Tax Exemption Revocation Tools

If your organization has had its tax exemption revoked (see yesterday's post for access to list), the National Council of Nonprofits has designed a webpage (all links are after the jump) and resources to help.

An excerpt.

“On June 8, 2011, the Internal Revenue Service (IRS) released a list of more than 275,000 nonprofits that had their tax-exempt status automatically revoked due to failure to file annual returns.

• Read the National Council's tip sheet on automatic revocation and what to do if your organization's tax-exempt status was revoked.

• Listen to this podcast from the IRS about the obligation of nonprofits to submit annual returns to the IRS and how revocation is automatic when a nonprofit does not file its annual returns for three consecutive years.

• The effective date of revocation is "the original filing due date, without regard to extensions, of the third annual required return or notice that was not filed." (Source: IRS Exempt Organization Update, February 24, 2011) For many nonprofits on the automatic revocation list, this effective date is May 15, 2010.

“How will we know if our organization’s tax-exempt status has been revoked?

“Check the automatic revocation of exemption list on the IRS website.

• The nonfiler revocation list will be updated monthly by the IRS.

• Separate lists will be published for each state, the District of Columbia, and all other territories and countries. The list will provide each revoked organization's name, Employer Identification Number (EIN), subsection code, last known address, and effective date of the revocation.

• Guidestar’s analysis in February 2011 indicates that 56 percent of the nonprofits most likely to be affected are 501(c)(3) public charities, and the vast majority—82 percent—appear to have incomes of $25,000 or less.

• Resources from Guidestar on revocation.

Revoked Tax Exemption List

It has now been published by the IRS in this IRS Website Posting.

An excerpt.

“The IRS has started publishing a list of organizations that have had their federal tax-exempt status automatically revoked for failing to file an annual information return or notice with the IRS for three consecutive years. The Automatic Revocation of Exemption List (Auto-Revocation List) is available in Adobe and Excel formats, and divided into separate lists by jurisdiction. The Auto-Revocation List provides the name, employer identification number (EIN), organization (subsection) code, last known address, effective date of revocation, and date on which the name was posted on IRS.gov.”

Nonprofit Revocation

The IRS is preparing to issue the list of those nonprofits whose tax-exempt status has been revoked and Guidestar has published a report on what it means for nonprofits, as reported in this news item.

An excerpt.

“As the IRS prepares to publish the first list of nonprofits whose tax-exempt status has been revoked for failure to file an annual return, many nonprofits, funders, and donors are probably wondering: "How will the revocations affect me?" GuideStar gives you the answer in a new report available for free download.

“Written by GuideStar staff, "What Automatic Revocation of Nonprofit Tax Exemptions Means for You: A Review for Nonprofits, Grantmakers, and Donors," concisely but thoroughly:
• outlines the forces driving the revocations;
• analyzes by organization type the nonprofits the IRS has identified as being at risk;
• defines the impact the revocations will have on different audiences; and
• lists resources where readers can get more information.”

IRS Form 990-N Threshold Increased

This is very good news, reported by Guidestar.

An excerpt.

“The IRS reminds smaller nonprofits that a higher filing threshold has gone into effect for Form 990-N; invites smaller businesses, including nonprofits, to attend a free webinar on the Small Business Health Care Tax Credit; has published new fees for exempt organizations for 2011; and has released instructions and withholding tables related to the payroll tax cut.

“New Form 990-N Filing Threshold

“The filing threshold for Form 990-N, also known as the ePostcard, has been raised for returns covering the 2010 tax year that are filed in 2011. Most exempt organizations with gross annual receipts of $50,000 or less may now file Form 990-N instead of Form 990-EZ or 990. Private foundations, however, must continue file Form 990-PF, regardless of organization size.

More info here.

Small Nonprofits

Over the past few years legislation was passed that required all nonprofits, even those with income of $25,000 a year or less, to file a 990 form with the IRS, and though it is a straightforward online process, many small nonprofits still struggle with it.

In response to the new interest in small nonprofits, the Urban Institute produced a brief, "Small Nonprofit Organizations: A Profile of Form 990-N Filers” and it is worth a read.

IRS News Item

This is an important announcement allowing a one-time special filing relief for small nonprofits.

