Fri. Sep 29th, 2023

In 2006, Congress passed into law, the Pension Protection Act (PPA) that required most tax-exempt charities to provide an annual notice to the IRS providing various required information. According to the law, small tax-exempt organizations that received annual donations of $50,000.00 and less would start complying with the notice provision’s rules in 2007. 慈善機構 Any organization that did not file the necessary information notice with the IRS for 3 consecutive years would be automatically revoked from its tax-exempt benefits. Following this law, in June 2011, the IRS released the initial list of organizations that were automatically revoked following failure to submit the necessary notice for 3 consecutive years. There were 275,000 organizations which were revoked from their tax-exempt statuses in this release.

What is the Difference between a Nonprofit Organization and a Charity?

Set of Revoked Organizations

The list of organizations that has been released by the IRS in June 2011 indicates the names of the charities, the Employer Identification Numbers (EIN) of the organizations, and the addresses of the organizations as held by the IRS in its database. It’s the responsibility of donors to ensure that the organizations they are donating to are not marked as “revoked” in the IRS’s books. This list of revoked charities is available at the IRS website and could be sorted by name or state for easier reference. The IRS in addition has indicated that they may be updating the list on a monthly basis as more organizations get free from compliance and are included with the list.

Efforts by the IRS to Ensure Compliance

Because the passing of the Pension Protection Act, the IRS has embarked on an awareness campaign to produce qualifying charities aware of the new requirements and to make sure that they comply with the rule. There has been various educational forums to produce charities alert to the new rules. The IRS in addition has sent over 1 million letters to organizations that had not yet complied to own them comply before they’re forced to be revoked. Furthermore, the IRS in addition has extended the time for automatic revocation considering that the 3 year non-compliance timeframe for big charities needs to have ended in 2009. The full time frame for small tax exempt charities which were to start reporting in 2007 needs to have lapsed in 2010.

Relief for Small Charities

The IRS is conscious that some small charities has been ignorant of the notice filing requirement and are therefore, providing a lenient way for these organization to come into compliance retroactively from time of revocation (so that they may not enter into any donation complications). Tax-exempt organizations that receive donations of less than $50,000.00 can gain status backdated to the time of revocation when they connect with be reinstated and pay a lowered fee of $100.00 rather than the regular fee of $400.00 or $850.00.

Implication on Donors

For donors, funds or aid provided to these revoked organizations before the revocation are still deductible for tax purposes. However, moving forward, a donor cannot produce a donation to the revoked organizations and deduct such donations within their tax returns. Therefore, it’s advisable for a donor to check on with the IRS’s list of revoked organizations before making donations to prevent any inconveniences during tax time.

Just how to be Reinstated

The IRS believes a vast most of the charity organizations which have been revoked are defunct and therefore, there are no consequences to the revocation. However, organizations which have been revoked but which are still operational still are able of having back to compliance. To do this, they will be required to perform a new application for registration and pay the relevant user fee. The payment of the fee also applies for organizations which were otherwise exempt before the revocation. However, to steer clear of the embarrassment to be listed on the revoked list, the IRS advises all tax-exempt organizations to make sure that they offer the relevant documentation for them in good time.

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