New Law for Tax Exempt Organizations

In August of 2006 Congress enacted and the President signed the Pension Protection Act of 2006.

The principle change made by this law, and one that will affect all Branches that have received a tax exempt letter from the IRS (qualifying the Branch as a 501(c)(3) organization) is that as of the year 2008 all organizations recognized as being exempt from Federal taxes by the IRS will be required to make an annual filing with the IRS. Prior to the enactment of this law, tax exempt organizations with annual income below $25,000 (from dues, meetings, exhibits or whatever) had no filing requirement. Organizations with income exceeding $25,000 always have been and will still be required to file an annual Form 990 (IRS Form 990, Return of an Organization Exempt from Tax).

Another provision of this law that may affect those Branches that file Unrelated Business Income (UBI) Forms with their annual 990 tax form (IRS Form 990-T, Exempt Organization Business Income Tax Return) is that they are now required to have this form available for public inspection as well as their 990s. (Advertising income in publications is probably the main source of UBI for tax exempts, including Branches.)

The changes made by this recent law for organizations that have received an exemption letter from the IRS pursuant to Section 501(c)(3) of the tax code can be found at www.irs.gov. Click on Charities and Religious Organizations and once there click on “New Law Revises EO Tax Rules.”

As of this date, the IRS has not announced what will be required in the “annual notice” that those organizations with less than $25,000 in income will have to file as of 2008. The IRS website states that what will be required will be posted “soon.”

If your branch is filing a Form 990, it is recommended that your accountant or whoever is filing the 990 review this website.

As soon as the IRS posts its requirements for the Annual Notice AALAS will pass these on to the Branches.