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Love to File Nonprofit Tax Documents?
By Brian J. Wagner
NAPS Immediate Past President
One thing February is known for is celebrating Valentine’s Day and all that love stuff. When you think love, I doubt the IRS comes to mind. However, I must say there is no love lost in reaching back in my column archives to resuscitate a topic that may have taxed the hearts of many branches.
Yes, I am talking about branches seeking nonprofit/tax-exempt status with the IRS. This column won’t drive you bananas or require Pepto-Bismol. Who knows, you just might enjoy this rekindled love story between the IRS and NAPS branches. Here’s the scoop:
NAPS Headquarters is a nonprofit/tax-exempt organization. Technically, NAPS is classified as a 501(c) 5 organization. That being said, throughout my NAPS resident officer tenure and now as immediate past president, I have received inquiries from branches wanting to know if they are covered under NAPS Headquarters’ nonprofit/tax-exempt umbrella. The heartbreaking answer is “no.”
NAPS Headquarters’ nonprofit/tax-exempt status does not automatically apply to all local and state NAPS branches. Each local and state branch must apply for their own nonprofit/tax-exempt status under the same IRS code under which NAPS Headquarters is covered. Note: this is not the same as filing an annual nonprofit tax return Form 990 with the IRS. That will be a separate IRS/NAPS love story. What I am addressing is filing IRS Form 1024, “Application for Recognition of Exemption,” for a local or state NAPS branch to request approval from the IRS to become a nonprofit/tax-exempt organization.
First, it’s optional—not a mandate—that a NAPS branch has nonprofit/tax-exempt status with the IRS. For those NAPS branches seeking nonprofit/tax-exempt status, but have yet to officially file their paperwork with the IRS, please note that the IRS has changed its application process for filing Form 1024 to online only. The IRS no longer accepts Form 1024s via the mail. This includes the online submission of various branch documents required to be submitted along with the 1024 application.
Unfortunately, the comprehensive tax-training material and Form 1024 template on the NAPS website that provides instructions on how to manually file for nonprofit/tax-exempt status no longer corresponds directly with the new IRS online nonprofit/tax-exempt system. NAPS Headquarters will need to update that training material.
However, there is some heartwarming news. Two NAPS branches recently sought my assistance on filing for nonprofit status. This provided an opportunity to experience the new Form 1024 online filing system. Through our due diligence, we were able to piecemeal and use various sections of NAPS’ current website tax-training material and various aspects of the Form 1024 template to complete and submit the two branches’ forms, including supporting branch documentation as required.
I love the fact this new IRS online process worked and did not drive us bananas or require taking gallons of Pepto-Bismol. What is a true love story is that the IRS already has approved one of the branches for nonprofit/tax-exempt status. The other branch request is pending.
In brief, the new online Form 1024 system requires a branch to first register an account with www.Pay.gov by creating a username and password. Once created, general branch information is entered as part of the online application process. Such information includes the branch’s official name, employer identification number (EIN), also known as the taxpayer identification number (TIN), and the names and addresses of current elected branch officers. Be still my tax-infected heart, there is more.
Next is the completion of an online questionnaire that requires written descriptions or explanations and “yes,” "no” or “N/A” answers. Again, we piece-mealed sections of NAPS’ original tax template training material to write the respective descriptions and explanations required by the IRS. Besides the questionnaire, a branch must upload and submit PDF branch documents that include its current constitution and bylaws that must be dated and signed by two branch officers before submission.
The IRS further requires the branch’s current year-to-date financial records and balance sheet, along with complete financial income and expense statements for the past two fiscal years. In addition, the IRS requires a signed and dated declaration by a branch officer on branch letterhead that includes the branch’s EIN that reads as follows:
“Under penalties of perjury, I declare that I have examined this information, including accompanying documents, and, to the best of my knowledge and belief, the information contains all the relevant facts relating to the request for information, and such facts are true, correct, and complete.”
Once all the required branch information has been entered and PDFs attached, the branch officer completing the application will click a box confirming all information is accurate. The final step before IRS submission is to enter the branch’s bank routing and account numbers (savings or checking) or debit card number to pay the $600 IRS nonprofit/tax-exempt application fee. In the past, the filing fee could be paid by check or money order. Today, however, the new IRS online system requires electronic payment through www.Pay.gov.
According to the IRS, the new Form 1024 process could take up to 180 days before a branch receives final approval. This timeline may include the IRS contacting the branch for additional information or requiring further clarification of information submitted.
It is important to note the IRS will send notices in the mail. Therefore, check your branch’s mailbox often to avoid delays to the IRS. In addition, the IRS will correspond with the branch via phone or U.S. Mail—not email. If the IRS requires additional information from the branch, it must be sent via U.S. Mail or by fax—not email.
It also is important to note that if your branch was previously approved for nonprofit/tax-exempt status, but failed to file its respective annual IRS Form 990 tax return for the past three consecutive years, there is a high probability your branch’s nonprofit/tax-exempt status has been revoked.
If that is the case, your branch must reapply and will be required to pay the respective $600 application fee. Otherwise, continue to file your annual 990 tax returns to keep your nonprofit/tax-exempt status.
Please note, this information is intended for instructional and information purposes only. Stay tuned for next month’s issue as I revisit the process and requirements for nonprofit/tax-exempt NAPS branches to file their respective annual IRS 990-N, 990 EZ or regular 990 tax returns.
There is one thing that won’t be exempt from this article and I hope receives your approval sooner than 180 days—my ice-cream-flavor-of-the-month recommendation: banana cream pie.