• 275,000 Organizations Lose Tax Exempt Status
  • August 2, 2011 | Author: David Kern
  • Law Firm: Buckingham, Doolittle & Burroughs, LLP - Akron Office
  • A recent news release from the Internal Revenue Service reported that as of June 8, 275,000 organizations had lost their tax exempt status for failing to comply with tax law changes that became effective in 2007.

    The new tax laws that caused the compliance issues were enacted under the Pension Protection Act (PPA) of 2006. They required all tax-exempt organizations to file any of the applicable Form 990’s with the IRS. The penalty for failing to do so for three consecutive years is the revocation of the entity’s tax exempt status.

    To help establish compliance with the revised reporting requirements, the IRS sent out more than one million notices to organizations that had not been required to file prior to the enacted tax law changes. Clearly, the message did not get through to many tax exempt businesses.

    Addressing the issue again, the IRS has now issued new procedures that will allow adversely affected organizations to have their tax exempt status reinstated - in some circumstances retroactive through the date of revocation.

    Any organization hoping to reinstate its tax exempt status will have to file a new Application for Recognition of Tax-Exempt Status on Form 1023 with the IRS and carefully comply with the new procedures. Applicable provisions and requirements for reinstatement may vary based upon 2010 gross receipts.