Thursday, June 9, 2011
The IRS issued a press release yesterday stating that "approximately 275,000 organizations under the law have automatically lost their tax-exempt status because they did not file legally required annual reports for three consecutive years" (see also Announcement 2011-35). The IRS published the names of the organizations on its website, organized by state.
At the same time, the IRS also provided a route for small organizations (annual gross receipts of $50,000 or less for 2010) that were required but failed to file Form 990-N for three years to regain their tax-exempt status retroactive to the date of revocation by filing Form 1023 or Form 1024 (application for recognition of exemption) no later than December 31, 2012 and paying a reduced $100 filing fee (see IRS Notice 2011-43 and Revenue Procedure 2011-36). Organizations that do not meet the eligibility requirements for this special relief may also apply for reinstatement but such reinstatement will only be retroactive if the organization can demonstrate reasonable cause for its failure to file, takes steps to ensure no such failures in the future, and files the late returns (including filing a Form 990-EZ in place of a required but not filed Form 990-N); such organizations also have to pay the normal exemption application user fee (see IRS Notice 2011-44).
Finally, the IRS also clarified the extent to which grantors and contributors may rely on the listing of an organization in the Cumulative List of Organizations described in Section 170(c) (Publication 78), including noting that revocations may be publicly announced on the IRS website instead of in the Internal Revenue Bulletin (see Revenue Procedure 2011-33).