December is usually a particularly charitable month, both due to the spirit of giving and the desire to get a tax break.
The IRS website features an article entitled “Eight Tips for Deducting Contributions.” The first tip: “If your goal is a legitimate tax deduction, then you must be giving to a qualified organization.” Yes, this seems obvious. However, you may be surprised to find that the “non-profit” organizations you’re a member of or that you’re donating to may have lost their tax-exempt status.
According to the IRS, approximately 18% of all non-profit organizations lose their tax exempt status every year from failing to file taxes three years in a row. For example, in my community, the IRS website had over 1,200 non-profits listed that had lost their tax exempt status, including two groups that I pay membership fees to. However, I did find some interesting surprises on a national level.
A good resource that I highly recommend checking out is www.Guidestar.org. (Quick note: faith-based organizations can be checked at www.ecfa.org.) With Guidestar, you can look up any non-profit (or not-for-profit) organization that you belong to or donate to. If the organization’s tax exempt status has been revoked, you will get a notice that toward the middle of the page that says the following:
This organization’s exempt status was automatically revoked by the IRS for failure to file a form 990, 990-EZ, 990-N, or 990-PF for 3 consecutive years. Further investigation and due diligence are warranted.
This organization is not registered with the IRS.
For more details, you have to create an account — which is very easy. Then this message will show near the top of the page. With an account, the “PDF Preview” (see below) can be downloaded for free and gives you access to their most recent tax returns, including the actual dates they were filed. So if the past three years’ worth of tax returns all show they were returned in May of 2016, for example, it helps confirm why the organization lost its exempt status. The tax returns also let you get an idea of how the money they receive is being used, and (with a little more digging), if there are discrepancies between what they tell their members/supporters and what they are reporting.
In addition to Guidestar, the IRS allows you to run checks using their “Exempt Organizations Select Check Tool,” which you can find here. Using the tool, select the middle option — “Were Automatically Revoked” — and type in the organization you’re researching. This will show up if the organization has lost its tax exempt status.
What if the organization’s tax exempt status has been revoked? Can it be reinstated?
According to the IRS website:
The law prohibits the IRS from undoing a proper automatic revocation and does not provide for an appeal process. An automatically revoked organization must apply to have its status reinstated, even if the organization was not originally required to file an application for exemption.