June 14, 2011
The IRS has published a list of approximately 275,000 organizations that have automatically lost their tax-exempt status because of the failure to file required annual returns for three consecutive years. The list will be updated monthly, and publication on the list serves as notice to donors that contributions are not tax-deductible.
How do I know if an organization I support is on the list? The IRS has posted Excel spreadsheets by state.
What does publication of the list mean to you? If your organization appears on the list, you must now must file a federal income tax return and pay federal income taxes. If you previously could accept tax-deductible contributions, you no longer can do so.
If your organization is not on the list, technically you don't have to do anything. This may be a good time to assure givers to your church or nonprofit that you are in good standing with the IRS.
What should a nonprofit do now that it is no longer tax-exempt? Nonprofits that re-apply may request in a letter to the IRS that the reinstatement of their tax-exempt status be retroactive to the date of their original tax-exempt recognition, but the IRS will grant that request only if it determines that there was “reasonable cause” for the nonprofit to have missed the filing deadlines. Make sure to carefully follow the instructions on the IRS website for requesting “retroactive reinstatement” of your organization’s tax-exempt status.
Can a nonprofit raise funds while it is not tax-exempt? Yes, but the nonprofit needs to be transparent and honest about the fact that it is not currently tax-exempt and, therefore, that contributions to it are not deductible to the donor.
If our organization is on the list, how can we apply for re-instatement? The IRS provided guidance on the revocation process and how organizations can apply for reinstatement of their tax-exempt status. See Notice 2011-43, Notice 2011-44, Revenue Procedure 2011-36, and Announcement 2011-35.
What information has the IRS provided to donors to charities which are on the list? The IRS has released Revenue Procedure 2011-33 which supersedes prior procedures regarding donor reliance for deductible contributions.
To see if a ministry is an ECFA member: http://www.ecfa.org/MemberSearch.aspx
To see if a non-member is listed as a 501(c)(3): http://www.irs.gov/app/pub-78/
For more information, see: http://www.irs.gov/charities/article/0,,id=239696,00.html
This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.