The Pension Protection Act of 2006 imposed new filing requirements on exempt organizations that were previously exempt from certain annual information filings with the Internal Revenue Service (IRS). Organizations with gross receipts below a specified threshold (currently $25,000) are not required to file information returns, Form 990 or 990EZ. However, the new law requires these organizations to furnish annually – in electronic form and in a time and manner to be prescribed by IRS regulation – a notice containing the legal name of the organization, any name under which the organization does business, the employer identification number, the organization’s mailing address and website (if applicable), the name and address of a principal officer, and evidence of continuing exemption from the annual information return (Form 990 or 990EZ) filing requirements. If the organization is terminated, it is required to notify the IRS of the termination.  

If an organization fails to notify the IRS of its existence as described above for three consecutive years, the organization’s exempt status is revoked. While it may be possible to get that status reinstated, it will require a reapplication for exempt status and a showing of reasonable cause for failing to annually file the required information notices.

Based upon the above, we think it is critical for all clients with entities that are either dormant or have activities below the current filing threshold to understand the new rules and plan to file the required notice with the IRS. The effective date for the annual notice is for tax years starting after 2006. Thus, while the IRS has not yet published guidance on how to file the required information, it will only apply to those years starting in 2007. Accordingly, all affected organizations should have sufficient time to comply.

Because Gelman, Rosenberg & Freedman does not keep a list of the small or dormant entities for which we have traditionally not performed any services, we are unable to know which clients may be affected by these new rules. If you are or are in control of such an entity, you should notify us so that we can provide you with the new filing procedures once they are made available by the IRS.