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IRS Revokes Tax-Exempt Status of Organizations Not Filing Returns

June 13, 2011

(Ines Sucre is a reference/outreach librarian at the Foundation Center-New York. A version of this post appears on the Philanthropy Front and Center-New York blog.)

Irs_logo After telling nonprofits since May 2010 that they would lose their tax-exempt status if they did not file their required annual information returns, the IRS has just released its initial automatic revocation of exemption list.

Automatic revocation of exempt status occurs as a consequence of not filing either a Form 990, 990-EZ, 990-PF or Form 990-N (the e-Postcard filing for small organizations with gross receipts of under $50,000) for three consecutive years. Organizations whose status has been revoked will be removed from Publication 78, the cumulative list of tax-exempt organizations. They may also owe federal income tax.

The Chronicle of Philanthropy has created a searchable database of the revocation list. A June 8 article by Chronicle writer Lisa Chiu goes into some depth about the issue.

The IRS is telling donors and foundations that organizations included in the list are no longer eligible to receive tax-deductible gifts. Donors also are reminded not to rely on IRS determination letters dated before the date of revocation or on a prior listing in Publication 78 as definitive proof of an organization's exempt status.

What Can You Do If Your Organization's Tax-Exempt Status Has Been Revoked?

The IRS spells it out:

  • Since the revocation of exempt status is automatic, there is no appeal process. Instead, organizations will have to re-file Form 1023 (or 1024, if applying for other than public charity status) to reinstate its exempt status.
  • Apply using the EIN assigned previously to your organization.
  • If the IRS determines that your organization meets the requirements for tax-exempt status, it will issue a new determination letter.
  • Pay a user fee based on your organization's annual gross receipts.
  • Direct the application to its correct destination by writing "Automatically Revoked" at the top of the application form and envelope. Mail to: Internal Revenue Service, P.O. Box 12192, Covington, KY 41012-0192.
  • An organization may request a retroactive reinstatement if it has reasonable cause for not filing its annual information returns.

Smaller Charities Get Some Relief

Small organizations that have lost their exempt status because they failed to file a Form 990-N e-Postcard in 2007, 2008, and 2009:

  • Will be able to claim reasonable cause for failing to file if they submit to the IRS an application for reinstatement of tax-exempt status.
  • Should write "Notice 2011-43" at the top of their application and on the mailing envelope.
  • Will pay a reduced user fee of $100.

For more information visit the IRS Web site, where you'll find a news release, a fact sheet, and an FAQ.

-- Ines Sucre

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