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New Tax Law Requires Exempt Organizations to E-File Annual Forms 990

July 12, 2019

On July 1, 2019, President Trump signed into law the Taxpayer First Act of 2019 which, among other things, expands the types of tax-exempt organizations that must file their annual returns electronically.

Currently, a tax-exempt organization is required to e-file its annual Form 990-series return (990, 990-EZ, 990-N, 990-T or 990-PF) only if the tax-exempt organization:

  1. Has total assets at the end of the year of $10 million or more and is required to file at least 250 returns (including Forms W-2 or 1099) during the calendar year ending with or within its taxable year;
  2. Is a private foundations or charitable trusts that files at least 250 returns during the calendar year; or
  3. Files a Form 990-N (e-postcard).

The new e-filing requirement applies to all tax-exempt organizations required to file a Form 990-series return or a Form 8872 (“Political Organization Report of Contributions and Expenditures”). However, organizations exempted from filing information returns, such as churches and governmental entities, are not affected by the new e-filing requirements.

Mandatory e-filing applies for tax years starting on or after July 2, 2019. Calendar year filers must begin e-filing with their 2020 returns. Fiscal year filers must begin e-filing for tax years beginning on or after July 2, 2019. Because the new e-filing mandate begins on July 2, 2019, an organization with a fiscal year commencing on July 1, 2019 will not be required to e-file its 2019 return. Instead it must commence e-filing with its 2020 return (which would cover the period July 1, 2020 through June 30, 2021).

Tax exempt organizations that currently do not file e-file returns can prepare and submit their returns electronically using IRS-approved tax preparation software, or by engaging a tax professional who uses software approved for electronic filing. A list of approved e-filing providers has not yet been released for tax year 2019, though we expect that the technical guidance on electronic filing options for exempt organizations will be updated as part of the implementation of the new law.

The IRS may delay implementation of obligatory e-filing for up to two years for financially small organizations with total assets of less than $500,000 and annual revenue less than $200,000, all organizations filing unrelated business income tax returns, and any organization facing undue burdens from the change. Organizations eligible for this temporary transitional relief should prepare to e-file their returns beginning in 2022 and beyond, when paper filing will be discontinued.

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