22.4 Tax-Exempt Organizations (Form 990)
Key Takeaways
- Form 990-N (e-Postcard): Gross receipts ≤$50,000.
- Form 990-EZ: Gross receipts <$200,000 AND assets <$500,000.
- Form 990 (full): Gross receipts ≥$200,000 OR assets ≥$500,000.
- Due 15th day of 5th month after fiscal year end (May 15 for calendar year); 6-month extension via Form 8868.
- Unrelated business income over $1,000 requires Form 990-T (21% corporate rate).
- §4960 Excess Compensation Excise Tax: 21% on comp over $1M; OBBBA expanded covered employees from top-5 to ALL employees starting 2026 (2025 still uses top-5 + carryover list).
- Failure to file for 3 consecutive years = automatic revocation.
Tax-Exempt Organizations: Form 990
Why This Matters for the Exam
Form 990 is the annual information return for tax-exempt organizations. The exam tests which version to file based on organization size, and UBIT requirements.
Expect at least 2-3 questions on nonprofit filing requirements.
Form 990 Versions
| Form | Gross Receipts | Total Assets | Who Files |
|---|---|---|---|
| 990-N (e-Postcard) | ≤$50,000 | N/A | Small orgs |
| 990-EZ | <$200,000 | <$500,000 | Mid-size orgs |
| 990 (Full) | ≥$200,000 | ≥$500,000 | Large orgs |
| 990-PF | N/A | N/A | Private foundations |
Form 990 Thresholds Decision Tree
| Gross Receipts | Assets | Form Required |
|---|---|---|
| ≤$50,000 | Any | 990-N |
| <$200,000 | <$500,000 | 990-EZ |
| ≥$200,000 | Any | 990 (Full) |
| Any | ≥$500,000 | 990 (Full) |
Filing Deadlines
| Calendar Year | Due Date | Extension |
|---|---|---|
| Form 990 | May 15 | 6 months (Form 8868) → November 15 |
| Form 990-EZ | May 15 | 6 months → November 15 |
| Form 990-N | May 15 | No extension |
General Rule: 15th day of the 5th month after fiscal year end.
Automatic Revocation
Organizations that fail to file for 3 consecutive years lose their tax-exempt status automatically.
| Failure | Consequence |
|---|---|
| 1 year missed | Penalty; status intact |
| 2 years missed | Warnings; status intact |
| 3 years missed | Automatic revocation of exemption |
Unrelated Business Income Tax (UBIT)
Tax-exempt organizations with unrelated business income may owe tax:
| UBIT Threshold | Requirement |
|---|---|
| Gross income > $1,000 | File Form 990-T |
| Tax rate | Corporate rate (21%) |
| Estimated taxes | Required if tax expected ≥$500 |
What Is Unrelated Business Income?
Income from a trade or business that is:
| UBI Requirement | Description |
|---|---|
| Regularly carried on | Not occasional activity |
| Not substantially related | Not related to exempt purpose |
UBI Examples
| Activity | UBI? | Reason |
|---|---|---|
| Gift shop selling educational items | No | Related to purpose |
| Gift shop selling unrelated merchandise | Yes | Not related |
| Advertising in nonprofit's magazine | Yes | Trade or business |
| Investment income (dividends, interest) | No | Excluded |
| Debt-financed property income | Yes | Special rules apply |
Form 990-T
| Form 990-T | Details |
|---|---|
| Who files | Orgs with UBI > $1,000 |
| Due date | 15th of 5th month (same as 990); 15th of 4th month for trusts |
| Extension | 6 months |
| Tax payment | Corporate rates (21% flat) |
| §512(a)(6) silo rule | UBI losses from one activity cannot offset gains from another |
NEW Focus: §4960 Excess Compensation Excise Tax
For tax-exempt employers, §4960 imposes a 21% excise tax on:
- Remuneration over $1,000,000 paid to a covered employee in a year, and
- Excess parachute payments to covered employees.
OBBBA expansion (effective for tax years beginning after December 31, 2025): the term covered employee expands from "any of the 5 highest-compensated employees of the org for the current or any preceding year beginning after 2016" to any current or former employee of the applicable tax-exempt organization. For TY 2025 (this exam cycle), the original top-5 + carryover definition still controls; the broader 2026 definition is a planning point, not yet a 2025 testing target.
Form 4720
The §4960 tax (and most other Chapter 42 excise taxes on tax-exempt orgs and private foundations) is reported on Form 4720, filed by the 15th day of the 5th month after year end.
Real-World Scenario
Scenario: A charity has $180,000 gross receipts, $400,000 assets, and $5,000 of advertising income from its newsletter.
- Form 990 version: Form 990-EZ (receipts <$200k AND assets <$500k).
- UBIT: Yes—advertising income is UBI.
- Form 990-T: Required (UBI > $1,000).
- Tax owed: $5,000 × 21% = $1,050.
On the Exam
Expect 2-3 questions on Form 990, typically:
- Threshold Questions: "Which Form 990 does an org with $X receipts and $Y assets file?"
- Due Date Questions: "When is Form 990 due for a calendar-year nonprofit?"
- UBIT Questions: "When must Form 990-T be filed?"
The key is to remember: 990-N ≤$50k; 990-EZ <$200k AND <$500k; 990 = large. Due May 15. UBIT > $1,000 = Form 990-T.
Which Form 990 does an org with $60,000 gross receipts and $100,000 assets file?
When is Form 990 due for a calendar-year nonprofit?
At what UBI threshold must Form 990-T be filed?