Hundreds of thousands of nonprofits face losing their tax-exempt status

On May 18, 2010, IRS Commission Doug Shulman stated that the IRS will be providing additional guidance in the near future on how it will help nonprofits maintain their tax-exempt status — even if they missed the May 17 deadline. “So I urge these organizations to go ahead and file — even though the May 17 deadline has passed,” stated Shulman. For more information, see www.irs.gov/charities/article/0,,id=169250,00.html.

May 17, 2010, was the deadline for nonprofit organizations, except for churches and church-related organizations with annual receipts of $25,000 or less, to e-file Form 990-N with the IRS.

The Pension Protection Act of 2006 (P.L. 109-280) mandates that nonprofits that do not file the required information for three consecutive years automatically lose their federal tax-exempt status. Because this requirement has been in effect since 2007, the third consecutive year is 2009, and the IRS may begin revoking tax exemptions.

When a nonprofit loses its tax exemption, the IRS is required to issue a public notice, says Sarah Hall Ingram, IRS commissioner for tax exempt and government entities. Until the IRS publishes the notice, donations to the organization are still deductible. According to Ingram, the IRS won’t publish the names of the nonprofits that lose their exemption until January 2011, so if somebody gives between now and when the name gets on the public list, the donor is protected.