Sánchez, Young want IRS to notify charities before revoking tax exempt status
On Monday, Reps. Linda Sánchez (D-CA) and Todd Young (R-IN) introduced H.R. 811, the IRS Notice for Organizations That Include Charities is Essential (NOTICE) Act.
Under current law, tax exempt organizations who fail to file annual returns for three consecutive years face automatic revocation of their tax-exempt status. Because small organizations were not required to file such returns prior to 2008, many organizations aren’t aware of pending revocation until after it has happened, at which point they must reapply for the status. Additionally, the IRS Taxpayer Advocate has found that thousands of organizations have had their status wrongfully revoked, with no course for remediation except to reapply. The IRS NOTICE Act would require the IRS to notify organizations 65 days before their tax-exempt status is automatically revoked, giving them time to file the necessary returns or identify an IRS error before action is taken. It also creates a path to retroactive reinstatement if the necessary notice is not sent and returns are subsequently filed.
“Too many good organizations get tripped up by this provision because of simple oversight,” said Young. “They are caught off-guard and not even aware of a problem until their name appears on an IRS list of organizations that lost their tax exempt status. At the very least, the IRS ought to be notifying these groups before such drastic action is taken, and this bill would require that they do so.”
“Thousands of non-profits across the country work hard to deliver their services despite small staffs and tight budgets,” said Sánchez. “Unfortunately, these circumstances can put them at a disadvantage when it comes to navigating our complicated tax system. Under the NOTICE Act, charities would be given an opportunity to remedy any outstanding claims with the IRS before being stripped of their tax-exempt status. This simple change to our tax code would allow organizations to continue providing their services to the communities they serve without interruption. I know that in my district, and across the country, there are non-profit organizations that would benefit immensely from this legislation.”
A database of the organizations who have lost their tax exempt status due to automatic revocation—including more than 12,000 in Indiana and nearly 68,000 in California—can be found at https://apps.irs.gov/app/eos/revokeSearch.do?dispatchMethod=navigateSearch&pathName=forwardToRevokeSearch&searchChoice=revoked.
Companion legislation was also introduced Thursday in the Senate by Sens. Dan Coats (R-IN) and Ben Cardin (D-MD) as S. 400.