An excerpt, and be sure to go to site for important links.

“IRS Offers One-Time Special Filing Relief Program for Small Charities; Oct. 15 Due Date to Preserve Tax-Exempt Status

“IR-2010-87, July 26, 2010

“WASHINGTON — Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program, the Internal Revenue Service announced today…

“If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.”

Nonprofit Lobbying

Nonprofits can lobby, but there are certain restrictions and this page at the Independent Sector’s website is very helpful, as is this page at the IRS.

An excerpt from Independent Sector.

“All nonprofits have a vital role to play in our democracy. For 501(c)(3) nonprofit organizations that role includes lobbying and building relationships with elected officials. Building relationships with elected officials is permitted -- and strongly encouraged -- for all of us.”

An excerpt from IRS.

“In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.

“Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items (such as legislative confirmation of appointive office), or by the public in referendum, ballot initiative, constitutional amendment, or similar procedure. It does not include actions by executive, judicial, or administrative bodies.

“An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation.

“Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.”

IRS 990 Filing Deadline May 15

We have been posting on this regularly as it is crucial to understand and take care of the requirements the 2006 law imposed on nonprofits, and this news from the Nonprofit Quarterly Newswire sums up the situation succinctly.

An excerpt.

“May 8, 2010; The Anchorage Daily News | A 2006 law, The Pension Protection Act of 2006, states that nonprofits that do not file their form 990 for three years in a row could lose tax-exempt status. This law affects all nonprofits, even those previously not required to file the form. This year marks the third year since the law took effect and therefore the potential D-day for many groups across the country. NPQ will provide a more in-depth story written in partnership with the Minnesota Council of Nonprofits and the National Center for Charitable Statistics early this week.

“The Foraker Group, a group focused on helping Alaska Nonprofits, says that 1,000 nonprofits in that state have yet to file their 990 form with the IRS. … This story from Mankato, Minnesota says there are 400,000 groups nationwide that have not filed. This new law makes for sensational headlines but it's relatively easy to avoid the drama.”

Notice: IRS Filing Deadline May 17

"Many Tax-Exempt Organizations Must File Form 990 by May 17 Deadline to Preserve Tax-Exempt Status with IRS

IR-2010-59, May 7, 2010

"WASHINGTON — A crucial filing deadline of May 17 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked.

"The Pension Protection Act of 2006 mandates that all non-profit organizations, other than churches and church related organizations, must file an information form with the IRS. This requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

"Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for those tax-exempt organizations. May 15 falls on a Saturday this year so the deadline this year is actually Monday, May 17. Organizations can request an extension of their filing date by filing Form 8868 by the original due date. Absent a request for extension, there is no grace period from filing by the original due date.

"Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). This asks for a few basic pieces of information. Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations file form 990-PF.

"Any tax-exempt organization that has not filed the required form in the last three years automatically will lose its tax exempt status effective as of the due date of the annual filing. Under the law, the IRS does not have discretion in this matter.

"A list of revoked organizations will be available to the public on IRS.gov.

"If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

"For more information, see the Exempt Organizations: Status Revoked for not Filing Annual Returns or Notices page on this website; or the ABC's for Exempt Organizations page."

Mandatory Annual Nonprofit 990 Filing

The 990 must be filed annually (and it is a very simple online process for small nonprofits) by almost all nonprofits, per this notice from the IRS.

An excerpt.

“Automatic Revocation for Not Filing Annual Return or Notice

“Most tax-exempt organizations, other than churches, must file a yearly return [990] or notice with the IRS. If an organization does not file as required for three consecutive years, the law provides that it automatically loses its tax-exempt status. Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

“What must be filed this year depends on the organization’s financial activity:”

IRS 501 c 3 Information

The new IRS Data Book for fiscal year 2009 is out, and it reveals that 70,263 new 501 c 3’s applied for tax exemption during their fiscal year, and 42,484 were approved, (p. 55) and there are now 1,238,201 total 501 c 3s in the country. (p. 56)

Losing Tax Exemption

The reason the IRS provides a tax exemption to nonprofit organizations is because they provide a public service.

