Over the past week the news wires have been burning up over the IRS’s decision to revoke the tax-exempt status of approximately 275,000 U.S. nonprofits for failing to comply with IRS tax law requirements. IRS attorneys report the agency is now offering its assistance to help nonprofits regain their tax-exempt status. Of course, like most government assistance it won’t be free. Getting back their tax-exempt status will cost nonprofits upwards of $850 each.
IRS tax lawyers say existing nonprofits will now be required to fill out an application and pay a user fee (whether they had to in the past or not). If the nonprofit’s average annual gross receipts exceed, or are projected to exceed $100,000 annually over a four year period, the user fee will be $850. If the annual gross receipts have not exceeded, or are projected not to exceed $100,000 annually over the same time period, the user fee will be reduced to $400. Smaller nonprofits with annual gross receipts of $50,000 or less for 2010 will pay a reduced application fee of $100.
According to IRS attorneys, the filing requirement for nonprofits dates back to a 2006 IRS tax law which mandates most tax-exempt nonprofits to file an annual information return or notice with the IRS. Churches and other religious groups are not included within this filing requirement. Smaller nonprofits were added to the IRS tax law in 2007.
For those donors who made a contribution prior to the nonprofit loosing its tax-exempt status, IRS tax lawyers say donors can still probably claim a tax deduction. However, these IRS attorneys warn that making a financial contribution to a nonprofit after it has lost its tax-exempt status will preclude the donor from claiming a deduction going forward. For potential donors questioning whether a nonprofit has been reinstated as a tax-exempt organization, IRS attorneys suggest you ask to see the IRS’s new determination letter relating to that specific nonprofit organization.
In most instances, the effective date of reinstating a nonprofit’s tax-exempt status will be the date the application is submitted to the IRS. But, IRS tax attorneys add that if the nonprofit so requests, the reinstatement can be made retroactive to the effective date of revocation.
If you have a nonprofit organization which has lost its tax-exempt status, or you made a donation to such an organization and have questions, you are encouraged to seek out advice from a competent tax lawyer to get the answers you need.
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