On June 8, 2011, the IRS published a list of 275,000 organizations whose tax-exempt status was revoked for failing to file a required Federal annual return. Of those organizations, more than 6,000 are Maryland tax exempts that have now lost their tax-exempt status based on their failure to meet the filing requirements. A list of Maryland non-profits that lost tax-exempt status can be viewed here.
The source of the revocations is the Pension Protection Act, passed in 2006, which requires most tax exempt organizations to file either an annual information return or an annual income tax return. This filing requirement was imposed on smaller tax-exempts for the first time in 2007. Tax-exempt status is automatically revoked if no return is filed for three consecutive years.
An organization that had its tax-exempt status revoked must apply to the IRS to have its tax-exempt status reinstated. Additionally, the entity must pay the appropriate user fee of between $400 and $850, depending on the organization’s annual receipts. Additionally, to minimize the period of tax-exempt status revocation, an organization seeking to have its tax-exempt status reinstated effective as of the date of the automatic revocation must file a request for retroactive reinstatement.
Non-profits with revoked tax-exempt status lose certain key tax benefits and donations to these organizations are not tax deductible. This impacts not only the non-profit organization itself, but potential donors – companies and individuals alike, including employers who make matching gifts. Before donating to a non-profit organization, the donor should verify that the organization retains its tax-exempt status. If your organization has questions about regaining tax-exempt status or you are a potential donor with questions about donating to an organization after revocation, contact Christopher Heagy at 410-752-9762 or firstname.lastname@example.org.