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2.   Filing Requirements and Required Disclosures

Table of Contents

Introduction

Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period.

Topics - This chapter discusses:

  • Annual information returns

  • Unrelated business income tax return

  • Employment tax returns

  • Political organization income tax return

  • Reporting requirements for a political organization

  • Donee information return

  • Information provided to donors

  • Report of cash received

  • Public inspection of exemption applications, annual returns, and political organizations reporting forms

  • Required disclosures

  • Miscellaneous rules

Useful Items - You may want to see:

Publication

  • 15 Circular E, Employer's Tax Guide

  • 15-A Employer's Supplemental Tax Guide

  • 15-B Employer's Tax Guide to Fringe Benefits

  • 598 Tax on Unrelated Business Income of Exempt Organizations

Form (and Instructions)

  • 941
    Employer's Quarterly Federal Tax Return

  • 990
    Return of Organization Exempt From Income Tax

  • 990-EZ
    Short Form Return of Organization Exempt From Income Tax

  • Schedule A (Form 990 or 990-EZ)
    Organization Exempt Under Section 501(c)(3)

  • Schedule B (Form 990 or 990-EZ)
    Schedule of Contributors

  • 990-PF
    Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation

  • 990-T
    Exempt Organization Business Income Tax Return

  • 990-W
    Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations

  • 1120-POL
    U.S. Income Tax Return for Certain Political Organizations

  • 4720
    Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

  • 5768
    Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation

  • 7004
    Application for Automatic 6-Month Extension of Time to File Certain Business Income Tax, Information, and Other Returns

  • 8274
    Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes

  • 8282
    Donee Information Return

  • 8300
    Report of Cash Payments Over $10,000 Received in a Trade or Business

  • 8453-X
    Political Organization Declaration for Electronic Filing of Notice of Section 527 Status

  • 8868
    Application for Extension of Time to File an Exempt Organization Return

  • 8870
    Information Return for Transfers Associated with Certain Personal Benefits Contracts

  • 8871
    Political Organization Notice of Section 527 Status

  • 8872
    Political Organization Report of Contributions and Expenditures

  • 8886-T
    Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction

  • 8899
    Notice of Income from Donated Intellectual Property

  • 8921
    Applicable Insurance Contracts Information Return

See chapter 6 for information about getting these publications and forms.

Annual Information Returns

Every organization exempt from federal income tax under section 501(a) must file an annual information return except:

  1. A church, an interchurch organization of local units of a church, a convention or association of churches, or an integrated auxiliary of a church (as defined later under Religious Organizations in chapter 3),

  2. A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs,

  3. A school below college level affiliated with a church or operated by a religious order, even though it is not an integrated auxiliary of a church,

  4. A mission society sponsored by or affiliated with one or more churches or church denominations, more than half of the society's activities are conducted in, or directed at, persons in foreign countries,

  5. An exclusively religious activity of any religious order,

  6. A state institution, the income of which is excluded from gross income under section 115,

  7. A corporation described in section 501(c)(1) [a corporation that is organized under an Act of Congress and is:

    1. an instrumentality of the United States, and

    2. exempt from federal income taxes],

  8. A black lung benefit trust described in section 501(c)(21) [Required to file Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons. See chapter 4 for more information.],

  9. A stock bonus, pension, or profit-sharing trust that qualifies under section 401 (required to file Form 5500, Annual Return/Report of Employee Benefit Plan),

  10. A religious or apostolic organization described in section 501(d) [required to file Form 1065, U.S. Return of Partnership Income],

  11. A foreign organization described in section 501(a) [other than a private foundation] that normally does not have more than $25,000 in annual gross receipts from sources within the United States and has no significant activity in the United States. For further information, see Revenue Procedure 94-17, 1994-1 C.B. 579,

  12. A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C.B. 418,

  13. An exempt organization (other than a private foundation, discussed in chapter 3) having gross receipts in each tax year that normally are not more than $25,000. (See the instructions for Form 990 for more information about what constitutes annual gross receipts that are normally not more than $25,000.),

  14. A private foundation exempt under section 501(c)(3) and described in section 509(a). (Required to file Form 990-PF), or

  15. A United States possession organization described in section 501(a) [other than a private foundation] that normally does not have more than $25,000 in annual gross receipts from sources within the United States and has no significant activity in the United States. For further information, see Revenue Procedure 2003-21, Internal Revenue Bulletin 2003-6.

