Wednesday, June 22, 2011

The List Is Out

Background
In 2006 Congress passed the law that automatically revoked the tax exempt status of any organization that failed to fulfill its Form 990 filing requirement for 3 years in a row. 2010 brought the first year this would be possible since the passing of the law with those who failed to file anything for the years 2007, 2008 & 2009. While the revocation date was effective for calendar year returns on May 17, 2010, the IRS continued to show some grace by allowing organizations to file through a special program conducted through October 15, 2010.

Results
With that program at its end and the final time passing to file most of the returns for the 2009 year, the IRS has finally issued the dreaded list of revocations. The list contains the names of approximately 275,000 organizations and can be found at www.irs.gov/autorevocationlist. It is organized by state. (Strangely enough the revocations for Texas is so large that it takes two files to cover it.)

What To Do
The law is clear - there is no disputing the revocation with the IRS or challenging it through the courts. IRS Notice 2011-44 details the process for reinstatement of tax exempt status. Organizations on the list are required to file new exemption applications, either Form 1023 or Form 1024, to request the exempt status be reinstated. Both the exemption application and the envelope should clearly indicate "Automatically Revoked" in order for the application to be directed to correct processing area.

Reinstatement will be effective the filing date of the exemption application unless the organization can provide reasonable cause for the failure to file Forms 990 all those years and provides the Forms 990 for 2007, 2008, 2009 and 2010. If the organization would have been eligible to file Form 990-N during all of the three missed year, then special procedures have been described to allow for a lower user fee to be paid with the application and they will gain retroactive exempt status. Procedures describing these special provisions can be found in IRS Notice 2011-43.

There will be many questions as organizations scramble to try to regain tax exempt status. The IRS has addressed many of those in its frequently asked questions found at http://www.irs.gov/charities/article/0,,id=221600,00.html. If an organization has received its notice of revocation or it is listed on the published list, it should seek the counsel of a CPA experienced in preparation of Forms 990 as well as experienced in the preparation of Forms 1023/1024.

3 comments:

  1. The Transitional Relief the IRS is offering small revoked groups (Notice 2011-43) is one of the best deals I have seen in my four decades of professional involvement with non-profit taxes. If you can honestly say there is still a need for your non-profit, and you feel you can muster the human and other resources needed to sustain it, don't pass up this opportunity to regain your tax exempt status.

    There are no shortcuts. You will have to fill out a new exemption application and pay an IRS User Fee. But for organizations with annual gross receipts normally less than $50,000, the User Fee will be reduced to only $100 and reinstatement will be retroactive. Inexplicably, the IRS did not mention this option in its official revocation letter. The offer is only good through December 31, 2012. You can find the details in IRS Notice 2011-43.

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