Starting in 2006, thanks to a provision in the Pension Protection Act, small charities are no longer exempt from filing annually with the IRS. Specifically, those with gross receipts of $25,000 or less must file the Form 990-N (AKA e-Postcard). The law also specified that charities failing to file the Form 990-N for three consecutive years would lose their tax-exempt status. After warning the charities that had failed to comply that they were about to lose their nonprofit status and giving them a second chance to file their documents, the IRS has finally revoked the tax-exempt status of 275,000 groups. After Wednesday’s action, the nonprofit sector shrunk by 17% to 1.3 million groups. Not all, but many of the organizations that had their tax-exempt status revoked are charities. So, as a donor, you should be aware that subsequent gifts to these organizations are not tax deductible.
Finally, if you are affiliated with a charity that has lost its tax-exempt status, then you should know that the IRS has left the door open for you. Groups can reapply for their tax-exempt status and have it reinstated retroactively. The fee for that process is $850, but the IRS says in certain circumstances it may lower the fee to $100.
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