Form 990-N for Small Exempt Organizations

Small exempt organizations (such as 11, 13, and 15 above) whose gross receipts are normally $25,000 or less are not required to file an information return. However, these organizations are now required to file an electronic Form 990-N with the IRS annually. The form will require the following information:

  • The organization's legal name,

  • Any name under which it operates and does business,

  • Its mailing address and internet website address (if any),

  • Its taxpayer identification number,

  • The name and address of a principal officer,

  • Organization's annual tax period,

  • Verification that the organization's annual gross receipts are still normally $25,000 or less, and

  • Notification if the organization has terminated.

Form 990-N is due by the 15th day of the fifth month after the close of the tax year. For tax years beginning after December 31, 2006, any organization that fails to meet its annual reporting requirement for 3 consecutive years will automatically lose its tax-exempt status. To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization.

Exceptions.   This filing requirement does not apply to:

  • Churches, their integrated auxiliaries, and conventions or associations of churches,

  • Organizations that are included in a group return,

  • Private foundations required to file Form 990-PF, and

  • Section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ.

Supporting Organization Annual Information Return

For tax years ending after August 17, 2006, all section 509(a)(3) supporting organizations are required to file an annual information return with the IRS regardless of the organization's gross receipts. On its annual information return, a supporting organization must:

  • List the section 509(f)(3) organizations with respect to which it provides support,

  • Indicate whether it is a Type I, Type II, or Type III supporting organization, and

  • Certify that the organization is not controlled directly or indirectly by disqualified persons (other than by foundation managers and other than one or more publicly supported organizations).

Forms 990 and 990-EZ

Exempt organizations, other than private foundations, must file their annual information returns on Form 990, or Form 990-EZ.

Generally, political organizations with gross receipts of $25,000 ($100,000 for a qualified state or local political organization (QSLPO)) or more for the tax year are required to file Form 990 (990-EZ) unless specifically excepted from filing the annual return. The following political organizations are not required to file Form 990 (Form 990-EZ).

  • A state or local committee of a political party.

  • A political committee of a state or local candidate.

  • A caucus or association of state or local officials.

  • A political organization that is required to report as a political committee under the Federal Election Campaign Act.

  • A 501(c) organization that has expenditures for influencing or attempting to influence the selection, nomination, election, or appointment of any individual for a federal, state, or local public office.

Form 990-EZ.   This is a shortened version of Form 990. It is designed for use by small exempt organizations and nonexempt charitable trusts.

  An organization may file Form 990-EZ, instead of Form 990, if it meets both of the following requirements.

  1. Its gross receipts during the year were less than $100,000.

  2. Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year were less than $250,000.

If your organization does not meet either of these conditions, you cannot file Form 990-EZ. Instead you must file Form 990.

Group return.   A group return on Form 990 may be filed by a central, parent, or like organization for two or more local organizations, none of which is a private foundation. This return is in addition to the central organization's separate annual return if it must file a return. It cannot be included in the group return. See the instructions for Form 990 for the conditions under which this procedure may be used.

  
Tip
 In any year that an organization is properly included as a subordinate organization on a group return, it should not file its own Form 990.

Schedule A (Form 990 or 990-EZ).   Organizations, other than private foundations, that are described in section 501(c)(3) and that are otherwise required to file Form 990 or 990-EZ must also complete Schedule A of that form.

Schedule B (Form 990 or 990-EZ).   Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors.

Form 990-PF

All private foundations exempt under section 501(c)(3) must file Form 990-PF. These organizations are discussed in chapter 3.

Electronic Filing

You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically.

If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. See Regulations section 301.6033-4 for more information.

