July 8, 2011 |

Why Nonprofits Lose Tax-Exempt Status

275,000 Nonprofits Lost Tax-Exempt Status in 2010

My first reaction when I read about the IRS revoking the tax exempt status of nonprofits who had not met the required filing requirements for three consecutive years was that most of the organizations were probably defunct.  However, when I looked at the list in our area (easily accessed via this IRS page) I was really shocked to see so many organizations that I knew — and that were certainly not out of business.

My advice to all non-profits is to check the list for their State.    The IRS has a process to apply to retroactively reinstate your tax exempt status.  There is a fee of as much as $850, but the fee can be reduced for smaller organizations that can prove they had good reason to not comply.

Another useful link is for an IRS website with guidance on Staying Exempt