State University Student Organizations: File Form 990?

State university student organizations are required to file Form 990 if they are tax-exempt under Section 501(c) of the Internal Revenue Code. This includes organizations operating as title-holding companies (501(c)(2)), membership organizations (501(c)(4)), trade associations (501(c)(6)), and fraternal beneficiary societies (501(c)(8)). However, most undergraduate student organizations will qualify for tax exemption under Section 501(c)(3) as they are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes.

Form 990 is an annual information return that must be filed with the IRS by most organizations exempt from income tax under Section 501(a). It provides an overview of the organization's activities, including program information, financial activities, compensation to key executives, and qualifications as a tax-exempt school.

The requirement to file Form 990 depends on the organization's gross receipts and total assets. Organizations with gross receipts of $50,000 or less per year can file Form 990-N, also known as the e-Postcard, annually. Organizations with gross receipts exceeding $50,000 per year must file Form 990 or Form 990-EZ, depending on their total assets. If total assets are less than $500,000, they can file Form 990-EZ; otherwise, they must file Form 990.

It is important to note that student organizations do not automatically receive tax-exempt status and must apply for it through the Internal Revenue Service. Additionally, Yale University's tax-exempt status does not extend to its undergraduate organizations, and each undergraduate organization is responsible for complying with federal and state tax laws.

Do state university student organizations have to file Form 990?

State university student organizations are generally required to operate as non-profit organizations. However, they are not automatically registered as 501(c)3 organizations and do not automatically receive tax-exempt status.

To qualify for tax-exempt status, an organization must be a type of organization described in Internal Revenue Code (IRC) Section 501(c). Organizations that meet the requirements of IRC Section 501(a) are generally exempt from federal income taxation.

The majority of undergraduate student organizations will qualify for tax exemption under IRC Section 501(c)(3). An organization exempt under IRC Section 501(c)(3) is an organization organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes.

To obtain tax-exempt status, organizations with gross receipts of not more than $5,000 per year are not required to apply for recognition. Organizations with gross receipts in excess of $5,000 per year must file IRS Form 1023, Application for Recognition of Exemption under IRC Section 501(c)(3) of the Internal Revenue Code.

Once an organization has obtained tax-exempt status, it is generally required to file an annual information return. The type of annual filing is determined by the organization's annual gross receipts and assets.

Organizations with gross receipts of not more than $50,000 per year must electronically submit IRS Form 990-N, also known as the e-Postcard. Organizations with gross receipts in excess of $50,000 per year must file IRS Form 990, Return or Organization Exempt from Income Tax, or IRS Form 990-EZ, Short Form, Return of Organization Exempt from Income Tax.

Form 990 is an annual information return required to be filed with the IRS by most organizations exempt from income tax under section 501(a), and certain political organizations and nonexempt charitable trusts. Parts I through XII of the form must be completed by all filing organizations and require reporting on the organization's exempt and other activities, finances, governance, compliance with certain federal tax filings and requirements, and compensation paid to certain persons.

Form 990 contains a dense amount of detailed information, and reviewing it can be time-consuming and overwhelming. While reviewing each line item might not be practical, it is important to carefully review some of the most sensitive sections of the form, especially since the information can be easily accessed by the public and the media.

There are three major hotspots in the form that warrant this special focus and scrutiny: Schedule J (executive compensation); Schedule L (conflicts of interest); and the presentation of financial information (core form).

What is Form 990?

Form 990, officially known as the "Return of Organization Exempt from Income Tax", is a United States Internal Revenue Service (IRS) form. It is used by tax-exempt organizations to provide the IRS and the public with financial information about their activities, including program information, financial activities, and compensation to key executives.

The purpose of Form 990 is to enable the IRS and the public to evaluate whether tax-exempt organizations, including colleges and universities, are complying with the requirements to maintain their tax-exempt status. The form is due on the 15th of the fifth month after the organization's fiscal year ends, with the option for a single six-month extension.

There are different variants of Form 990, and organizations are required to file the applicable form based on their gross receipts, assets, and primary source of funding. Form 990-N is for organizations with gross receipts less than or equal to $50,000, Form 990-EZ is for organizations with gross receipts less than $200,000 and assets less than $500,000, and Form 990 is for organizations with gross receipts greater than or equal to $200,000 or assets greater than or equal to $500,000.

Form 990 is required to be filed by most tax-exempt organizations under section 501(a) of the Internal Revenue Code. This includes organizations described by any of the subsections of Section 501(c), 501(d) apostolic organizations, 501(e) cooperative hospital service organizations, 501(f) cooperative service organizations of schools, and more.

