The Internal Revenue Service today announced that approximately 275,000
organizations under the law have automatically lost their tax-exempt status
because they did not file legally required annual reports for three consecutive
years. The IRS believes the vast majority of these organizations are defunct,
but it also announced special steps to help any existing organizations to apply
for reinstatement of their tax-exempt status.
Congress passed the Pension Protection Act (PPA) in 2006, requiring most
tax-exempt organizations to file an annual information return or notice with
the IRS. For small organizations, the law imposed a filing requirement for the
first time in 2007. In addition, the law automatically revokes the
tax-exempt status of any organization that does not file required returns or
notices for three consecutive years.
For several years, the IRS has made an extensive effort to inform
organizations of the changes in the law through multiple outreach and education
avenues, including mailing more than 1 million notices to organizations that
had not filed. In addition, last year the IRS published a list of at-risk
groups and gave smaller organizations an additional five months to file
required notices and come into compliance. About 50,000 organizations filed
during this extension period. Overall, the IRS believes the vast majority of small
tax-exempt organizations are now in compliance with the 2006 law.
“During the past several years, the IRS has gone the extra mile to help make
tax-exempt groups aware of their legal filing requirement and allow them
additional time to file,” IRS Commissioner Doug Shulman said. “Still, we
realize there may be some legitimate organizations, especially very small ones,
that were unaware of their new filing requirement. We are taking additional
steps for these groups to maintain their tax-exempt status without jeopardizing
their operations or harming their donors.”
As part of this, the IRS issued guidance today on how organizations can
apply for reinstatement of their tax-exempt status, including retroactive
reinstatement. In addition, the IRS announced transition relief for certain
small tax-exempt organizations – those with annual gross receipts of $50,000 or
less for 2010 – that were made subject to the new “postcard” filing
under the PPA. The relief allows eligible small organizations to regain their
tax-exempt status retroactive to the date of revocation and pay a reduced
application fee of $100 rather than the typical $400 or $850 fee. Full details
are available in Notice
2011-43, Notice
2011-44 and Revenue
Procedure 2011-36, issued today.
If an organization appears on the list of organizations whose tax-exempt status
has been automatically revoked it is because IRS records indicate the
organization had a filing requirement and did not file the required returns or
notices for 2007, 2008 and 2009.
The list of organizations whose tax-exempt status has been revoked for
failing to meet their filing requirement, which will be available on the IRS
website at www.IRS.gov, includes each
organization’s name, Employer Identification Number (EIN) and last known
address. It is searchable by state. It also includes the effective date of the
automatic revocation and the date it was posted to the list. The IRS will
update the list monthly to include additional organizations that lose their
tax-exempt status.
The vast majority of tax-exempt groups file their required returns and are
unaffected by the revocation listing. In addition, the IRS believes the vast
majority of the newly revoked groups are no longer in existence and need to be
removed from the tax-exempt listing as the 2006 law requires.
This listing should have little, if any, impact on donors who previously
made deductible contributions to auto-revoked organizations because donations
made prior to the publication of an organization’s name on the list remain
tax-deductible. Going forward, however, organizations that are on the
auto-revocation list that do not receive reinstatement are no longer eligible
to receive tax-deductible contributions, and any income they receive may be
taxable.
Publication on the list of organizations whose tax-exempt status has been
revoked serves as notice to donors and others that they may no longer rely on a
prior listing in IRS Publication 78, Cumulative List of Organizations, as an
indication of an organization’s tax-exempt status or its eligibility to receive
tax-deductible contributions. An updated version of Publication 78 with current
listings will be published on the IRS website later this week. Nor can donors
rely on an IRS determination letter issued to the organization prior to the
date of automatic revocation.
Existing organizations that seek to have their tax-exempt status reinstated
must complete an application and pay a user fee regardless of whether they were
originally required to file such an application. More information on the
reinstatement process, including retroactive reinstatement, can be found on
IRS.gov.