275,000 Organizations Automatically Lost Tax-Exempt Status!

275,000 Organizations Automatically Lost Tax-Exempt Status!
The Internal Revenue Service said on June 8, 2011 approximately 275,000 organizations automatically lost their tax-exempt status under the law because they did not file legally required annual reports for three consecutive years.

Congress passed the Pension Protection Act 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.

As part of this, the IRS issued guidance 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.

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The list of organizations whose tax-exempt status has been revoked for failing to meet their filing requirement, available on the IRS website at http://www.IRS.gov, includes each organization’s name, Employer Identification Number (EIN) and last known address. The IRS will update the list monthly to include additional organizations that lose their tax-exempt status.

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Publication on the list of organizations whose tax-exempt status has been revoked serves as notice to donors and others that they may no longer rely on a prior listing in IRS Publication 78, Cumulative List of Organizations, as an indication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.

Based in Saint Paul, Minnesota, ABA Tax Accounting has been helping clients in Minnesota and surrounding states grow their businesses since 1989. We provide federal and state income tax planning and preparation services for privately held companies, non-profit organizations, individuals, estates, trusts, partnerships, and corporations. Our experienced professional staff understands tax and compliance regulations so that you don’t have to. We advise our clients of important changes in tax laws before they occur. We make certain our clients are aware of and meet all filing deadlines with time to spare. For more information on the reinstatement process, including retroactive reinstatement, please feel free to contact us.
Amare Berhie, Senior Tax Accountant
ABA Tax Accounting
Toll free 866-936-0430

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