Termination of an Exempt Organization
Most tax-exempt organizations that end their operations, either through shutting down, transferring their assets or merging with another tax-exempt organization, must inform the IRS about the details of the action.
How you should inform the IRS
Tell the IRS that you're terminating when you file your annual return or notice, as summarized below:
|Return/report required||How to report|
|Form 990-N (e-Postcard)||Answer yes to question asking whether organization has terminated or has gone out of business.|
|Form 990 or 990-EZ||Check Terminated box in header of return.|
|Form 990-PF||Check Final return box in header of return.|
When the return is due
If you are terminating your organization or effectively going out of business by merging with another organization, you will need to file a final form by the 15th day of the 5th month after the end of the period for which a return is due. For example, an organization (other than a private foundation) that has a calendar year tax period and terminates at the end of the calendar year must file the final return by May 15th of the year after the year in which the termination occurs. If the same organization terminates on August 31, it must file the return on or before the 15th day of the fifth month (i.e., 4 months and 15 days) from the date on which the termination occurs.
Information you will need to disclose
- Form 990 filers should check the Terminated box in the header area on page 1 of the return and answer yes to the question whether the organization liquidated, terminated, or dissolved (line 31 of Part IV) and, if applicable, to the question whether the organization engaged in a significant disposition of net assets (line 32 of Part IV).
- Form 990-EZ filers should check the Terminated box in the header area on page 1 of the return and answer yes to the question whether the organization liquidated, terminated, dissolved or made a significant disposition of net assets (line 36 of Part V).
- Form 990-N filers should answer "Yes" to the question "Has your organization terminated or gone out of business?"
After you’ve indicated on the 990 or 990-EZ that you are terminating your organization or transferring assets, you’ll need to file a Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets. The information required on Schedule N includes a description of the assets and any transaction fees, the date of distribution, the fair market value of the assets and information about the recipients of the assets.
Relationship between your organization and transferee organization
Schedule N also asks specific questions about whether an officer, director, trustee, or key employee of your organization is, or is expected to be, involved in the successor or transferee organization by governing, controlling, or having a financial interest in that organization. If you answer yes to any of the questions, you will need to provide the name of the person involved and an explanation of the circumstances.
Attachments to your return
You will need to provide a certified copy of your articles of dissolution or merger, resolutions and plans of liquidation or merger along with your Form 990 or 990-EZ. You may also need to provide other documentation requested in Schedule N.
Organizations in certain states must notify the state attorney general or other appropriate state office of the organization’s intent to dissolve, liquidate, or terminate.
Publication 4779, Facts About Terminating or Merging Your Exempt Organization
Form 990, Return of Organization Exempt From Income Tax
Form 990-EZ, Short Form Return of Organization Exempt From Income Tax
Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets
Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ
Form 990 Series, Filing Phase-In