To take away any part of that tax exemption, as might be happening in Boston—along with other cities, like Albany and Baltimore, considering similar policies—unless a case can be made that the nonprofits in question are no longer providing the publics service which earned them nonprofit status, is wrong.

An excerpt from the Boston Globe.

“Boston’s hospitals, universities, and other tax-exempt nonprofits may be asked to contribute tens of millions of dollars more to city coffers to help pay for basic municipal services such as police and public works.

“After 14 months, a mayoral task force has nearly completed its work examining the city’s uneven system of individual agreements with such institutions, under which they voluntarily pay cash and provide services in lieu of property taxes. Some pay millions; others pay significantly less.

“The city is pushing institutions to gradually increase contributions to 25 percent of what they would owe in taxes if they were not exempt, a change that would more than triple the current amounts paid by some of the city’s biggest landowners.

“Hospitals and universities say that higher payments in lieu of property taxes would force them to lay off workers and pass on to students and patients higher tuition and medical costs.

“The new formula, which the city panel will begin finalizing at a meeting today, would seek to increase payments among hospitals and universities alone by almost $25 million over five or more years, according to preliminary figures.


“To soften the blow, officials have suggested that institutions could cover up to 50 percent of their payments by offering community programs such as free prostate cancer screenings in public housing and scholarships for Boston students.”

Tax Exemption & Donations

There are several items a donor should know about the nonprofit organization they choose to support and this link to the IRS Nonprofit site is a good resource.

An excerpt.

IRS Tax Tip 2010-59

Every year, millions of taxpayers donate money to charitable organizations. The IRS has put together the following list of six things you should know about the tax treatment of tax-exempt organizations.

1. Annual returns are made available to the public. Exempt organizations generally must make their annual returns available for public inspection. This also includes the organization’s application for exemption. In addition, an organization exempt under 501(c)(3) must make available any Form 990-T, Exempt Organization Business Income Tax Return. These documents must be made available to any individual who requests them, and must be made available immediately when the request is made in person. If the request is made in writing, an organization has 30 days to provide a copy of the information, unless it makes the information widely available.

2. Donor lists generally are not public information. The list of donors filed with Form 990, Return of Organization Exempt From Income Tax, is specifically excluded from the information required to be made available for public inspection by the exempt organization. There is an exception, private foundations and political organizations must make their donor list available to the public.

3. How to find tax-exempt organizations. The easiest way to find out whether an organization is qualified to receive deductible contributions is to ask them. You can ask to see an organization's exemption letter, which states the Code section that describes the organization and whether contributions made to the organization are deductible. You can also search for organizations qualified to accept deductible contributions in IRS Publication 78, Cumulative List of Organizations and its Addendum, available at IRS.gov. Taxpayers can also confirm an organization’s status by calling the IRS at 877-829-5500.

4. Which organizations may accept charitable contributions. Not all exempt organizations are eligible to receive tax-deductible charitable contributions. Organizations that are eligible to receive deductible contributions include most charities described in section 501(c)(3) of the Internal Revenue Code and, in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10), cemetery companies described in section 501(c)(13), volunteer fire departments described in section 501(c)(4), and veterans organizations described in section 501(c)(4) or 501(c)(19).

5. Requirement for organizations not able to accept deductible contributions. If an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.

6. How to report inappropriate activities by an exempt organization. If you believe that the activities or operations of a tax-exempt organization are inconsistent with its tax-exempt status, you may file a complaint with the Exempt Organizations Examination Division by completing Form 13909, Tax-Exempt Organization Complaint (Referral) Form. The complaint should contain all relevant facts concerning the alleged violation of tax law. Form 13909 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IRS Exempt Organizations Newsletter

This is a very valuable and virtually indispensible, periodic newsletter from the IRS Charitable division that every nonprofit should subscribe to, and you can do so here.

Site excerpt:

“Sign up to receive free e-mail updates from the IRS about issues of tax policy, services and available information that impact tax-exempt organizations, such as:

• news releases from the IRS related to exempt organizations;
• new forms, guidance and other publications;
• changes and additions to the IRS Charities and Nonprofits Web site; and
• upcoming IRS training and outreach events

“The updates are brief summaries with links to more extended discussions of content available on the irs.gov website.”