IRS Announces First Round of Revocations for Nonprofits That Failed to File Form 990

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On June 10, 2011, the Internal Revenue Service ("IRS") released the complete list of approximately 275,000 nonprofit organizations that have lost their tax-exempt status for failure to file Form 990, Form 990-N, Form 990-EZ, or Form 990-PF for three consecutive years. The list of revoked entities is available on the IRS website. The list includes the organization’s name, Employer Identification Number, last known address, and effective date of revocation of exempt status; it will be updated monthly. In its announcement, the IRS indicated that it believes most of these organizations are likely defunct, however, it has issued guidance regarding the steps such organizations must take to apply for reinstatement of their tax-exempt status.

This is the first group of revocations resulting from the passage and implementation of the Federal Pension Protection Act (the "Act"), passed by Congress in 2006. The Act mandated annual filing requirements for virtually all tax-exempt organizations, including tax-exempt organizations with gross receipts of $25,000 or less that were not previously required to file an annual return with the IRS. The Act also provided for the automatic revocation of any tax-exempt organization that does not file the required returns or notices for three consecutive years, and requires the IRS to publish and maintain a list of all such organizations that are so revoked.

In conjunction with its recent publication of the names of the first wave of organizations with revoked tax-exempt status, the IRS also issued guidance regarding the impact that the revocations have on charitable contributions to revoked organizations, and the manner in which organizations may seek reinstatement of tax-exempt status, including retroactive reinstatement. The IRS also announced transition relief for certain small tax-exempt organizations.

In connection with the announcement and publication of revocations of exempt status, the IRS issued the following guidance:

Revenue Procedure 2011-33 (Contributions to Revoked Organizations) states that where an organization listed in Publication 78 ceases to qualify as an organization to which contributions are deductible under Section 170 of the Internal Revenue Code (the “Code”), as a result of loss of exempt status due to failure to file annual reports for three consecutive years, grants and contributions made to the organization by persons unaware of the change in the status of the organization generally will be considered allowable if made on or before the date of publication of the list of revoked organizations. The IRS may disallow a deduction for any contribution made after revocation of exempt status but prior to the published notice of the revocation where the grantor had knowledge of the revocation prior to publication, was aware that revocation was imminent, or was, in part, responsible for the revocation. Publication on the list of organizations whose tax-exempt status has been revoked is intended to serve as a notice to donors and others that they may no longer rely on a prior listing in Publication 78.

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Published In: Nonprofits Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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