Federal tax law provides that a tax-exempt organization that does not file appropriate tax returns for three consecutive years automatically loses its  tax-exempt status. The IRS announced that it is giving one-time relief for small exempt organizations that failed to file for three years to reinstate compliance and retain tax-exempt status.  Tax-exempt organizations that lose their exemptions must reapply for tax-exempt status.   Income received by the organization while it is not tax-exempt may be taxable.

The IRS posted a list of organizations that may lose their tax-exempt status.  See the list of Arizona tax-exempts that are in jeopardy.  The listed organizations have until October 15, 2010, to file all necessary returns to reinstate their tax-exempt status.

If your organization needs to reinstate its tax-exempt status there are two options:

  • Small organizations that file Form 990-N should obtain this form from the IRS website and file it by October 15, 2010.
  • Organizations that file Form 990-EZ (but not eligible to file Form 990-N) should obtain the form from the IRS website and file it by October 15, 2010, plus pay a $100 – $500 compliance fee based on revenue.

Large tax-exempt organizations that must file IRS Form 990 or Form 990-P are not eligible for this one-time relief program.

From the IRS website:

Tax-exempt organizations that fail to satisfy annual filing requirements for three consecutive years automatically lose their tax-exempt status. The IRS is providing one-time relief that will allow small exempt organizations to come back into compliance and retain their tax-exempt status even though they failed to file for three consecutive years. If an organization loses its exemption, it will have to reapply to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

This one-time relief benefits Form 990-N (e-Postcard) and Form 990-EZ filers only. Organizations required to file Form 990 or Form 990-PF are not eligible and are automatically revoked if they fail to file for three consecutive years.

List of organizations at risk of automatic revocation: The IRS website has a list of organizations at risk of losing their tax-exempt status because, according to IRS records, they have not filed for 2007, 2008 and 2009. The list contains the name of the organization and its last-known address. Check this list to see whether your organization is at risk of automatic revocation and can avoid this consequence by following IRS guidance.

Note: The list may be incomplete, as certain organizations may be at risk even though their names do not appear. In addition, the list may include organizations that were required to file Form 990 or Form 990-PF and are not eligible for the relief program, and organizations whose filing dates have not yet occurred.

Additional information: