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IRS Providing Exempt Orgs With Answers on Credits

Posted on June 24, 2020

Tax-exempt organizations can review guidance posted by the IRS for answers about the employee retention credit and other credits enacted as part of COVID-19 relief measures, according to an agency official.

A number of credits enacted as part of the Families First Coronavirus Response Act (P.L. 116-27) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) are available to exempt organization and for-profit employers, Janine Cook, IRS deputy associate chief counsel (employee benefits, exempt organizations, and employment taxes), said June 22.

Information about the credits is available at IRS.gov, and the agency has been updating its FAQs about the credits as more questions come up, Cook said during the 2020 American Institute of CPAs Not-for-Profit Industry conference.

The IRS posted additional FAQs about the employee retention credit on June 19, Cook said. The credit, established by the CARES Act, is available to employers whose operations are fully or partially shut down because of government orders related to COVID-19 or whose gross receipts drop significantly in 2020 compared with 2019.

The new FAQs provide more examples and explanations on what would constitute a full or partial shutdown of operations.

One updated FAQ notes that a taxpayer could have an essential business or essential operation that’s still open under a government order but have another portion that isn’t, Cook said, adding that “even though they’re an essential business or essential organization, they still might have a partial shutdown.”

FAQ #34 includes an example of a hospital.

“They’re an essential operation, of course, as a hospital, but as we’ve seen, they may not be able to do their elective surgeries,” Cook said. “So we did an FAQ to deal with that circumstance and explain how a hospital in that situation would still have a partial shutdown of operations.”

In new FAQ #46, the IRS addresses the measurement of gross receipts. The update explains that the “measuring stick” for claiming the employee retention credit based on a significant decline in gross receipts “is a broad one,” Cook said.

“It’s basically everything you get, including contributions and revenues of various types,” Cook explained.

Filing Extensions

Stephanie Robbins, an attorney in the IRS Office of Chief Counsel, pointed out that Notice 2020-23, 2020-18 IRB 742, and Notice 2020-35, 2020-25 IRB 948, postpone various filing and other deadlines for exempt organizations.

Forms that can be affected by the filing extensions include the Form 990 series information returns;  exemption applications; Form 4720, “Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code”; and forms pertaining to political organizations, Robbins said.

The notices also give exempt organizations more time to perform various time-sensitive actions. Those include more time to conduct nonprofit hospital community health needs assessments, provide notification of private foundation termination, submit supplemental group ruling information, and file Tax Court petitions or petitions for declaratory judgment or other claims, Robbins said.

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