Federal Tax Compliance for Puerto Rico Nonprofits
Overview
Nonprofit organizations operating in Puerto Rico must comply with both Puerto Rico and U.S. federal tax regulations. This section provides essential guidance for Puerto Rico nonprofits to navigate federal tax filing requirements, payroll obligations, and reporting responsibilities.
Federal Tax Filing Requirements for Puerto Rico Nonprofits
Form 990 Series
Most tax-exempt organizations under Section 501(a) of the Internal Revenue Code, including nonprofits operating in Puerto Rico, are required to file an annual information return with the IRS. The specific form depends on the organization’s size and type:
Form 990, Return of Organization Exempt From Income Tax: Required for organizations with gross receipts of $200,000 or more or total assets of $500,000 or more.
Form 990-EZ, Short Form Return of Organization Exempt From Income Tax: For organizations with gross receipts less than $200,000 and total assets under $500,000.
Form 990-N, Electronic Notice (e-Postcard): For organizations with gross receipts of $50,000 or less.
Certain religious, governmental, and political organizations may be exempt from filing Form 990 but should verify their status annually.
Filing Deadlines and Extensions
The Form 990 series is due on the 15th day of the 5th month after the close of the nonprofit’s fiscal year. Extensions can be requested by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return.
Payroll and Employment Tax Obligations
Nonprofits in Puerto Rico must adhere to federal employment tax requirements, including:
Social Security and Medicare taxes
Federal unemployment tax (FUTA)
Income tax withholding for employees, as applicable
Proper classification of workers and compliance with payroll tax deposits are critical to avoid penalties.
Unrelated Business Income Tax (UBIT)
If a Puerto Rico nonprofit generates income from activities unrelated to its exempt purpose, it may be subject to federal unrelated business income tax. Such income must be reported on Form 990-T, Exempt Organization Business Income Tax Return.
Coordination with Puerto Rico Tax Laws
Nonprofits must also maintain compliance with Puerto Rico tax regulations, including income tax exemption requests under Section 1101.01 of the Puerto Rico Internal Revenue Code and filing annual informational returns as required by Puerto Rico tax authorities.