Friday, November 20, 2009
Deadline Approaching for Revocation of Tax-Exempt Status for Failure to File Required IRS Annual Returns
A little over three years ago Congress passed a little-noticed amendment to the annual return filing requirement for most tax-exempt organizations. That amendment added an additional penalty for such organizations that fail to meet their filing requirements, including not only the well-known Form 990 and Form 990-EZ but also the relatively new Form 990-N required for organizations that fall below the annual gross receipts filing threshold of $25,000 for the first two forms (see IRS explanation). The new penalty is automatic revocation of tax-exempt status, although organizations that have their status revoked may apply for reinstatement based on reasonable cause for the failure to file. The first three year period is 2007 through 2009, which means that once the 2010 filing deadline passes for these forms (May 15th for tax-exempt organizations with calendar fiscal years), organizations that failed to file such forms for those three years will automatically lose their tax-exempt status. It will be interesting to see whether this new penalty results in a substantial reduction in the number of tax-exempt organizations, as there are hundreds of thousands of such organizations on the IRS list that at least until the imposition of the Form 990-N requirement did not file an annual return with the IRS.