New Law Streamlining Form 990 Extensions Comes into Effect

Nonprofits rejoice! The long-awaited streamlining of Form 990 extensions will finally come into effect for the 2016 tax year (i.e. tax years beginning January 1, 2016). Form 990 tax returns are due four and a half months after the exempt organization’s fiscal year end. For many organizations operating on a calendar year, that due date is May 15.

Under the previous format, nonprofits could obtain a 3-month extension by filing Form 8868 before their initial due date. The IRS then required a second filing to request an additional extension and to demonstrate “reasonable cause”. Due to the difficulty in obtaining assistance from the IRS combined with late penalties that accrued on a per day basis, many organizations struggled with this system.

However, H.R.3236 was signed into law on July 31, 2015 and changed that process. The new format eliminates the two-step extension and grants an automatic 6-month extension for 990 filings when a timely Form 8868 is submitted. Thus, for many organizations operating on a calendar year, 990 due dates can be extended from May 15 to November 15 through one simple filing with the IRS.

Although this legislation streamlines the process with the IRS, it doesn’t completely alleviate the headache for nonprofit organizations. Different state agencies are still figuring out how it will affect their charitable solicitation renewal processes. Some states will mirror the new IRS process and honor a 6-month extension after filing for a timely state extension whereas other states will continue to offer only a 3-month extension.

Due to constantly evolving federal and state standards, many organizations find it difficult to stay on top of their charitable solicitation renewals. Here at Harbor Compliance, we are continually in touch with state agencies to be on the forefront of shifts in procedures and policies. For assistance navigating charitable solicitation requirements, please contact us at 888-995-5895 or learn more about our fully managed services.

In other news…

In January 2017, Harbor Compliance and the National Council of Nonprofits (Council of Nonprofits) announced a “Best Practices Partnership” and unveiled a resource guide to help nonprofits with often-misunderstood state fundraising registration requirements. This resource, Charitable Solicitation Compliance: An explanation of state charitable registration requirements, is available for anyone to download, free-of-charge.