The IRS has released several updates to its Automatic Revocation of Exempt Status List.  As of October 7, 2011, more than 385,000 non-profits have had their tax exempt status revoked because they failed to file required annual returns.  The IRS is offering transitional relief for small organizations.  Small groups will still have to file new exemption applications, but if they do so by December 31, 2012 the User Fee will be only $100 and re-instatement is likely to be retroactive.  Details are available in IRS Notice 2011-43.

Exempt Organizations Before Mass Revocations
When the IRS publishes their Non-filer Revocation List, up to a third of existing exempt organizations will be expunged from the IRS database.  Using the power of Microsoft Excel Pivot Tables, I've pulled togather a few charts and graphs for a pre-revocation look at the universe of tax exempts. 

2010 Databook
The IRS has released its 2010 Databook.  Fewer than 60,000 501(c)(3) applications were processed during fiscal year 2010, a drop of more than 15% from 2009.  More than 81% of (c)(3) applications handled in 2010 were approved.  This is the highest approval rate since fiscal year 2000.  For more about last year's exemption applications, visit Table 24.

2011 Workplan
The recently released Exempt Organizations 2011 Workplan provides a few insights into exemption application processing:

The number of exemption applications and other rulings has fallen every year since a high of more than 90,000 in 2007.  This is partly due to the 2008 elimination of the IRS Advance Ruling program, which eliminated around 20,000 cases every year.  In fiscal year 2010, Exempt Organizations handled approximately 65,500 rulings.

Perhaps reflecting the falling number of applications, only two new positions have been added to the Exempt Organizations rulings staff since 2008.  In contrast, a hundred new positions have been added to the EO Examinations roster during the same period of time.

The percentage of applications closed by screening, rather than in-depth development, has been increasing, accounting for nearly half of all application closures since 2003, and more than half of all closures since 2005. 

The 2011 workplan does not mention the potential impact of the Nonfiler Automatic Revocation List.  This list, expected to contain the names of hundreds of thousands of organizations whose exempt status has been revoked for failure to file a required return, is expected soon; no one knows how many of these organizations will file new exemption applications.

Comment on Form 1023
The 501(c)(3) application, Form 1023, is among the first IRS forms to appear on a new government website inviting comments.  If you have suggestions that might help the IRS design better 501(c)(3) application,  visit http://www.pracomment.gov/.
(This comment period has now closed.)

Further Delays for Cyber Assistant
According to the IRS fee schedule for 2011 (Rev. Proc 2011-8), references to the reduced fee for using the Cyber Assistant have been removed because the Cyber Assistant is not likely to be released in 2011.

Revocations for Failure to File
In the fall of 2010, the IRS began revoking the tax exempt status of organizations that have failed to file a required return for three consecutive years.  The IRS will publish a list of these revoked non-profits in early 2011.  (This list was finally published on June 8, 2011.) Sandy Deja has written a new ebook to help these de-listed groups  figure out what to do next.  For more information, click on the "New: Regain Exempt Status" tab above.

User Fees Increase
The User Fees that must be paid with an exemption application increased for applications mailed after January 3, 2010.  Organizations whose gross receipts average less than $10,000 per year must pay $400.  Others pay $850.  When the Cyber Assistant becomes available (date unknown), applicants who use it will be eligible for a reduced User Fee of $200, while everyone else, including small organizations, will pay $850.

Cyber Assistant
The IRS continues to work on its "Cyber Assistant."  This tool will guide applicants through the Form 1023, providing continuation sheets for lengthy responses, cover sheets for attachments, and relevant taxpayer education.  When a Cyber Assistant-aided application is finished, it must be printed out and submitted to the IRS in the usual way; special bar-coding on the printed form will alert the IRS that the applicant is eligible for the reduced User Fee of $200.  For help on deciding whether to wait for the Cyber Assistant, click on "Cyber 1023" tab above.

Address Change
There has been a slight change in the address where exemption applications should be sent.  Send all Forms 1023, 1024, 8734 and 8718 to:

        Internal Revenue Service
        E.O. Application Receiving
        P. O. Box 12192
        Covington, Kentucky  41012-0192

Elimination of Advance Rulings
On September 9, 2008, the IRS issued new regulations eliminating the "Advance Ruling" for new publicly supporte 501(c)(3) organizations.  A public charity relying on either one of the one-third public support tests no longer needs to complete a tax year that is at least eight months long before receiving a final determination that it is publicly supported.

If a new organization can show that it can reasonably expect to meet a public support test, the IRS will recognize it as a public charity for all purposes for its first five years, regardless of the level of public support it in fact receives.

Although the IRS has not changed Form 1023, information on the elimination of Advance Rulings has been incorporated into Prepare Your Own.

Next Form 1023
In early 2011, the IRS accepted comments on Form 1023, the application for 501(c)(3) status.  They may have decided, however, that no changes are needed at this time.  The IRS has applied for and received OMB approval of continued use of the form, without changes, until March 31, 2014.

Prepare Your Own 501(c)(3) Application

$38.95



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