The Form 990 disclosures strongly encourage nonprofit boards to adopt a variety of board policies regarding governance practices, such as whistleblower and document retention policies. The IRS has indicated that it will use Form 990 as an enforcement tool, particularly regarding executive compensation.

Form 990 is an important tool for transparency and accountability for tax-exempt organizations, and it plays a crucial role in ensuring compliance with tax laws and maintaining public trust.

Who has to file Form 990?

Generally, tax-exempt organizations must file an annual information return, or Form 990. This includes all tax-exempt higher education institutions, such as colleges and universities, which are required to file Form 990 to provide an overview of their activities, including their financial activities, compensation to key executives, and qualifications as a tax-exempt school.

However, there are some exceptions to this rule. Tax-exempt organizations with annual gross receipts not normally exceeding $25,000 are not required to file an annual information return, although they may be required to file an annual electronic notice (e-Postcard) Form 990-N. Churches and certain religious organizations, certain state and local instrumentalities, and other organizations are also exempt from the annual return filing requirement.

There are four different 990 forms that can be filed, depending on the organization's financials and whether it is classified as a private foundation or public organization. The 990-N form, or e-Postcard, is for nonprofit organizations whose annual gross receipts are less than $50,000. The 990-EZ form can be filed by nonprofit organizations whose annual gross receipts are less than $200,000 and have total assets of less than $500,000. Organizations that do meet these requirements also have the option to file the full 990 form if they choose. The 990 form is required for nonprofit organizations whose annual gross receipts are greater than or equal to $200,000, or they have total assets that are greater than or equal to $500,000. The 990-PF form is required for all private foundations, regardless of financials and assets.

It is important to note that if an organization fails to file its 990 taxes for three consecutive years, the IRS will automatically revoke its 501(c)(3) tax-exemption status.

What are the deadlines for filing Form 990?

The deadline to file Form 990 depends on the accounting period of the organization in question. For instance, if an organization's accounting tax period runs from September 1, 2023, to August 31, 2024, its Form 990 deadline will be January 15, 2025.

Generally, Form 990 is due by the 15th day of the 5th month after the end of an organization's accounting period. For example, if an organization operates on a calendar tax year, its Form 990 will be due on May 15 of the following year.

If an organization is unable to meet the deadline, it can file Form 8868 to request an automatic 6-month extension. Form 8868 must be filed on or before the original deadline for the Form 990 return. For instance, if an organization follows a calendar tax year, Form 8868 must be filed by May 15, 2025.

It is important to note that the 990-N due date cannot be extended, but there is no penalty for submitting it late unless it is the third (and final) year.

What are the penalties for not filing Form 990?

Failing to file Form 990 on time can result in significant penalties for tax-exempt organizations, including state universities. The penalty amount is determined by the organization's gross receipts and the number of days the return is delayed. For organizations with gross receipts below $1 million, the penalty is $20 for each day late, up to a maximum of $10,000 or 5% of the organization's gross receipts for the year. If an organization's gross receipts exceed $1 million, the penalty increases to $100 per day, with a maximum penalty of $50,000. These penalties are outlined in Sec. 6652(c)(1) and are mandatory, leaving no room for discretion by the IRS.

In addition to the late filing fees, there are other consequences for not submitting Form 990. If an organization fails to file the required information returns for three consecutive years, it will automatically lose its tax-exempt status. This means that the organization will no longer be exempt from federal income tax and will be subject to additional taxes. Furthermore, individuals within the organization who are responsible for compliance may be charged a penalty of $10 per day, with a maximum penalty of $5,000 for any one return.

To avoid these penalties, organizations must ensure they file Form 990 by the due date, which is generally the 15th day of the 5th month after the organization's tax year ends. For example, organizations with a calendar tax year must file Form 990 by May 15th. It's important to note that filing late or incomplete returns can also result in penalties, and the IRS may send back incomplete returns, requiring organizations to resubmit within 10 days to avoid penalties.

While the penalties for not filing Form 990 can be severe, there are some circumstances under which relief from penalties may be granted. These fall into four main categories: reasonable cause, statutory exceptions, administrative waivers, and correction of service error. Reasonable cause can include circumstances beyond the taxpayer's control, such as death, serious illness, natural disasters, or mistakes. Statutory exceptions include situations like timely mailing being treated as timely filing, and administrative waivers may be granted by the IRS in certain cases, such as delays in printing or mailing forms.

Frequently asked questions