The IRS may waive the requirement to file electronically in cases of undue hardship. For information on filing a waiver, see Notice 2005-88 which is on page 1060 of Internal Revenue Bulletin 2005-48.

Form 990.   An organization is required to file Form 990 electronically if it files at least 250 returns during the calendar year and has total assets of $10 million or more at the end of the tax year.

Form 990-PF.   An organization is required to file Form 990-PF electronically if it files at least 250 returns during the calendar year.

Due Date

Form 990, 990-EZ, or 990-PF must be filed by the 15th day of the fifth month after the end of your organization's accounting period. Thus, for a calendar year taxpayer, Form 990, 990-EZ, or 990-PF is due May 15 of the following year.

Extension to file.   Use Form 8868 to request an automatic 3-month extension of time to file Form 990, 990-EZ, or 990-PF and also to apply for an additional (not automatic) 3-month extension if needed.

  Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. For more information, see Form 8868 and its instructions.

  When filing Form 8868 for an automatic 3-month extension, neither a signature, nor an explanation is required. However, when filing Form 8868 for an additional 3-month extension, both a signature and an explanation are required.

Application for exemption pending.   An organization that claims to be exempt under section 501(a) but has not established its exempt status by the due date for filing an information return should complete and file Form 990 or 990-EZ (or Form 990-PF if it considers itself a private foundation). If the organization's application is pending with the IRS, it must so indicate on Form 990, 990-EZ, or 990-PF (whichever applies) by checking the application pending block at the top of page 1 of the return. For more information on the filing requirements, see the instructions for Forms 990, 990-EZ, and 990-PF.

State reporting requirements.   Copies of Form 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. See the instructions for those forms.

Form 8870.   Organizations that filed a Form 990, 990-EZ, or 990-PF, and paid premiums or received transfers on certain life insurance, annuity, and endowment contracts (personal benefit contracts), must file Form 8870. For more information, see Form 8870 and its instructions.

Penalties

Penalties for failure to file.   Generally, an exempt organization that fails to file a required return must pay a penalty of $20 a day for each day the failure continues. The same penalty will apply if the organization does not give all the information required on the return or does not give the correct information.

Maximum penalty.   The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year.

Organization with gross receipts over $1 million.   For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.

Managers.   If the organization is subject to this penalty, the IRS may specify a date by which the return or correct information must be supplied by the organization. Failure to comply with this demand will result in a penalty imposed upon the manager of the organization, or upon any other person responsible for filing a correct return. The penalty is $10 a day for each day that a return is not filed after the period given for filing. The maximum penalty imposed on all persons with respect to any one return is $5,000.

Exception for reasonable cause.   No penalty will be imposed if reasonable cause for failure to file timely can be shown.

Unrelated Business Income Tax Return

Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. An exempt organization that has $1,000 or more of gross income from an unrelated business must file Form 990-T.

The obligation to file Form 990-T is in addition to the obligation to file the annual information return, Form 990, 990-EZ, or 990-PF.

Estimated tax.   Exempt organizations must make quarterly payments of estimated tax on unrelated business income. An organization must make estimated tax payments if it expects its tax for the year to be $500 or more. Use Form 990-W to figure the organization's estimated tax payments.

Travel tour programs.   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose to which tax exemption was granted to the organization.

  Whether travel tour activities conducted by an organization are substantially related to the organization's tax exempt purpose is determined by looking at all the relevant facts and circumstances, including, but not limited to, how a travel tour is developed, promoted, and operated.

Example.

ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). As part of its activities, ABC operates a travel tour program. The program is open to all current members of ABC and their guests. ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. XYZ pays ABC a per person fee for each participant. Although the literature advertising the tours encourages ABC members to continue their lifelong learning by joining the tours, and a faculty member of ABC's related university frequently joins the tour as a guest of the alumni association, none of the tours include any scheduled instruction or curriculum related to the destinations being visited. The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. Therefore, ABC's tour program is an unrelated trade or business.

For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T.

Employment Tax Returns

Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements or if the taxes clearly do not apply.

