May 07, 2010
Automatic Revocation of Tax-Exempt Status for Failure to File Form 990
A Nonprofit E-Alert
Past Issues of Nonprofit E-Alerts
Starting May 15, 2010, the Internal Revenue Service (IRS) will revoke the tax-exempt status of nonprofit organizations that have failed to file Form 990, 990-EZ, or 990-N (collectively, the Form 990) for three consecutive years beginning January 1, 2007. In other words, an organization that does not file Form 990 for tax years 2007, 2008 and 2009 will have its tax-exempt status revoked on the applicable filing deadline in 2010. For nonprofit organizations with a calendar fiscal year, this filing deadline is May 15, 2010.
The Pension Protection Act of 2006 started the requirement that most nonprofit organizations, including those with less than $25,000 of revenue, annually file the Form 990 return and imposed the penalty of revocation of tax-exempt status for those nonprofit organizations failing to file for three years in a row. The revocation is effective from the last day the nonprofit organization could have timely filed the third required Form 990.
An organization failing to file Form 990 for three consecutive years will receive a letter from the IRS notifying it that the organization's exempt status has been automatically revoked for failure to file. In addition, a list of revoked organizations will be available to the public on the IRS website. All organizations with revocations of section 501(c)(3) exempt-status will be removed from Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986.
An organization whose tax-exempt status is revoked may obtain reinstatement of the status by filing Form 1023, Application for Recognition of Exemption, or Form 1024, Application for Exemption under Section 501(a), and paying the requisite user fee. The organization may request, in a letter attached to the application for exemption, to have the date of reinstatement retroactive to the date of revocation. The IRS will grant this request if it determines that the organization had reasonable cause for not filing the Form 990 for three consecutive years and approves the organization's exemption application.
For tax-exempt organizations that have not yet filed the third Form 990, they may obtain an automatic three-month extension to file the Form 990 by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return. The request must be filed by the original due date of the return (May 15, 2010, for fiscal years ending December 31). An additional three-month extension may be obtained by filing another Form 8868 and the organization must submit a detailed description of the reasons causing the additional delay in filing the return. Note that Form 8868 cannot be filed to request extensions for Form 990-N.