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Tax-Exempt Organization Automatic Revocation of Exemption

All tax-exempt organizations regardless of size are required to file an annual information return, generally referred to as the “Form 990,” with the IRS each year. Tax-exempt organizations that fail to file a Form 990 for three consecutive years automatically have their tax-exempt status revoked by the IRS. Recently, the IRS announced that 275,000 tax-exempt organizations in the United States have had their tax-exempt status revoked for failure to file their Form 990’s.

To assist organizations that have had their tax-exempt status revoked, the IRS issued Notice 2011-43, Notice 2011-44 and Rev. Proc. 2011-36. Notice 2011-43 offers some relief to small tax-exempt organizations with average annual gross receipts of $50,000 or less by allowing such organizations to reinstate their tax-exempt status at a reduced cost. Notice 2011-44 provides guidance to larger tax-exempt organizations that have had their tax-exempt status revoked by describing the process that must be followed in order to have their tax-exempt status reinstated.

Income earned by organizations that have had their tax-exempt status revoked will be taxable income and donations to such organizations will not be tax deductible by the donor. Click here for a list of organizations in Kentucky that have had their tax-exempt status automatically revoked. If your organization is on the list and the organization is still active, it will need to seek reinstatement of its tax-exempt status as soon as possible.

If you have any questions regarding this Alert, or need assistance with reinstatement of an organization’s tax-exempt status, please contact a member of Greenebaum's Tax and Finance Practice Group.


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