For more information, get a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941.

Trust fund recovery penalty.   If any person required to collect, truthfully account for, and pay over any of these taxes willfully fails to satisfy any of these requirements or willfully tries in any way to evade or defeat any of them, that person will be subject to a penalty. The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. The term person includes:

  • An officer or employee of a corporation, or

  • A member or employee of a partnership.

Exception.   The penalty is not imposed on any unpaid volunteer director or member of a board of trustees of an exempt organization if the unpaid volunteer serves solely in an honorary capacity, does not participate in the day-to-day or financial operations of the organization, and does not have actual knowledge of the failure on which the penalty is imposed.

  This exception does not apply if it results in no one being liable for the penalty.

FICA and FUTA tax exceptions.   Payments for services performed by a minister of a church in the exercise of the ministry, or a member of a religious order performing duties required by the order, are generally not subject to FICA or FUTA taxes.

FUTA tax exception.   Payments for services performed by an employee of a religious, charitable, educational, or other organization described in section 501(c)(3) that are generally subject to FICA taxes if the payments are $100 or more for the year, are not subject to FUTA taxes.

FICA tax exemption election.   Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274.

  To elect the exemption, Form 8274 must be filed before the first date on which a quarterly employment tax return would otherwise be due from the electing organization. The organization may make the election only if it is opposed for religious reasons to the payment of FICA taxes.

  The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business.

Revoking the election.   The election can be revoked by the IRS if the organization fails to file Form W-2, Wage and Tax Statement, for 2 years and fails to furnish certain information upon request by the IRS. Such revocation will apply retroactively to the beginning of the 2-year period.

Definitions.   For purposes of this election, the term church means a church, a convention or association of churches, or an elementary or secondary school that is controlled, operated, or principally supported by a church or by a convention or association of churches.

  The term qualified church-controlled organization means any church-controlled section 501(c)(3) tax-exempt organization, other than an organization that both:

  1. Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and

  2. Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that are not unrelated trades or businesses.

Effect on employees.   If a church or qualified church-controlled organization has made an election, payment for services performed for that church or organization, other than in an unrelated trade or business, will not be subject to FICA taxes. However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. The tax applies to income of $108.28 or more for the tax year from that church or organization, and no deductions for trade or business expenses are allowed against this self-employment income.

  Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return.

Political Organization Income Tax Return

Generally, a political organization is treated as an organization exempt from tax. Certain political organizations, however, must file an annual income tax return, Form 1120-POL, for any year they have political organization taxable income in excess of the $100 specific deduction allowed under section 527.

Tip
A political organization that has $25,000 ($100,000 for a qualified state or local political organization) or more in gross receipts for the tax year must file Form 990 or 990-EZ (and Schedule B of the form), unless excepted. See Forms 990 and 990-EZ, earlier.

Political organization.   A political organization is a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function.

Exempt function.   An exempt function means influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, local public office or office in a political organization, or the election of the Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. It also includes certain office expenses of a holder of public office or an office in a political organization.

Caution
Certain political organizations are required to notify the IRS that they are section 527 organizations. These organizations must use Form 8871. Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. For a discussion on these forms, see Reporting Requirements for a Political Organization, later.

Political organization taxable income.   Political organization taxable income is the excess of:

  1. Gross income for the tax year (excluding exempt function income) minus

  2. Deductions directly connected with the earning of gross income.

To figure taxable income, allow for a $100 specific deduction, but do not allow for the net operating loss deduction, the dividends-received deduction, and other special deductions for corporations.

Exempt organization not a political organization.   An organization exempt under section 501(c) that spends any amount for an exempt function must file Form 1120-POL for any year which it has political taxable income. These organizations must include in gross income the lesser of:

  1. The total amount of its exempt function expenditures, or

  2. The organization's net investment income.

Separate fund.   A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization.

Caution
Section 501(c)(3) organizations are precluded from, and may suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office.

Due date.   Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. If any due date falls on a Saturday, Sunday, or legal holiday, the organization may file the return on the next business day.

