Never rely on anything an internet "expert" says

In this case, from the IRS website at:


http://www.irs.gov/Charities-&-Non-Prof ... re-to-File



"If an organization fails to file a required return by the due date (including any extensions of time), it must pay a penalty of $20 a day for each day the return is late. The same penalty applies if the organization does not give all the information required on the return or does not give the correct information.

In general, the maximum penalty for any return is the lesser of $10,000 or 5 percent of the organization's gross receipts for the year. For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.

If the organization is subject to this penalty, the IRS may specify a date by which the return of correct information must be filed. If the return is not filed by that date, an individual within the organization who fails to comply may be charged a penalty of $10 a day. The maximum penalty on all individuals for failures with respect to a return shall not exceed $5,000.

Please note: Automatic revocation occurs when an exempt organization that is required to file an annual return (e.g., Form 990, 990-EZ or 990-PF) or submit an annual electronic notice (Form 990-N, or e-Postcard) does not do so for three consecutive years. Under the law, the organization automatically loses its federal tax exemption."

Also it is possible to file extensions.

Bob H

"Correct me please, but if an organization is recognized by the IRS as a 501(c)(3) organization, would they ever have to pay taxes? If so, I'd curious to know how many do pay federal tax."

There are two aspects to being a 501(c)(3). The first is organizational compliance. (signified by the IRS determination letter) The second is operational compliance. (that's operating within your exempt purpose, filing your 990's, etc).

If a properly organized tax exempt (TE) fails to operate within is tax exempt purpose, it is possible to create a tax liability.

It is also possible for a TE to engage in commercial activities outside its exempt purpose and in that case, it is subject to unrelated business income tax (UBIT).

"Your nonprofit must by law be a regular corporation"

While there may be some state charity laws making such a requirement, the Internal Revenue Code does not require incorporation.

https://www.law.cornell.edu/uscode/text/26/501


(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

That having been said, I can't think of a good reason not to incorporate. It provides the "corporate veil", continuity of life and all the good parts of incorporation.


"A non profit that I was a director of got into a disagreement with the County over a property tax issue. The result was the organization ended having to pay a penalty of several thousand dollars. The state picked this up in a tax audit and said the penatily was a result of the directors making an error in judgement. The state said the directors were responsible for the penatily, not the non profit, and would have to pay the penalty out of their own pockets."

Realistically, the only way this happened is that there was more than a "disagreement". They had to extremely negligent with this liability, to the point that a court would find them not be acting with the scope of their fiduciary responsibilities.