The Internal Revenue Service (IRS) recently released News Release 2024-15, notifying taxpayers about a temporary halt in the electronic filing (e-filing) of Form 990-T and Form 1120-POL. This delay, attributed to IRS system upgrades, impacts returns with due dates falling between January 15, 2024, and March 15, 2024. Taxpayers affected by this delay are urged to take note of the following important information.

E-Filing Unavailability

Until March 17, 2024, taxpayers won’t have the option to electronically file Form 990-T and Form 1120-POL, including returns on extension, for the period from January 15, 2024, to March 15, 2024. This temporary inconvenience is a result of ongoing IRS system enhancements.

Impact on Returns Due from Jan. 15, 2024, to March 15, 2024

  • Form 990-T (Exempt Organization Business Income Tax Return):
    • Organizations subject to unrelated business income tax (UBIT) must file Form 990-T electronically. To navigate the e-filing unavailability, affected organizations should request a six-month extension by submitting Form 8868 by the due date of the return.
    • About 2,000 of the 200,000 Form 990-T filers are estimated to be affected during this period.
    • Any balance due must be submitted with Form 8868 to avoid interest and penalties.
    • Starting March 17, 2024, organizations can e-file Form 990-T by the extended due date.
    • Organizations failing to submit an extension or not e-filing timely should include a reasonable cause request for penalty relief, citing the unavailability of e-filing.
  • Form 1120-POL (U.S. Income Tax Return for Certain Political Organizations):
    • Organizations with a Form 1120-POL due from Jan. 15, 2024, to March 15, 2024, can file on paper. Alternatively, they may request a six-month extension using Form 7004 and pay the full balance due to avoid interest and penalties.
    • Only a handful of organizations typically e-file during this affected period.

Filing for Clean Energy Credits

The electronic filing delay does not impact government entities and Indian tribal governments not subject to UBIT. They can still timely file Form 990-T to make an elective payment election (EPE) for Clean Energy Tax Credits. EPE is available for tax years beginning in 2023, with returns not due until after March 17, 2024.

Encouragement for E-Filing

While government entities and Indian tribal governments not subject to UBIT are exempt from the electronic filing mandate, the IRS encourages all taxpayers to e-file. This aligns with the agency’s commitment to modernize processes and improve efficiency.

Conclusion

Taxpayers affected by the temporary e-filing delay should carefully consider the outlined procedures for Form 990-T and Form 1120-POL. Staying informed about these changes is crucial to ensuring compliance and avoiding potential penalties. For the latest updates and news related to exempt organizations, taxpayers are encouraged to connect with the IRS through social media channels and subscribe to IRS newsletters.

Note: For technical or procedural questions about exempt organizations, contact a member of the PBMares Not-for-Profit Team or your current CPA.