  
Tip
 Form 1120-POL is not required of an exempt organization that makes expenditures for political purposes if its gross income does not exceed its directly connected deductions by more than $100 for the tax year.

Extension to file.    Use Form 7004, to request an automatic 6-month extension of time to file Form 1120-POL. The extension will be granted if you complete Form 7004 properly, make a proper estimate of the tax (if applicable), file Form 1120-POL by the due date of and pay any tax that is due.

Failure to file.   A political organization that fails to file Form 1120-POL, is subject to a penalty equal to 5% of the tax due for each month (or partial month) the return is late up to a maximum of 25% of the tax due, unless the organization shows the failure was due to reasonable cause.

For more information about filing Form 1120- POL, refer to the instructions accompanying the form.

Failure to pay on time.   An organization that does not pay the tax when due generally may have to pay a penalty of 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if the organization can show that the failure to pay on time was due to reasonable cause.

Reporting Requirements for a Political Organization

Certain political organizations are required to notify the IRS that the organization is to be treated as a section 527 political organization. The organization is also required to periodically report certain contributions received and expenditures made by the organization. To notify the IRS of section 527 treatment, an organization must file Form 8871. To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872.

Form 8871

A political organization must electronically file Form 8871 to notify the IRS that it is to be treated as a section 527 organization. However, an organization is not required to file Form 8871 if:

  • It reasonably expects its annual gross receipts to always be less than $25,000.

  • It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U.S.C. 431(4)).

  • It is a state or local candidate committee.

  • It is a state or local committee of a political party.

  • It is a section 501(c) organization that has made an “exempt function expenditure”.

All other political organizations are required to file Form 8871.

An organization must provide on Form 8871:

  1. Its name and address (including any business address, if different) and its electronic mailing address,

  2. Its purpose,

  3. The names and addresses of its officers, highly compensated employees, contact person, custodian of records, and members of its Board of Directors,

  4. The name and address of, and relationship to, any related entities (within the meaning of section 168(h)(4)), and

  5. Whether it intends to claim an exemption from filing Form 8872 or Form 990 (Form 990-EZ).

Employer identification number.   Before filing Form 8871, the political organization must have its own EIN even if it has no employees. If your organization needs an EIN, you can apply for one:

  • Online— Click on the Employer ID Numbers (EINs) link at www.irs.gov/businesses/small.

  • By telephone at 1-800-829-4933 from 7:00 am to 10:00 pm in the organization's local time zone.

  • By mailing or faxing Form SS-4

  If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance.

Due dates.   The initial Form 8871 must be filed within 24 hours of the date on which the organization was established. If there is a material change an amended Form 8871 must be filed within 30 days of the material change. When the organization terminates its existence, it must file a final Form 8871 within 30 days of termination.

  If the due date falls on a Saturday, Sunday, or legal holiday, the organization may file on the next business day.

How to file.   An organization must file Form 8871 electronically via the IRS Internet website at www.irs.gov/polorgs (Keyword: political orgs).

Form 8453-X.   After electronically submitting Form 8871, the political organization must print, sign, and mail Form 8453-X to the IRS. Upon receipt of the Form 8453-X, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872.

Penalties

Failure to file.   An organization that is required to file Form 8871, but fails to do so on a timely basis, will not be treated as a tax-exempt section 527 organization for any period before the date Form 8871 is filed. Also, the taxable income of the organization for that period will include its exempt function income (including contributions received, membership dues, and political fund-raising receipts) minus any deductions directly connected with the production of that income.

  Failure to file an amended Form 8871 will cause the organization not to be treated as a tax-exempt section 527 organization. If an organization is treated as not being a tax-exempt section 527 organization, the taxable income of the organization will be determined by considering any exempt function income and deductions during the period beginning on the date of the material change and ending on the date that the amended Form 8871 is filed.

   The tax is computed by multiplying the organization's taxable income by the highest corporate tax rate.

Fraudulent returns.   Any individual or corporation that willfully delivers or discloses to the IRS any list, return, account, statement or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation) or imprisoned for not more than 1 year or both.

