The IRS has granted an automatic six-month extension of time for certain tax-exempt organizations to file a Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T is generally used by tax-exempt organizations to report income from business activities that don’t directly support their primary tax-exempt purpose, also known as unrelated business income (UBI). Form 990-T is also used by tax-exempt organizations to make the so-called “elective pay” or “direct pay“ election associated with several different refundable tax credits.
Which Entities Can Benefit From the Automatic Extension?
Revenue Procedure 2024-39, issued Oct. 11, 2024, applies to those entities making an elective payment election on Form 990-T. According to the Department of Treasury and the IRS, this extension is granted to entities making elective payment elections in the first year such elections are available because many were unfamiliar with the filing and extension process.
The revenue procedure grants relief to organizations that failed to file a timely extension on Form 8868, Application for Extension of Time to File an Exempt Organization Return. The guidance applies to applicable entities filing a Form 990-T for an elective pay election for a taxable year ending on any day between, and including, Dec. 31, 2023, through Nov. 30, 2024 providing that other requirements are also met. Taxpayers are not required to file Form 8868 to receive the extension.
The IRS also provides a specific procedure to follow if an organization receives notice that its elected payment election was ineffective because “it was filed past the return’s due date and on or before the automatically extended due date provided under the revenue procedure.”
Additionally, the revenue procedure temporarily waives the requirement to make an elective payment election electronically. Qualifying entities can make an elective payment option via paper-filed Form 990-T if they follow specific requirements. However, the IRS strongly recommends the electronic filing of returns for greater processing efficiency in elective payment elections.
For more information about Form 990-T, elective payment elections and determining UBIT liability, please connect with our tax professionals.
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