Thousands of Nonprofits to Lose Tax Exempt Status – and many of them don’t even know it.
An obscure section of the Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations. First, it mandated that all tax-exempt organizations, other than churches and church-related organizations, must file an annual return with the IRS. The filing requirements vary. Second, the law also requires tax-exempt organizations that fail to be in compliance with its filing provisions automatically loses its federal tax-exempt status. Under the provisions of the act, a huge number of nonprofit organizations are currently scheduled to lose their status after having failed to meet the Act’s filing requirements as of May 15th of 2010. Under a special one-time relief program recently announced, nonprofits can come into compliance by Oct 15th without losing their tax exempt status. If they do not and lose their tax exempt status, then the following results will occur:
- Donations made to the organizations will not be deductible as charitable expenses. Donors may or may not be aware of this before filing.
- Revenues received by the organization may become taxable.
- The organization will have to re-file for tax exempt status in a lengthy and expensive process which includes IRS filing fees of up to $850.
Three Things to Do Now to Save Your Tax Exempt Status
- Find out if you are on the list of thousands of organizations slated to lose their tax exempt status.
- Find out what your filing mandate is.
- Come into compliance before you lose your status and the charitable revenue streams you rely on.
