ComplianceLegalFinanceTax & AccountingDecember 22, 2020

Verify organization's tax-exempt status before you donate

Approximately 275,000 organizations have automatically lost their tax-exempt status with the IRS. Why? Tax-exempt organizations may be exempt from paying tax, but they are not exempt from filing annual reports.

Back in 2006, Congress provided for automatic revocation of tax-exempt status whenever an organization fails to file the required reports for three consecutive years. This year that law kicked in, resulting in hundreds of thousands of organizations losing their tax-exempt status.

The revocations affect not only the organization, but anyone who donates to it because you can only claim a charitable contribution deduction for donations made to officially tax-exempt organizations. Any donations made prior to the automatic revocation are tax-deductible, assuming all other requirements for deductibility are met. However, any donations made after the revocation date are not deductible, unless the organization's tax-exempt status is reinstated.

In general, the organizations affected are small, local organizations. However, in some cases, chapters of larger organizations may have lost their status as well. For example, numerous Knights of Columbus chapters automatically lost tax-exempt status, as have some American Legion posts. It is the donor's responsibility to verify that the organization is tax-exempt.

It is easy to access to this information on the IRS web site. The list of revocations is searchable by state and includes the effective date of the automatic revocation The IRS will update the list monthly to include additional organizations that lose their tax-exempt status. In addition, an updated version of Cumulative List of Organizations, is available. This searchable online publication lists all the organizations that  are eligible to receive tax-deductible contributions.

Nikki Nelson
Customer Service Manager
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