What to do if your branch lost its tax-exempt status
A number of NALC branches may have received a notice from the Internal Revenue Service (IRS) advising them that their tax-exempt status has been revoked because they failed to file either a Form 990, Form 990-EZ or Form 990-N over the past three years.
In 2007, the IRS, and subsequently, the office of the NALC secretary-treasurer, announced the change in the IRS requirement to file a Form 990 even if the branch has no income. This change resulted from the Pension Protection Act of 2006.
Click here to read the secretary-treasurer's March 2011 Postal Record column.
A branch that loses its tax-exempt status is liable for taxes on its dues income. However, the IRS provides a chance for branches or state associations that have lost tax-exempt status to be reinstated by filing Form 1024 and Form 8718, and by paying a user fee. For more information, click here to download a PDF of the IRS's “Automatic Revocation of Tax-Exempt Status” fact sheet.
Click here for some helpful answers for questions on Form 1024.
Branches that were eligible to file a Form 990-N (e-Postcard) can obtain transitional relief by applying for reinstatement of tax-exempt status by Dec. 31. Such branches will be treated by the IRS as having established reasonable cause for their filing failures and their tax-exempt status will be reinstated retroactively to the date it was automatically revoked.
More information for Form 990-N-eligible branches is available at www.irs.gov—see Notice 2011-43.
Branches that should have filed Form 990 or Form 990-EZ at least once in the last three years will have to show reasonable cause for their failure to file in order to receive retroactive reinstatement. Full details are available in Notice 2011-44 at www.irs.gov.
Additional information on the reinstatement process, including retroactive reinstatement, can be found on the IRS website, which also provides a list of organizations whose tax-exempt status has been revoked.
You can click here to download a PDF of the “IRS Determination Letter” issued to NALC Headquarters, which covers NALC branches and state associations.
Every branch receiving income from dues is urged to ensure that its tax-exempt status is in place presently, and if not, to apply immediately for reinstatement.
In addition, all branch fiduciary officers should ensure that the appropriate Form 990, Form 990-EZ or Form 990-N is filed in a timely fashion, as failure to file still can result in the loss of tax-exempt status.
Branches with no dues receipts are advised to contact their national business agent’s office or the NALC secretary-treasurer’s office for advice.
Click here to read the secretary-treasurer’s Postal Record column from August 2011, entitled Bonding—it’s the law; revocation of tax-exempt status.
The IRS requires four criteria on the organizing document. Thus, even though many branches have included a constitution, a charter and by-laws, the IRS in some cases has denied reinstatement due to lack of the four criteria on one document. Therefore, an addendum to the national charter is available for use in applying to the IRS for reinstatement of tax-exempt status. You should include this addendum with the other forms required for application.
• State association addendum for IRS (Word)
• State association addendum for IRS (PDF)
• Branch addendum for IRS (Word)
• Branch addendum for IRS (PDF)