Tax-exempt organizations (such as a fraternity/sorority chapter, house corporation or alumni/ae association) that fail to satisfy annual 990 filing requirements for three consecutive years now automatically lose their tax-exempt status. In fact, the IRS recently released a list of organizations at risk of losing their tax-exempt status (called, appropriately, the "At Risk List"). According to IRS records, these groups have not filed for 2007, 2008 and 2009. There are more than 321,000 organizations on this list - including thousands of fraternity and sorority chapters. Want to know if your chapter is at risk? Download the information for your state from this site.
Thankfully, the IRS is providing one-time relief that will allow some organizations (only smaller ones, unfortunately) to come back into compliance and retain their tax-exempt status even though they failed to file for three consecutive years. However, only those organizations eligible to file the Form 990-N (e-Postcard) and Form 990-EZ may benefit from this one-time "get out of jail free" card - and it expires after October 15, 2010. To find out which form your chapter should be filing click here.
Larger organizations required to file Form 990 or Form 990-PF are not eligible for this relief, and the IRS will automatically revoke their status if they fail to file for three consecutive years. So what does that mean? If an organization loses its exemption, it must reapply to regain its tax-exempt status, and any income received between the revocation date and renewed exemption may be taxable.
If your chapter is not yet on the "At Risk" list published by the IRS, don't get complacent as you may still be in danger. Here's why: if your chapter did not file a 990 for 2007 or 2008 and your 2009 filing deadline is December 1, you would not appear on this list yet - your chapter's name won't be added until after your filing deadline passes. Additionally, the sheer volume of non-profits makes this a difficult process to manage, and the IRS admits that "this list may not be complete" so we recommend that you check it every so often to see if your chapter has been added.
If you are unsure whether or not you have filed your 990 during the last three years, it's time to start doing some research - fast. If you have used OmegaFi's online 990 filing process, your historical returns are available through the Chapter DeskTop; - otherwise, check with your tax professional or alumni advisors to see if they may have copies of prior year's returns. For more information about and to find out if you are eligible for the temporary Filing Relief Program, visit this page. But remember - this "get out of jail free" card expires October 15th.
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