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Help for Organizations That Have Lost Their Tax-Exempt Status
In 2006, Congress passed the Pension Protection Act that required small tax-exempt organizations to begin filing an information return starting in 2007. Part of this act revokes the tax-exempt status of any organizations who did not file these required returns for three years in a row.
As of this year, there are about 275,000 organizations that have lost their tax-exempt status due to non-filing. Although many of these organizations are believed to be no longer functioning, there are still some that now must reapply for reinstatement of that status.
The IRS created a list last year of all organizations that are at risk of losing their tax-exempt status, or that have already. These organizations are on this list because they failed to complete and file the required information returns for the tax years 2007, 2008 and 2009. The list is available on the IRS website and includes the name of the organization, their EIN, and last known address, and will be updated on a monthly basis. In addition, the IRS sent out over 1 million notices to organizations informing them of their requirement to file, and offered many an additional 5 months to get the returns in. Approximately 50,000 organizations filed and were reinstated during that time period.
Now the IRS is continuing to do everything it can to make sure tax-exempt organizations are informed about their filing requirements and making allowances in order to assist them in maintaining their tax-exempt status without harming their donors or their functionality. This includes reduces applications fees from $400-$850 down to $100, as well as retroactive reinstatement. For those organizations seeking reinstatement, they must submit an application as well as pay a user fee to get reinstated to the tax-exempt status.
For those taxpayers who may be concerned about the deductibility of donations made to organizations on the revoked status list, many need not fear. Any donations made prior to the date that the organization was added to the list will still be considered tax deductible by the IRS.
Taxpayers need to bear in mind that donations made after the date that an organization falls out of compliance and is no longer considered a tax exempt status, then the donations will no longer be considered tax deductible.
(1) IRS. Internal Revenue Service 8 June 2011
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