IRS Revokes Exempt Status Of 275,000 Nonprofits

There are about 275,000 fewer nonprofit organizations in the United States this morning – at least according to the Internal Revenue Service (IRS).

The IRS released its initial list of revoked organizations late yesterday and plans to update it each month with additional nonprofits whose filing dates have come due. The 275,000 nonprofits represent more than 17 percent of the 1.6 million organizations currently on file with the IRS. Nonprofits that have lost their exempt status will have to apply to have it reinstated.

Organizations with annual gross receipts of $50,000 or less for 2010 that were subject to the new “postcard” filing can regain 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’s exempt status is revoked, it’s no longer exempt from federal income tax and may be required to file federal income tax returns.

Organizations are on the revoked list because IRS records indicated they had a filing requirement – either a Form 990, 990-EZ, 990-PF or 990-N (“e-Postcard”) – and did not file for three consecutive years, ending in 2009. The IRS believes that the vast majority of those revoked are no longer in existence and need to be removed from the tax-exempt listing, as required by the Pension Protection Act (PPA) of 2006.

The PPA required most exempt organizations (including associations, memberships organizations and charities), even the smallest ones, to file an annual information return or notice with the IRS for the first time in 2007.

The tax agency made a big push in the last few years to inform organizations that had not filed that they were in jeopardy of losing their status. The IRS mailed some 650,000 letters to charities in 2007, twice published a list of at-risk groups last year and also extended the filing period. There were about 341,000 nonprofits — more than a 20 percent — classified as at-risk a year ago, and about 50,000 organizations filed during the extension period, according to the IRS.

“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,” he said in a statement accompanying the release.

The full list of revoked organizations is posted at www.irs.gov/autorevocationlist