IRS Revokes Tax-Exempt Status of 5100 Minnesota Nonprofits

St. Paul, Minn., June 8, 2011 – Today, the IRS issued the list of 5,132 Minnesota nonprofits whose federal tax-exempt status was automatically revoked earlier this year. Minnesota’s smallest nonprofits were for the first time required to file an annual IRS return in 2010, 275,00 of which nationwide did not do so.

Many of these organizations are no longer in existence, or somehow were not reached by previous outreach efforts and failed to file. The Minnesota Council of Nonprofits (MCN) reached out to as many organization as possible prior to the deadline to notify them of the new requirement. Most of the list of organization on the list are assumed to be non-active or defunct, but had not notified the IRS of their status.

"Many of these organizations are no longer in existence, or somehow were not reached by previous outreach efforts and failed to file," said Jon Pratt, Minnesota Council of Nonprofits executive director. "The vast majority of active nonprofits are unaffected."

The announcement of these revocations comes years after Congress imposed an annual filing requirement for all nonprofits and an automatic revocation penalty for those that do not file for three years in a row. Of the list of organizations that had their status revoked on May 15, 2011, 60 percent were charitable organizations that would be eligible to receive tax deductible contributions if they were still active.

Organizations Ask: "Is My Organization on the List?"

MCN is posting the list of Minnesota organizations, with name, Federal Employer Identification number, address on record, former tax exemption type, and date of revocation. In addition, the IRS has posted excel spreadsheets by state. The Chronicle of Philanthropy also has a searchable database of revoked organizations nationwide.

What Should a Nonprofit Do Now that It is No Longer Tax-Exempt?

The National Council of Nonprofits has developed a special webpage and tip sheet on options available to organizations. Nonprofits that re-apply may request in a letter to the IRS that the reinstatement of their tax-exempt status be retroactive to the date of their original tax-exempt recognition, but the IRS will grant that request only if it determines that there was “reasonable cause” for the nonprofit to have missed the filing deadlines. Make sure to carefully follow the instructions on the IRS website for requesting “retroactive reinstatement” of your organization’s tax-exempt status.

Fortunately, the IRS has created a special transition relief for organizations seeking a reinstatement, allowing a reduced application fee of $100 rather than the standard $400 or $850 fee.

Can a Nonprofit Raise Funds While It is Not Tax-Exempt?

Yes, but the nonprofit needs to be transparent and honest about the fact that it is not currently tax-exempt and, therefore, that contributions to it are not deductible to the donor. Most foundations will not make contributions to organizations that are not tax exempt.

Do We Have Other Options for Raising Money that Would be Eligible for a Tax Deduction?

Consider finding a fiscal sponsor: A nonprofit may want to explore partnering with a fiscal sponsor which can provide the nonprofit with the opportunity to continue to receive gifts that are tax deductible to the donor. Read about fiscal sponsorship.

Download the List of Minnesota Nonprofits with Tax Exempt Status Revoked on May 15, 2011

Types of Minnesota Organizations with Exempt status revoked on May 15, 2011

20     501(c)(2) — Title Holding Corporation for Exempt Organization
3132   501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to
766   501(c)(4) — Civic Leagues, Social Welfare Organizations, and Local Associations of Employees
92   501(c)(5) — Labor, Agricultural, and Horticultural Organizations
321   501(c)(6) — Business Leagues, Chambers of Commerce, Real Estate Boards, etc
277   501(c)(7) — Social and Recreational Clubs
105   501(c)(8) — Fraternal Beneficiary Societies and Associations
37   501(c)(9) — Voluntary Employees Beneficiary Associations
5   501(c)(10) — Domestic Fraternal Societies and Associations
19   501(c)(11) — Teachers' Retirement Fund Associations
19   501(c)(12) — Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies
48   501(c)(13) — Cemetery Companies
3   501(c)(14) — State-Chartered Credit Unions, Mutual Reserve Funds
66   501(c)(15) — Mutual Insurance Companies or Associations
6   501(c)(17) — Supplemental Unemployment Benefit Trusts
169   501(c)(19) — Post or Organization of Past or Present Members of the Armed Forces
50   Other/unknown
5132   Total Minnesota organizations with exempt status revoked on May 15, 2011


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