What Should Mutual Insurance Companies or Associations Know About Tax Exemption and Form 990 Filing?
- Updated August 14, 2023 - 2.00 PM - Admin, Tax990
The IRS has established different IRC sections for the purpose of providing federal tax exemption to
Each nonprofit that seeks tax exemption will be classified under the corresponding IRC section based on its type, purpose, and certain other aspects.
This article explains how Mutual Insurance Companies or Associations can obtain tax exemption and what their filing requirements for Form 990 are.
Table of Contents
How Does the IRS Define Mutual Insurance Companies
As per the IRC Section 501(c)(15), Mutual Insurance Companies or Associations are organizations that are organized and operated exclusively for providing insurance benefits to members substantially at cost.
This includes certain Burial and funeral benefit companies that are providing their benefits in the form of supplies and services.
Generally, these organization often limits membership to residents of a particular county.
If the benefits are paid (in cash) upon the insured person’s death, the organization will not be considered a life insurance company under 501(c)(15) and instead be considered as a local benevolent life insurance association under IRC 501(c)(12).
How Can Mutual Insurance Companies Apply for Tax Exemption?
Mutual Insurance Companies or Associations that would like to operate as tax-exempt organizations under the IRC Section 501(c)(15) can file Form 1024 - Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code.
However, in order to be eligible for tax exemption under 501(c)(15), Mutual Insurance Companies must fulfill certain requirements.
The gross receipts for the taxable year should be less than or equal to $150,000, and more than 35% of those gross receipts are premiums.
The membership should be limited to policyholders, and all policyholders should be members.
Must be offering insurance substantially at cost.
The excess premium costs should be returned to the policyholder.
The members should have the right to choose management as well as the right to receive the company’s net assets in case of dissolution.
What are the 990 filing Requirements for Mutual
The IRS requires the Mutual Insurance Companies that obtained tax-exempt status under the IRC Section 501(c)(15) to file 990 Series Forms annually as part of their annual tax filing requirements.
By doing so, the organizations provide the IRS with the assurance that their tax-exempt status isn’t misused.
Here are the different form variants in the 990 Series are,
Form 990-N - Mutual Insurance Companies with gross receipts of $50,000 or less
Form 990-EZ - Mutual Insurance Companies with gross receipts less than $200,000 and assets less than $500,000.
Form 990 - Mutual Insurance Companies with gross receipts of $200,000 or more (or) assets of $500,000 or more.
Additional Filing Requirements
When is the Form 990 Due date for Mutual Insurance Companies?
The due date for filing 990 returns is generally the 15th day of the 5th month following the end of the accounting period that the organization follows.
So, if a Mutual Insurance Company follows the calendar tax year, then their 990 deadlines will be May 15th.
Operating on a Fiscal Tax Year? Find your 990 due date.
If this deadline falls on a non-business day, such as a weekend or a federal holiday, the Mutual Insurance Companies should file their 990 returns by the next business day.
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