Veterans post tax filing: VFW, American Legion and other posts

Most posts are part of a group exemption

IRS Publication 3386, the tax guide for veterans organizations, says most 501(c)(19) veterans organizations are part of a group exemption letter. The national or department organization is the central organization; the posts are its subordinates and adopt its constitution and bylaws.

A group exemption gives each listed post tax-exempt status. It does not file the post's annual return. Publication 3386 says veterans organizations generally must file Form 990, Form 990-EZ or Form 990-N, unless their central organization files a group return that includes the post's information. So each post, and each separately organized auxiliary, files its own return every year unless it is on a group return.

To check: the central organization, not the IRS, decides which posts its group exemption covers. Ask your department or national headquarters whether your post is on its list and whether it files a group return. You can also look up the post's EIN in the IRS Tax Exempt Organization Search or the 990.tax nonprofit lookup; posts covered by a group exemption are often not listed separately.

Which return

• Gross receipts normally $50,000 or less: Form 990-N, the e-Postcard.
• Gross receipts under $200,000 and total assets under $500,000 at year end: Form 990-EZ (or the full Form 990).
• Above either limit: Form 990. 990.tax does not file the full Form 990.

"Normally" is an average: for a post three years old or more, the average over the current year and the two before it.

The canteen and gaming count in full

Publication 3386 defines gross receipts as the total amounts received from all sources, without subtracting any costs or expenses such as gaming prizes, payouts or other expenses. For a post that means:

• Bar, canteen and kitchen sales, before the cost of what was sold
• Bingo, pull-tab and raffle sales, before prizes
• Hall rentals, dues and donations
• Fish fries, breakfasts and other fundraisers, at what they took in

A post can therefore pass $50,000 in gross receipts while netting very little. A post that files Form 990-EZ and runs gaming also completes the gaming part of Schedule G, according to Publication 3386.

Unrelated business income: Form 990-T

Bar and dining service for members and their bona fide guests is a normal post activity. Sales to the general public, including public fundraisers, can be unrelated business income. Publication 3386 says a veterans organization files Form 990-T if it has gross income of $1,000 or more from an unrelated business in a year, and that a post open to the public should keep separate records of member and nonmember receipts. Form 990-T is in addition to the 990-N or 990-EZ, and 990.tax does not file it.

Membership rules

To qualify under section 501(c)(19), at least 75% of a post's members must be past or present members of the US Armed Forces, and at least 97.5% must be past or present members, cadets, or spouses, widows, widowers, ancestors or lineal descendants of either. A post that does not meet these tests may be exempt under another section, such as 501(c)(4).

When it is due

Form 990, 990-EZ and 990-N are due on the 15th day of the 5th month after the post's tax year ends: May 15 for a calendar year. If that day falls on a weekend or legal holiday, the next business day counts. Form 8868 extends a 990-EZ by six months; the 990-N has no extension. See when Form 990 is due.

Missed years

The IRS charges no penalty for a late 990-N; a late 990-EZ can be charged $25 a day, up to the lesser of $13,000 or 5% of gross receipts, unless there is reasonable cause. A post that files nothing for three consecutive years loses its exemption automatically, effective on the due date of the third return. See automatic revocation and reinstatement.