Waiver of penalties.   The IRS may waive any additional tax assessed on an organization for failure to file Form 8871 if the failure was due to reasonable cause and not willful neglect.

Additional information.   For more information on Form 8871, see the form and its instructions. For a discussion on the public inspection requirements for the form, see Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms, later.

Form 8872

Every tax-exempt section 527 political organization that accepts a contribution or makes an expenditure, for an exempt function during the calendar year, must file Form 8872 except:

  • A political organization that is not required to file Form 8871 (discussed earlier).

  • A political organization that is subject to tax on its income because it did not file or amend Form 8871.

  • A qualified state or local political organization (QSLPO), discussed below.

All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872.

Qualified state or local political organization.   A state or local political organization may be a QSLPO if:

  1. All of its political activities relate solely to state or local public office (or office in a state or local political organization).

  2. It is subject to a state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS.

  3. The state agency and the organization make the reports publicly available.

  4. No federal candidate or office holder:

    1. Controls or materially participates in the direction of the organization,

    2. Solicits contributions for the organization, or

    3. Directs the disbursements of the organization.

Information required on Form 8872.   If an organization pays an individual $500 or more for the calendar year, the organization is required to disclose the individual's name, address, occupation, employer, amount of the expense, the date the expense was paid, and the purpose of the expense on Form 8872.

  If an organization receives contributions of $200 or more from one contributor for the calendar year, the organization must disclose the donor's name, address, occupation, employer, and the date the contributions were made.

  For additional information that is required, see Form 8872.

Due dates.   The due dates for filing Form 8872 vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election is held, or any other calendar year ( a non-election year).

  If the due date falls on a Saturday, Sunday, or legal holiday, the organization may file on the next business day.

Election year filing.    In election years, Form 8872 must be filed on either a quarterly or a monthly basis. Both a pre-election report and a post-election report are also required to be filed in an election year. An election year is any year in which a regularly scheduled general election for federal office is held (an even-numbered year).

Non-election year filing.    In non-election years, the form must be filed on a semiannual or monthly basis. A complete listing of these filing periods are in the Form 8872 instructions. A non-election year is any odd-numbered year.

How to file.   Form 8872 may be filed either electronically or by mail; however, organizations that have, or expect to have, contributions or expenditures of $50,000 or more in contributions or expenditures for the year must file electronically.

  
address
 To file by mail, send Form 8872 to the:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201

Electronic filing.   File electronically via the IRS internet website at www.irs.gov/polorgs. You will need a user ID and password to electronically file Form 8872. Organizations that have completed the electronic filing of Form 8871 and submitted a completed and signed Form 8453-X, will receive a username and password in the mail.

  Organizations that have completed the electronic filing of Form 8871, but have not received their user ID and password may request one by writing to the following address:

Internal Revenue Service
Attn: Request for 8872 Password
Mail Stop 6273
Ogden, UT 84201

Lost username and password.   If you have forgotten or misplaced the username and password issued to your organization after you filed your initial Form 8871, send a letter requesting a new username and password to the address under Electronic filing. You may also fax your request to (801) 620-3249. It may take 3-6 weeks for your new username and password to arrive, as they will be mailed to the organization.

Penalty

A penalty will be imposed if the organization is required to file Form 8872 and it:

  • Fails to file the form by the due date, or

  • Files the form but fails to report all of the information required or reports incorrect information.

The penalty is 35% of the total amount of contributions and expenditures to which a failure relates.

Fraudulent returns.   Any individual or corporation that willfully delivers or discloses any list, return, account, statement, or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned for not more than 1 year, or both.

Waiver of penalties.   The IRS may waive any additional tax assessed on an organization for failure to file Form 8872 if the failure was due to reasonable cause and not willful neglect.

Donee Information Return

Dispositions of donated property.   If an organization receives charitable deduction property and within 3 years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282. However, an organization is not required to file Form 8282 if:

  • The property is valued at $500 or less, or

  • The property is consumed or distributed for charitable purposes.

