakdown of the Form 990 returns.
The Form 990/990-PF return can be complex, and the IRS and certain state agencies have been more attentive to compliance issues, many of which must be disclosed on the Form 990/990-PF return. For these reasons, it is imperative that every nonprofit organization have an accountant experienced in the tax rules applicable to nonprofits. If your nonprofit organization needs a referral for an accountant experienced in preparing and filing Form 990 returns, please contact us.
If your nonprofit organization engages in fundraising, it must register in each state in which it solicits funds. These solicitation registrations must be renewed annually and are typically due on the same date as IRS filings are due. Failure to register or renew your nonprofit’s solicitation registration(s) may result in penalties. If your nonprofit organization needs a referral for a firm experienced in preparing and filing solicitation of funds registration statements, please contact us.
Change in Officers and Directors
A nonprofit organization should include changes in its officers and/or directors on its Form 990. In addition, all entities with an Employer Identification Number (EIN) are required to submit Form 8822B to update the IRS on any changes to the entity’s responsible party (generally, the president or treasurer). This form must be filed within 60 days of the change. While the instructions to Form 8822B note that there are no penalties for failure to file the form, interest and penalties set forth on any notice of deficiencies or assessments made against a nonprofit entity that were sent to the wrong responsible party will not be abated. Departing officers and directors should ensure that the nonprofit entity files a Form 8822B within 60 days of officer and director elections and/or appointments.
Additionally, many states require a nonprofit organization to notify the state when there has been a change in the nonprofit organization's officers and/or directors. Pennsylvania, for instance, requires a nonprofit organization to file an annual statement on or before April 30 of each year if there has been a change in the nonprofit organization's officers. These filing requirements vary from state to state, so it is important to be aware of the filing requirements for each state in which your nonprofit operates.
Nonprofit organizations should always review their insurance coverage at the end of each year. If this review was not done due to other more pressing year-end obligations, it is imperative that your officers, directors and/or management team immediately review your organization’s insurance policies to ensure that your organization and its officers, directors and management team have adequate insurance coverage (general liability coverage, directors and officers coverage, etc).
Proper coverage will depend on a nonprofit organization’s activities and total assets. Failure to maintain proper coverage could result in a nonprofit organization’s directors, officers and/or agents being personally liable for the nonprofit organization’s actions. If your nonprofit organization needs a referral for an insurance broker who regularly obtains insurance coverage for nonprofit organizations and their officers, directors, executives and agents, please contact us.
For more information about this Alert, please contact Richard S. Caputo at 610.458.3121 or [email protected], Jacqueline Motyl at 610.458.1420 or [email protected] or any member of the firm’s Nonprofit Organizations Practice Group.