The Taxpayer First Act of 2019: What Exempt Organizations Need to Know

By Magdalena M. Czerniawski  |  October 1, 2019

The Taxpayer First Act of 2019 (“Act”) was signed into law by President Trump on July 1, 2019. It includes several provisions that are important to exempt organizations, as they will bring about filing changes.

Under the Act, all organizations are required to e-file their Form 990 Return of Organization Exempt from Income Tax. This is a change from the current law, which only requires organizations that file more than 250 informational returns with the IRS and have more than $10 million in assets to e-file their tax returns. The new law drops the threshold to 100 informational returns in the calendar year 2021 and down to 10 in calendar years after 2021, closing the gap between larger nonprofits and smaller ones. Form 990-N is required to be electronically filed already, therefore, this provision will require substantially all organizations to e-file. Private foundations, which, under current law are only required to e-file if they have more than 250 returns filed with the IRS regardless of the asset size, will also be required to e-file under the new law, as will organizations required to file Form 8872 Political Organization Report of Contributions and Expenditures. It is worth noting that the new law also includes a provision that requires exempt organizations to make their tax returns available to the general public, “in a machine-readable format as soon as practicable.”

The Act provides transitional relief for organizations with gross receipts less than $200,000 and gross assets of $500,000 or less who currently file Form 990-EZ. The relief is granted for years beginning after July 1, 2021. This e-filing requirement is also extended for Form 990-T Unrelated Business Taxable Income, which previously could only be paper-filed.

The Act has also brought much needed change for Form 990-N. Under the current provisions, if an organization that files Form 990-N (has gross receipts under $50,000) fails to file the information returns for three consecutive years, it automatically loses tax-exempt status. The new law gives organizations a chance to comply with filing obligations, requiring that if the organization fails to file Form 990-N for two consecutive years, the IRS must reach out with a notice stating that if the organization doesn’t file for another year, the tax-exempt status will be revoked.

While most nonprofits already choose to e-file their tax returns, it’s important to keep in mind that going forward, this option is mandatory. Should you or your organization have any questions regarding e-filing, consult with your tax advisor or a member of Marks Paneth’s Nonprofit, Government & Healthcare Group.

About Magdalena M. Czerniawski