Q&A: Churches and Form 990

How do you know if your tax exemption status is still valid with the IRS?

How do you find out if your tax exemption is still valid? I was told the IRS is making changes and if you are not active in their system as of October 9, 2009, you won’t be able to operate as a church!

This question probably arose from a misunderstanding related to filing a Form 990 series information return. Most types of nonprofit organizations are required by law to file either Form 990 (or the simpler Form 990-EZ for smaller organizations)if their “gross receipts” (revenues) normally exceed the threshold amounts published by the IRS in the instructions to the forms. Organizations not required to file Form 990 or 990-EZ because their revenues are below the threshold amounts must still file an annual electronic Form 990-N with the IRS to advise the IRS that the organization still exists. Organizations that are required to file either Form 990, 990-EZ or 990-N and don’t do so will have their exempt status automatically revoked by the IRS after failing to file for three consecutive years. Churches, associations of churches, integrated auxiliaries of churches, certain foreign missions organizations and certain other specifically-listed types of nonprofit organizations are exempt from filing Form 990, 990-EZ or 990-N, regardless of their size. Furthermore, churches, associations of churches, and integrated auxiliaries of churches are exempt from federal income tax as 501(c)(3) organizations whether they file an application for exemption with the IRS or not. Accordingly, while it is true that the IRS will revoke the exempt status of some nonprofits that fail to file Form 990, 990-EZ, or 990-N, that is not true with respect to churches.

Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

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