New filing requirement with the FTB for small California nonprofit organizations

Starting January 1, 2011, very small tax-exempt organizations in California must file an e postcard with the state Franchise Tax Board. This is very similar to the federal e-postcard.  Form FTB 199N is used for the FTB while Form 990-N is used with the IRS.

Key things you need to know:

Basic information from the state can be found here.

Consequences of not filing – Not filing puts tax-exempt status in California at risk. If an organization is required to file a 199N but fails to file for three consecutive years, then the organization will lose its tax exempt status.  Bad stuff starts to happen when you lose tax-exempt status.  The best approach?  Don’t go down that path.  File the return every year.

Transition – the new filing requirement applies to years beginning on or after January 1, 2010. That means if your fiscal year ends December 31, 2010 or later you need to file. First filing time will open up January 1, 2011.

Who files? – If your gross receipts (that means all-inclusive, total revenue) is normally $25,000 or less you can file a 199N. If your total revenue is normally greater than $25,000, you must file the long 199.

What in the world does “normally $25,000 or less” mean? – That means you take the average of the current year gross receipts and immediately preceding two years. This gives you leeway in case your income is usually far below $25,000 but you have one really good year in terms of donations. That one year of going above $25,000 doesn’t necessarily trigger having to prepare the long 199. You may still be able to file the 199N with a one-year blip. Do the average calculation to see if you can still file the 199N.

Who is exempt? – Churches, conventions or associations of churches, integrated auxiliaries, and religious orders do not have to file either the 199 or 199N.  There are other exemptions, but I doubt people reading this blog fall into those categories. Filing requirements and exemptions can be found on the FTB website here.

Deadline for filing? – 4 and 1/2 months after you your fiscal year-end. For example an organization with December 31 year-end must be filed by May 15.

Where can you get the paper form to fill out? – Umm, nowhere. The form has to be filed electronically.  You can find the form here.  The good news? It is extremely simple.

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