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IRS Reports 10,000 Fewer Nonprofits In 2012

By The NonProfit Times - March 26, 2013

There were 10,000 fewer registered tax-exempt organizations in 2012 than in 2011.

According to the Internal Revenue Service (IRS) Data Book for 2012, which was released Monday, there were 1,484,818 501(c) organizations for the fiscal year ending in September, compared with 1,494,882 in 2011 – a decrease of 10,064, or about 0.68 percent.

The IRS approved 52,615 organizations for tax-exempt status, out of 60,793 applications – an approval rate of 86.5 percent. The overwhelming majority of applications came from 501(c)3 organizations, classified as religious and charitable, which numbered more than 1.081 million last year. By comparison, there were 909,574 501(c)3’s in the 2002 data book – a difference of 170,546, or 18.75 percent.

Overall, the number of tax-exempt organizations and nonexempt charitable trusts dropped by more than 13,000 (or 0.8 percent), from 1,629,149 in 2011 to 1,616,053 in 2012. Nonexempt charitable trusts were down by 3,000, or 2.26 percent, to just less than 131,000.

The number of 501(c)3 organizations climbed by 0.163 percent, or 1,761, from 1,080,130 in 2011 to 1,081,891 in 2012. Among the 17 subsections within section 501(c), only two others saw an increase in their aggregate totals from 2011 to 2012:

  • 501c(1) Corporations organized under an act of Congress, up from 216 to 449 – up 107 percent
  • 501(c)19, War veterans’ organizations, up from 33,654 to 33,737 – up less than 0.25 percent.

Almost three-quarters, or 74 percent, of the 60,793 tax-exempt applications filed last year were for 501(c)3 organizations. There were 148 applications disapproved among 501(c), and of those 123 (or 0.237 percent) were 501(c)3 applications. About 8,000 applications classified as “other,” include applications that were withdrawn by the organization, were incomplete, or did not provide the required information.

Of the 51,748 applications for 501(c)3 organizations, about 87 percent, or 45,029, were approved. In the 2002 data book, there were 79,379 applications, with 64,188 approved – a rate of almost 81 percent.

Applications for the largest subsections, with a least 1,000 applications, were approved at a rate of 80 percent or better last year, including:

  • 88.9 percent, 501(c)6, Business leagues, 1,886 applications
  • 83.7 percent, 501(c)4, Social welfare organizations, 2,774 applications
  • 81.7 percent, 501(c)7, Social and recreation clubs, 1,402 applications

The largest subsections within 501(c) – those with at least 50,000 registered organizations – all saw a decrease in their numbers:

  • 4.66 percent, 501(c)8, Fraternal beneficiary societies (50,763)
  • 4.35 percent, 501(c)4, Social welfare organizations (93,142)
  • 2.99 percent, 501(c)5, Labor and agricultural organizations (50,046)
  • 1.61 percent, 501(c)6, Business leagues (69,198)
  • 1.58 percent, 501(c)7, Social and recreation clubs (56,880)

Last year, the IRS reported a decrease of 18 percent in the number of tax-exempt organizations, and a decline of 7 percent in the number of applications. Those declines were a result of the IRS revoking tax-exempt status of an estimated 385,000 organizations after they failed to file tax returns for three consecutive years, beginning in 2007.

In an effort to purge IRS records of inactive organizations, the Pension Protection Act (PPA) of 2006 enacted a basic filing requirement for even the smallest organizations. Beginning this month, the IRS provides current information about automatic revocations by including organizations on the Automatic Revocation List within a month of their effective date of revocation (http://www.irs.gov/Charities-&-Non-Profits/Automatic-Revocation-of-Exemption-List ). Previously, organizations didn’t appear on the list until six months after revocation.

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