  Form 8282 must be filed with the IRS within 125 days after the disposition. Additionally, a copy of Form 8282 must be given to the previous donor. If the organization fails to file the required information return, penalties may apply.

Charitable deduction property.   This is any property (other than money or publicly traded securities) for which the donee organization signed an appraisal summary or Form 8283, Noncash Charitable Contributions.

Publicly traded securities.   These are securities for which market quotations are readily available on an established securities market as of the date of the contribution.

Appraisal summary.   If the value of the donated property exceeds $5,000, the donor must get a qualified appraisal for contributions of property, see the Exceptions below.

Exceptions.   A written appraisal is not needed if the property is:

  • Nonpublicly traded stock of $10,000 or less,

  • A vehicle (including a car, boat, or airplane) donated after 2004 if your deduction for the vehicle is limited to the gross proceeds from its sale,

  • Intellectual property donated after June 3, 2004,

  • Certain securities considered to have market quotations readily available (see Regulations section 1.170A-13(c)(7)(xi)(B)),

  • Inventory and other property donated by a corporation that are qualified contributions for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A), or

  • Any donation of stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business.

  The donee organization is not a qualified appraiser for the purpose of valuing the donated property. For more information, get Publication 561, Determining the Value of Donated Property.

Form 8283.   For noncash donations over $5,000, the donor must attach Form 8283 to the tax return to support the charitable deduction. The donee must sign Part IV of Section B, Form 8283 unless publicly traded securities are donated. The person who signs for the donee must be an official authorized to sign the donee's tax or information returns, or a person specifically authorized to sign by that official. The signature does not represent concurrence in the appraised value of the contributed property. A signed acknowledgment represents receipt of the property described on Form 8283 on the date specified on the form. The signature also indicates knowledge of the information reporting requirements on dispositions, as previously discussed. A copy of Form 8283 must be given to the donee.

Information Provided to Donors

A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization.

In certain circumstances, an organization may be able to meet both of these requirements with the same written document.

Disclosure of Quid Pro Quo Contributions

A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution over $75.

Quid pro quo contribution.   This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60. Even though the deductible part of the payment is not more than $75, a disclosure statement must be filed because the donor's payment (quid pro quo contribution) is more than $75.

Disclosure statement.   The required written disclosure statement must:

  1. Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and

  2. Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received.

The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution.

  No disclosure statement is required if any of the following are true.

  1. The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, in Cumulative Bulletin 1990-1, and Revenue Procedure 92-49, in Cumulative Bulletin 1992-1.

  2. There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop).

  3. There is only an intangible religious benefit provided to the donor. The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods.

  4. The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of:

    1. Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or

    2. Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedure 90-12 (as adjusted for inflation).

Good faith estimate of fair market value.   An organization may use any reasonable method to estimate the fair market value (FMV) of goods or services it provided to a donor, as long as it applies the method in good faith.

  The organization may estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued.

Example 1.

A charity provides a one-hour tennis lesson with a tennis professional for the first $500 payment it receives. The tennis professional provides one-hour lessons on a commercial basis for $100. A good faith estimate of the lesson's FMV is $100.

Example 2.

For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. A good faith estimate of the FMV of the right to hold the event in the museum can be made by using the cost of renting a hotel ballroom with a capacity, amenities, and atmosphere comparable to the museum room, even though the hotel ballroom lacks the unique art displayed in the museum room. If the hotel ballroom rents for $2,500, a good faith estimate of the FMV of the right to hold the event in the museum is $2,500.

Example 3.

For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. The artist does not provide tours on a commercial basis. Tours of the museum normally are free to the public. A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist.

Penalty for failure to disclose.   A penalty is imposed on a charity that does not make the required disclosure of a quid pro quo contribution of more than $75. The penalty is $10 per contribution, not to exceed $5,000 per fund-raising event or mailing. The charity can avoid the penalty if it can show that the failure was due to reasonable cause.

Acknowledgment of Charitable Contributions of $250 or More

A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment from the charitable organization. The donor must get the acknowledgment by the earlier of: