Over 279,000 nonprofits lose tax-exempt status

PJ staff report | September 12, 2011

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Tax-exempt status

More than a quarter-million nonprofits, or 16 percent of nonprofits in the U.S., have had their tax-exempt status revoked by the Internal Revenue Service, a new report says.

The 279,599 revocations came in response to the nonprofits' failure to provide information filings to the IRS for three consecutive years, a requirement born of the Pension Protection Act of 2006.

While the numbers are high, the majority of nonprofits affected likely had already closed up shop, says the report from the Urban Institute's Center on Nonprofits and Philanthropy.

"While it is tempting to attribute the failing of these organizations to the recession, it is more likely that these organizations have been out of operation for many years," says the report, "Revoked: A Snapshot of Organizations that Lost their Tax-Exempt Status."

Nonprofits were given until Oct. 15, 2010, to file with the IRS, which worked to provide notice to the sector through a massive public-awareness effort that included mailings to all organizations on file, radio and television announcements, and public presentations.

Human-services organizations accounted for 31.2 percent all revocations, with recreation groups, sports leagues or hobby clubs accounting for more than a third of human-services renovations.

About a quarter of human-services revocations affected more traditional human-services groups, like neighborhood and community centers and groups that assist people with special needs.

Public and societal-benefit organizations, including neighborhood coalitions and community-service groups, accounted for 28.1 percent of revocations.

Almost one in 10 revocations affected arts groups, with a third of those related to performing arts.

About 23 percent of listed nonprofits in the District of Columbia had their tax-exempt status revoked, more than any state, followed by Utah, which lost 20 percent.

For nonprofits with gross receipts of $50,000 or less in 2010, the IRS is offering reinstatement of tax-exempt status retroactive to the revocation date for a fee of $100, less than the regular fee of $400 or $850.

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