In 2006, Congress passed into law, the Pension Protection Act (PPA) that required most tax-exempt charities to supply an annual notice to the IRS providing various required information. In line with 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. Any organization that didn’t file the mandatory information notice with the IRS for 3 consecutive years will be automatically revoked from its tax-exempt benefits. Following this law, in June 2011, the IRS released the first list of organizations that had been automatically revoked following failure to submit the mandatory notice for 3 consecutive years. There were 275,000 organizations that were revoked from their tax-exempt statuses in this release.
Listing 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) 慈善機構 of the organizations, and the addresses of the organizations as held by the IRS in its database. It’s the responsibility of donors to confirm that the organizations that they’re donating to are not marked as “revoked” in the IRS’s books. This list of revoked charities can be obtained at the IRS website and may be sorted by name or state for easier reference. The IRS has also indicated that they will be updating the list on a regular basis as more organizations escape compliance and are put into the list.
Efforts by the IRS to Ensure Compliance
Considering that the passing of the Pension Protection Act, the IRS has embarked on an awareness campaign to make qualifying charities conscious of the new requirements and to ensure that they adhere to the rule. There have been various educational forums to make charities conscious of the new rules. The IRS has also sent over 1 million letters to organizations that had not even complied to possess them comply before they’re forced to be revoked. Furthermore, the IRS has also extended enough time for automatic revocation considering that the 3 year non-compliance time frame for large charities should have ended in 2009. The full time frame for small tax exempt charities that were to start reporting in 2007 should have lapsed in 2010.
Relief for Small Charities
The IRS is aware that some small charities could have been ignorant of the notice filing requirement and are therefore, providing a lenient means for these organization to come into compliance retroactively from time of revocation (so that they will not enter any donation complications). Tax-exempt organizations that receive donations of significantly less than $50,000.00 can gain status backdated to enough time of revocation if they connect with be reinstated and pay a lowered fee of $100.00 in place of the normal fee of $400.00 or $850.00.
Implication on Donors
For donors, funds or aid provided to these revoked organizations prior to the revocation continue to be deductible for tax purposes. However, in the years ahead, a donor cannot make a donation to the revoked organizations and deduct such donations inside their tax returns. Therefore, it’s advisable for a donor to check with the IRS’s list of revoked organizations before generally making donations in order to avoid any inconveniences during tax time.
Just how to be Reinstated
The IRS believes that a vast most of the charity organizations which were revoked are defunct and therefore, you can find no consequences to the revocation. However, organizations which were revoked but that are still operational still are able to getting back into compliance. To take action, 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 that were otherwise exempt prior to the revocation. However, to prevent the embarrassment of being listed on the revoked list, the IRS advises all tax-exempt organizations to ensure that they offer the relevant documentation for them in good time.