The Pension Protection Act of 1996 (“PDA”) requires tax-exempt organizations with average annual receipts of less than $25,000 to submit a new form with the IRS, known as the 990-N or e-postcard. In the event that small tax-exempt organizations failed to submit their 2007, 2008 and 2009 annual returns their tax-exempt status was automatically revoked.

In spite of the Internal Revenue Service’s (IRS) education outreach, many small tax-exempt organizations had no knowledge of the new filing requirements, and approximately 275,000 organizations had their tax exempt status revoked by the IRS. Organization’s whose tax-exempt status has been automatically revoked, are listed on the IRS’s website. Click here to view the list.

To minimize the impact of automatic revocation, the IRS issued transitional relief in Notice 2011-43 in June 2011 to provide allow for retroactive reinstatement of the organization’s tax-exempt status. To obtain reinstatement of its tax-exempt status, an organization must apply for reinstatement with the IRS, even if it was not originally required to apply for tax-exempt status.

Under Notice 2011-43, the IRS will treat an organization as having established reasonable cause for failure to file Form 990-N for taxable years 2007, 2008 and 2009 if:

  • The organization was not required to file annual information returns (e.g., Form 990, Form 990-EZ, Form 990-PF) for taxable years beginning before 2007;
  • The organization was eligible in each of its taxable years beginning in 2007, 2008 and 2009 to submit a Form 990-N e-postcard. This generally means organizations with annual gross receipts that are normally less than $25,000; and,
  • On or before December 31, 2012, the organization submits to the IRS a properly completed and executed application for reinstatement of tax-exempt status.

The tax-exempt status of organizations that meet the above requirements will be reinstated retroactively to the date of revocation. An organization seeking reinstatement of tax exempt status pursuant to this method must write “Notice 2011-43” on the top of the form it uses to apply for reinstatement of tax-exempt status (e.g., IRS Form 1023 or IRS Form 1024) and on the envelope. The organization must also attach the following statement:

[Name of Organization] was not required to file annual information returns for taxable years beginning before 2007; was eligible in each of its taxable years beginning in 2007, 2008 and 2009 to file a Form 990-N e-Postcard; and had annual gross receipts of normally not more than $25,000 in each of its taxable years beginning in 2007, 2008 and 2009.

The transitional relief in Notice 2011-43 pertains only to certain small tax-exempt organizations.

MCB has over 60 years of experience working with non-profit organizations on their accounting, audit, tax and compliance needs. Contact Kathy Flaherty for more information or to schedule a meeting to discuss your non-profit compliance requirements.

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