July 28, 2010 - From: P. B. Onderdonk, Jr., National Judge Advocate
THIS IRS ANNOUNCEMENT MAY BE OF SIGNIFICANT INTEREST TO ALL POSTS.

 One-time filing relief allows tax-exempts to file Form 990 by Oct. 15, 2010 to save exempt status

IR 2010-87 http://www.irs.gov/newsroom/article/0,,id=225959,00.html

     IRS has announced that under a one-time relief program small tax-exempt organizations that failed to file returns for 2007, 2008 and 2009 can avoid losing their tax-exempt status by filing a return by Oct. 15, 2010. Two types of relief are available: (1) a filing extension for the smallest organizations (eligible to file Form 990-N); and (2) a voluntary compliance program for small organizations (eligible to file Form 990-EZ).
     Filing requirement for tax-exempts. Under Code Sec. 6033(a), most tax-exempt organizations, other than churches, must file with IRS an annual Form 990, Form 990-EZ (Short Form Return or Organization Exempt From Income Tax), or Form 990-PF (Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation), or submit a Form 990-N (Electronic Notification (e-Postcard)). For the 2009 tax year (returns filed in 2010), exempt organizations with gross receipts over $500,000 or total assets over $1.25 million are required to file Form 990 (rather than Form 990-EZ). Under the discretionary exemption in Code Sec. 6033(a)(3)(B), IRS provides that exempt organizations whose annual gross receipts aren't normally in excess of a specified amount file the simplified Form 990-N. Starting with the 2010 tax year, IRS will increase from $25,000 to $50,000 the filing threshold for organizations required to file Form 990-N.
     Three year filing rule. Under the 2006 Pension Protection Act (PPA), a non-church exempt organization's failure to file Form 990 for three consecutive years will result in the revocation of the organization's exempt organization status under Code Sec. 501(a) on and after the date IRS has set for filing the third annual return or notice. (Code Sec. 6033(j)(1)) The PPA filing requirement has been in effect since the beginning of 2007, which makes 2009 the third consecutive year under the new law. Thus, absent a relief measure, any exempt organization that fails to file for 2007, 2008 and 2009 automatically loses its federal tax-exempt status.
     Form 990-series information returns are due on the 15th day of the fifth month after an organization's fiscal year ends. For organizations using the calendar year as their fiscal year, May 15 is the deadline. Since May 15 fell on a Saturday, the deadline this year was Monday, May 17.
     If an organization loses its exemption, it ordinarily must reapply with IRS to regain its tax-exempt status, and any income received between the revocation date and renewed exemption may be taxable.
     One-time relief. In IR 2010-87, IRS announced that two types of relief are available for small tax-exempt organizations that would lose their exempt status under the three-year filing rule: (1) a filing extension for the smallest organizations required to file Form 990-N; and (2) a voluntary compliance program for small tax-exempt organizations eligible to file Form 990-EZ. IRS has provided details about the relief program on its website, along with Frequently Asked Questions (FAQs). The one-time filing relief program FAQs can be viewed on the IRS website at http://www.irs.gov/charities/article/0,,id=225954,00.html
     IRS advised that tax-exempt organizations eligible to file Form 990-N need only go to its website, supply the eight information items called for on the form, and electronically file it by October 15. That will bring them back into compliance.
     Under the voluntary compliance program, IRS advises that tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by October 15 and pay a compliance fee. IRS says that the compliance fee is in lieu of taxes, penalties, and interest that otherwise would be incurred because of the failure to file. If the organization's gross receipts (as reported on the 2009 information return) are $100,000 or less, the compliance fee is $100; if they are $100,001 to $200,000, the fee is $200; and if they are $200,001 to $499,999, the fee is $500. The payment of the compliance fee doesn't affect the organization's liability for any taxes that would be imposed even if they had filed their returns, including but not limited to unrelated business income tax and employment taxes.
     IRS cautions that this relief isn't available to larger organizations required to file Form 990 or to private foundations that file Form 990-PF.
     List of noncompliant organizations. To further alert tax-exempt organization to the problem, IRS has also posted on its website the names and last-known addresses of at-risk organizations with return due dates between May 17 and Oct. 15, 2010 for which IRS has no record that the required returns have been filed for the past three years (see http://www.irs.gov/charities/article/0,,id=225889,00.html ). IRS will keep this list on its website until Oct. 15, 2010. Organizations that have not filed their required returns by that date will have their tax-exempt status revoked. IRS will publish a list of these revoked organizations in early 2011.
     IRS warns, however, that the list may be incomplete, and that certain organizations may be at risk even though their names don't appear. In addition, the list may include organizations that were required to file Form 990 or Form 990-PF and so aren't eligible for the relief program, as well as organizations whose filing dates have not yet occurred.
     IRS advises that donors who contribute to at-risk organizations are protected until this final revocation list is published.
     RIA Research References: For tax-exempt organization's annual return Form 990, see FTC 2d/FIN ¶ S-2801; United States Tax Reporter ¶ 60,334; TaxDesk ¶ 688,001.
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The Legislative Division Update
TOPIC 1: Medicare Reimbursement for VA Medical Care
BACKGROUND: VA is prohibited from billing Medicare for third-party reimbursements for the treatment of enrolled, Medicare-eligible veterans’ nonservice-connected medical conditions. The American Legion recommends Medicare reimbursements to supplement VA annual budget. ACTION: During congressional testimony and numerous interviews with the media, The American Legion promoted Medicare Reimbursement as a new revenue stream for VA. Position: The American Legion fully supports Medicare reimbursement for VA and will seek legislation in the 111th Congress.

TOPIC 2: Budget Reform for VA Medical Care
BACKGROUND: The American Legion, VFW, DAV, AMVETS, Blinded Veterans Association, JWV, Military Order of the Purple Heart, PVA, and VVA have joined forces in support of changing VA medical care from discretionary to mandatory annual appropriations. The goal is to help stabilize VA medical care funding by using a formula based system similar to Social Security and Medicare. The Partnership is placing emphasis on sufficiency, timeliness, and predictability of VA’s annual appropriations. On February 12, companion legislation was introduced in both the House and Senate to address this issue. Entitled the “Veterans Health Care Budget Reform and Transparency Act of 2009,” the bills are: S. 423, introduced by Senator Daniel Akaka (HI) with 45 cosponsors; and, H.R. 1016, introduced by Representative Bob Filner (CA) with 110 cosponsors. On Thursday, May 21, this bill was marked up by the Senate Veterans’ Affairs Committee. ACTION: The American Legion continues to lobby lawmakers to effect budget reform for VA Medical Care. On April 2, during consideration of the FY 2010 budget resolution, Senate Concurrent Resolution 13, Senator James Inhofe (OK) introduced an amendment that would include VA medical care in a listing of Federal programs that receive advance appropriations. The amendment was approved by unanimous consent. The House agreed to this amendment on April 29, when the conference report to the budget resolution was approved by both congressional chambers. Position: The American Legion will continue to seek legislation for assured funding in the 111th Congress and will monitor these bills as they work through Congress.

TOPIC 3: Disabled Veterans’ Tax in the 111th Congress
BACKGROUND: Following passage of this year’s Defense Authorization Bill, Chapter 61 military retirees with less than 20 years of military service and military retirees rated 100 percent service-connected disabled due to Individual Unemployability can now qualify for concurrent receipt of their military retirement pay and their VA disability compensation without the dollar for dollar offset for Combat Related Special Compensation. ACTION: On January 8, Representative Gus Bilirakis (FL) introduced H.R. 303, the “Retired Pay Restoration Act.” This legislation would: a) allow the receipt of both military retired pay and veterans' disability compensation with respect to any service-connected disability, b) repeal provisions phasing in the full concurrent receipt of such pay through December 31, 2013, and c) make eligible for the full concurrent receipt of both veterans' disability compensation and either military retired pay or combat-related special pay those individuals who were retired or separated from military service due to a service-connected disability. The measure currently has 66 cosponsors. A companion measure, H.R. 333 – the “Disabled Veterans Tax Termination Act” – was introduced by Representative Jim Marshall (GA) on the same day. This measure would: a) allow retired members of the Armed Forces who have a service-connected disability rated less than 50 percent to receive concurrent payment of both retired pay and veterans' disability compensation, b) eliminate the phase-in period for concurrent receipt, and c) extend eligibility for concurrent receipt to chapter 61 disability retirees with less than 20 years of service. This legislation currently has 79 cosponsors. Senator Reid (NV) introduced S. 546, a bill to amend title 10, United States Code, to permit certain retired members of the uniformed services who have a service-connected disability to receive both disability compensation from the Department of Veterans Affairs for their disability and either retired pay by reason of their years of military service or Combat-Related Special Compensation. This proposal has 34 cosponsors. The American Legion will continue to urge expanding benefits for all service-connected disabled military retirees in the 111th Congress. President Obama submitted to Congress his “topline” budget in which he specifically addressed the Disabled Veterans’ Tax and his intentions to allow more service-connected disabled military retirees receive more of their VA compensation and military retirement pay without offsets. ACTION: The American Legion is publicly thanking cosponsors. Position: The American Legion supports the full repeal of the Disabled Veterans’ Tax in the 111th Congress.

TOPIC 4: VA Budget for FY 2010
BACKGROUND: National Commander Dave Rehbein addressed a Joint Session of the Veterans’ Affairs Committees on September 11 to present the views of The American Legion regarding matters that will come before the 111th Congress. The American Legion’s legislative portfolio supports VA health care funding that is sufficient, timely and predictable; ending the ban on Priority 8 enrollment; a seamless transition from DOD to VA, including reserve component service members; long-term care of aging veterans; medical and prosthetics research; construction of state-of-the-art medical facilities; technology for electronic medical records; reduction of the outrageous disability compensation claims backlog; veterans’ employment rights, veterans’ hiring preference by government and government contractors, and veteran-owned and service disabled veteran-owned small businesses in government procurement programs; job training for veterans with military occupational specialty skills not readily transferable to the private sector; care for homeless veterans; and proper administration of new GI Bill benefits. President Obama sent a “topline” budget to Congress that provided some insight into the budget request he is crafting for April 2009. The “topline” figures for VA are rather promising -- $56 billion in discretionary and $57 billion in mandatory -- $113 billion in FY 2010. This is a significant increase ($4.9 billion) in VA funding. However, the budget document contained very little details and no legislative initiatives. ACTION: On March 10, The American Legion testified before the Senate and House Veterans Affairs Committees to give its views on the President’s budget request. POSITION: The American Legion funding request for this portfolio includes $42.8 billion for medical care, including medical and prosthetic research; $3.3 billion for major and minor construction; $2.7 billion for information technology and $2.8 billion for VA general operating expenses.

TOPIC 5: Flag Amendment
BACKGROUND: The American Legion remains committed to protecting Old Glory from acts of physical desecration and overturning Texas v. Johnson (1989). During the Washington Conference, efforts were taken to determine the official positions of lawmakers currently listed as “unknown.” ACTION: On April 30, Representative Jo Ann Emerson (MO) introduced House Joint Resolution 47, a constitutional amendment to prohibit the physical desecration of Old Glory. H.J. Res. 47 currently has 23 cosponsors. On May 6, Senator David Vitter (LA) introduced Senate Joint Resolution 15, a Senate companion measure in line with The American Legion’s language. S.J. Res. 15 currently has 21 cosponsors. House and Senate offices of past supporters have been contacted urging them to sign on as cosponsors. POSITION: The American Legion fully supports a proposed constitutional amendment to prohibit the physical desecration of Old Glory.

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