IRS Pulls Exemptions for 43 Local Nonprofits

The Gig Harbor Bulldogs and the local chapter of Knights of Columbus were among the list of 43 local nonprofit organizations that lost their tax-exempt status this past week. 

The New York Times reported that the Internal Revenue Service revoked the status from 275,000 groups after they did not meet legal requirements to file annual tax reports for three consecutive years. 

According to a press release issued by the IRS, it has made several attempts to notify the groups, but the majority of these organizations are believed to be defunct. 

Congress passed the Pension Protection Act (PPA) in 2006, requiring most tax-exempt organizations to file an annual information return or notice with the IRS. For small organizations, the law imposed a filing requirement for the first time in 2007. In addition, the law automatically revokes the tax-exempt status of any organization that does not file required returns or notices for three consecutive years. 

The IRS also believes the vast majority of small tax-exempt organizations are now in compliance with the 2006 law. “Still, we realize there may be some legitimate organizations, especially very small ones, that were unaware of their new filing requirement," IRS Commissioner Doug Shulman said. "We are taking additional steps for these groups to maintain their tax-exempt status without jeopardizing their operations or harming their donors.”

The IRS issued instructions on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement. In addition, the IRS announced transition relief for certain small tax-exempt organizations – those with annual gross receipts of $50,000 or less for 2010 – that were made subject to the new "postcard" filing under the PPA. The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100 rather than the typical $400 or $850 fee.

Click here to review the complete list of organizations that were revoked.