IRS Removes Tax-Exempt Status from Thousands of Organizations   Leave a comment

The IRS removed tax-exempt status from approximately 275,000 organizations which did not file information returns with the IRS for the last three years. An article in The New York Times suggested that many of these organizations no longer exist, and the removal of their exempt status should cause them no harm. The IRS agrees. Organizations that do exist but are managed by individuals unfamiliar with the requirement to file the Form 990, 990-EZ or 990-N may be learning of their new problems later this year.

The IRS published instructions for organizations which need to apply to have their exempt status reinstated retroactively.

Large nonprofits are required to file Form 990 every year by May 15 (the deadline can be extended), or Form 990-EZ if that is sufficient. Smaller nonprofits must file Form 990-N, the “e-postcard”, which simply states the name and address of the nonprofit but does not require any financial data. In Massachusetts, public charities are required to file Form PC with the Attorney General’s office (Nonprofits/Public Charities division), and they must also file an Annual Report with the Massachusetts Secretary of State.

In Massachusetts, a nonprofit which wishes to dissolve must apply to the state Attorney General’s office (Nonprofits/Public Charities division), and if the Attorney General approves, the nonprofit may petition the Massachusetts Supreme Judicial Court for dissolution, and the remaining assets of the nonprofit can be transferred to another charity with a similar mission as the dissolving charity.

SOURCES

IR-2011-63: http://www.irs.gov/newsroom/article/0,,id=240239,00.html

“I.R.S. Ends Exemptions for 275,000 Nonprofits” by Stephanie Strom, The New York Times, June 8, 2011. http://www.nytimes.com/2011/06/09/business/09charity.html?_r=1&scp=1&sq=IRS%20exempt&st=cse

“The Voluntary Dissolution of a Massachusetts Public Charity” by R. A. Rockefeller and T. L. Sturges. http://nixonpeabody.com/linked_media/publications/dissolution_public_charity_BBA_Rockefeller.pdf

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