The Urban Institute, a nonpartisan economic and social research institute based in Washington, D.C., recently found that more than 275,000 organizations across the country had their tax-exempt status revoked by the IRS.
In North Carolina, that number was 6,363 of a total of 47,938 nonprofit organizations, the Institute’s Center on Nonprofits and Philanthropy found. That’s 13 percent of all nonprofit organizations registered in the state.
Here’s some of what Amy S. Blackwood and Katie L. Roeger wrote in the study, called Revoked: A Snapshot of Organizations that Lost their Tax-Exempt Status:
More than 275,000 organizations have lost their tax-exempt status for failing to file a return with the IRS for three consecutive years. The Pension Protection Act of 2006 required most tax-exempt organizations to file a return with the IRS and called for automatic revocation for nonprofits that failed to file a return for three consecutive years. The majority of organizations are believed to be defunct, but the IRS announced special steps to help existing nonprofits reapply for tax-exemption. This brief provides a snapshot of the nonprofits that have lost their tax exempt status and examines these organizations by type, age and location.
Human services organizations account for the largest percentage of revoked organizations (31 percent) followed by public and societal benefit organizations (28 percent) and arts organizations (10 percent)
While it may be 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. In fact, more than a quarter of all organizations whose exempt status was revoked last appeared in the IRS Business Master File before 2007, and only 10 percent of organizations that lost their tax-exempt status filed a financial return (Form 990 or Form 990-EZ) during their lifespan.
Some organizations whose status has been revoked are likely still operating; only time will tell how many.
Read the entire brief in PDF format.