Rev. Rul. 60-144

Advice has been requested whether an organization claiming exemption from tax under section 501(a) of the Internal Revenue Code of 1954 will be considered as meeting the return requirements of the Code and the regulations promulgated thereunder when, prior to the time it establishes a tax-exempt status, it files an information return, Form 990 or Form 990-A, in lieu of an income tax return, and whether such information return will be considered as starting the running of the statutory period of limitations on assessment of tax.

Section 6012(a) of the Internal Revenue Code of 1954 provides, in part, with certain exceptions not here material, that income tax returns shall be made by every corporation subject to tax under Subtitle A and every trust having specified income. The Income Tax Regulations provide, in part, that these returns shall be made on Form 1120, U.S. Corporation Income Tax Return, or Form 1041, U.S. Fiduciary Income Tax Return, as the case may be.

The mere claim of exemption from tax under section 501(a) of the Code does not relieve an organization from filing income tax returns and paying the tax. Section 1.6033-1(c) of the regulations provides that an information return on Form 990 or Form 990-A is not required to be filed by an organization claiming an exempt status under section 501(a) prior to the establishment by the organization of such exempt status under section 501(a) of the Code and section 1.501(a)-1 of the regulations. If the date for filing an income tax return and paying the tax occurs before the tax-exempt status of the organization has been established, the organization is required to file the income tax return and pay the tax due thereon. However, under the provisions of sections 6081 and 6161 of the Code and the regulations thereunder, an organization may apply for an extension of time for filing its return and paying the tax. Upon establishment of its exempt status, the organization may file a claim for refund of income tax paid for the period for which its tax-exempt status is established.

It follows, therefore, that if such an organization files an information return on Form 990 or Form 990-A instead of an income tax return on Form 1041 or Form 1120, the requirements of the Code and the regulations have not been met. This is true even though section 6501(g)(2) of the Code provides that an information return filed by an organization claiming a tax-exempt status which determines in good faith that it is exempt, shall be deemed to be the return of the organization for purposes of the statute of limitations on assessment of the tax in the event such organization is held to be taxable for the year for which the return is filed.

Section 6501 of the Code, relating to limitations on assessment and collection, provides, in part, as follows:

(a) GENERAL RULE.-Except as otherwise provided in this section, the amount of any tax imposed by this title Internal Revenue Title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) * * * and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period.

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(g) * * *

(2) EXEMPT ORGANIZATIONS.-If a taxpayer determines in good faith that it is an exempt organization and files a return as such under section 6033, and if such taxpayer is thereafter held to be a taxable organization for the taxable year for which the return is filed, such return shall be deemed the return of the organization for purposes of this section.

The provisions of section 6501(g)(2) of the Code relate solely to the statute of limitations on assessment of tax with respect to organizations claiming exemption from income tax under section 501(a) of the Code. It does not modify in any manner the return and payment requirements of the regulations for taxable organizations but operates independently of such requirements, thus serving a separate and distinct purpose. If, in reliance on the provisions of such section, an organization fails to file a proper tax return, or does not obtain an extension of time for filing the return and paying the tax as provided in sections 6081 and 6161 of the Code and the regulations thereunder, it may possibly subject itself to additions to the tax if it eventually is held not to be exempt. However, if a question arises with respect to the statute of limitations on assessment of the tax the organization has the right under section 6501(g)(2) to show that it determined in good faith that it was an exempt organization and that it timely filed an information return on Form 990 or Form 990-A. If these requirements are met, the information return will be deemed the return of the organization for purposes of starting the running of the statutory period of limitations.

Where the provisions of section 6501(g)(2) of the Code apply, the filing of an information return on Form 990 or Form 990-A will start the running of the statutory period of limitations on assessment of the tax in case such organization is held to be taxable for the year for which the return is filed. Because of their significance for purposes of the statute of limitations, information returns on Form 990 or Form 990-A, which may be erroneously filed by an organization in lieu of the tax returns required by the regulations, will be retained by District Directors of Internal Revenue. The organization will ordinarily be requested to file an exemption application, if it has not already done so, and to file proper tax returns in conformity with the regulations pending establishment of a tax-exempt status.

For information regarding the return forms required to be filed in the case of an employees' trust described in section 401(a) of the Code or a religious or apostolic association or corporation described in section 501(d) of the Code, see section 1.6033-1 of the regulations.

Revenue Ruling 54-393, C.B. 1954-2, 125, based on the application of the Internal Revenue Code of 1939, provided, in part, that in any case in which an organization filed an information return prior to the establishment of a tax-exempt status, the District Director would return it to the organization together with an appropriate exemption application and a request that such exemption application be completed and returned to his office. Revenue Ruling 54-393 is applicable, however, only to taxable years coming under the 1939 Code and is not applicable to taxable years governed by the 1954 Code.