Wednesday, June 8, 2011

IRS Publishes List of Automatic Revocations for Failure to File Form 990

The IRS announced today that it has published the list of organizations whose exemptions have been automatically revoked due to failure to file Form 990, 990-EZ or 990-N for three consecutive years. (See our previous discussions here, herehere and here.) The names of  the approximately 275,000 organizations are available on the IRS website, Automatic Revocation of Exemption List, with separate spreadsheet lists available by state. [UPDATE - As Sandy Deja notes in the comments, the number of total organizations on the revocations list is now upwards of 330,000.]

The Service has also published several notices and procedures today along with the announcement of the revocations list in order to provide some guidance and relief to those organizations that have had their exempt status revoked. Below are summaries (and certainly not exhaustive) of the main points in each document.

Revenue Procedure 2011-33 (pdf)- This Rev. Proc. provides that donors to organizations listed in Publication 78 or the Business Master File may rely on that listing to support a charitable contribution deduction for a donation made on or before the date of a public announcement that the organization has ceased to qualify as an organization to which deductible contributions can be made under IRC section 170.  As applied to those organizations whose exemption is being revoked for failure to file a Form 990, 990-EZ, or 990-N  pursuant to IRC section 6033(j), deductions will be allowed for contributions made on or before the date of publication of the revocation list.  However, the Rev. Proc. also notes that the IRS may disallow a deduction where the donor 1) had knowledge of the revocation prior to publication, 2) was aware that the revocation was immanent, or 3) was partly responsible for or aware of the organization's activities and deficiencies that gave rise to the loss of qualification.

Revenue Procedure 2011-36 (pdf) - This Rev. Proc. provides a reduced filing fee of $100 for certain small organizations that have had their exempt status revoked under section 6033(j) and are re-applying for exemption. These organizations must normally have annual gross receipts of $50,000 or less and otherwise qualified  for transitional relief under Notice 2011-43. The organization's application (Form 1023 or Form 1024) must be postmarked by December 31, 2012.

Notice 2011-43 (pdf) - This Notice provides "transitional relief" for small organizations that failed to file the Form 990-N (e-Postcard) for the three consecutive years 2007, 2008, and 2009. In addition to the reduced filing fee noted in Rev. Proc. 2011-36, this notice provides that these small organizations will be treated as having established reasonable cause for failing to file and their exempt status will be reinstated retroactive to the date of automatic revocation. In order to qualify, the organization must:

  • Not have been required to file Form 990 or 990-EZ for tax years beginning before 2007
  • Been eligible to file Form 990-N for 2007, 2008, and 2009
  • Submit its application for reinstatement for exempt status by December 31, 2012.
Notice 2011-44 (pdf) - This Notice gives the process and procedures for organizations other than those small organizations to which Notice 2011-43 and Rev. Proc. 2011-36 apply. Generally, these organizations must apply for reinstatement of exemption by submitting a Form 1023 or Form 1024 with the full user fee. They should write "automatically revoked" at the top of the application and on the envelope. If the organization is seeking to have its exempt status reinstated to the date of revocation, it must request reinstatement by including:
  • A statement statement supporting the claim of reasonable cause for fialure to file and the steps taken to avoid or mitigate such failures
  • A statement describinig safeguards the organization has put in place to ensure that the organization will not fail to file returns in the future.
  • Any evidence to substantate the above statements
  • Properly completed and executed information returns for those years that the organization failed to file. 
  • Properly completed and executed Form 990-EZ returns for those years the organization was eligible to file Form 990-N and failed to file.
  • A declaration signed under penalty of perjury by an officer, director, trustee or other official.
The Notice goes on to explain what the "reasonable cause" standard of care is for failure to file returns, noting that:
[A]n organization requesting retroactive reinstatement must provide evidence that it exercised ordinary business care and prudence in determining and attempting to comply with its reporting requirement under section 6033 for each of the three years and over the entire three-year period, but was nevertheless unable to file the required returns or notices for three consecutive years.
Needless to say, that's a pretty high standard. It should also be noted that, in order to have the exemption reinstated back to the date of automatic revocation, the Form 1023 or Form 1024 must be filed within 15 months of the IRS's revocation letter or the posting of the organization's name on the revocation list on the IRS website.


Sandy Deja said...

In the two months since the IRS originally published the Automatic Revocation List, more than 50,000 more names have been added to the list. The total number on the Auto-Rev list now tops 330,000.

Patrick Sternal said...

Thanks for the update Sandy!

Sandy Deja said...

A little more than a year into this revocation program, the total of IRS revocations has risen to more than 444,000.

The good news is that as of early July, 2012, 8,194 revoked non-profits had successfully applied to have their status reinstated.

There are only 5 months left of "Transitional Relief," the special IRS reinstatement program for small non-profits. Small non-profits interested in reinstatement have no time to waste!