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For Whom the Revocations Tolled: An In-Depth Analysis

What do we know about the 279,595 nonprofits named on the first Automatic Revocation of Exemption List? Not much for almost half (134,615) of them, because they either never appeared on the IRS list of exempt organizations or have not been on it for some time. GuideStar's vice president of research, Chuck McLean, analyzed the characteristics of the remaining 144,980 nonprofits that lost their exemptions for failure to file an annual return for three consecutive years. Here's what he found.

for-whom-revocations-tolled-by-type.jpgOrganization Type

More than half—57 percent—of the revoked organizations for which we have additional data were 501(c)(3) public charities. Another 9 percent were 501(c)(3) private foundations. These nonprofits are especially important in terms of revocation because the overwhelming majority of tax-deductible contributions are made to 501(c)(3) organizations.





for-whom-revocations-tolled-revenue.jpgOrganization Size by Revenue

As many in the nonprofit sector predicted, the revocations appear to have affected small nonprofits the most. More than 75 percent of the revoked organizations for which we have additional information had annual revenues of less than $25,000. A handful of larger organizations, some with revenues in the millions, did lose their exemptions for failure to file, however. (Note: Nonprofits in the "Never Filed" group on the chart below were required to file a return even before the Pension Protection Act of 2006 was enacted but apparently never did so.)


for-whom-revocations-tolled-by-sector.jpgSector

Although the IRS has been using the National Taxonomy of Exempt Entities (NTEE) system to classify new tax-exempt organizations for more than a decade, previous efforts focused on larger nonprofits. Thus it is not surprising that nearly half (48 percent) of the revoked nonprofits for which we have additional data fell into the "unclassified" category. Public services organizations made up the next-largest (21 percent) group, followed by educational organizations (7 percent) and public, societal benefit nonprofits (also 7 percent).

 


Geography

State information is available for all revoked organizations, and the table below reflects all 279,595 nonprofits in the automatic revocation list. Generally, the number of revoked nonprofits was proportional to the total number of tax-exempt organizations for a given state in the IRS records.

Revoked Organizations by State

StateNumber% All Automatically Revoked Nonprofits
Alabama 3,460 1.2%
Alaska 898 0.3%
Arizona 4,025 1.4%
Arkansas 2,557 0.9%
California 33,733 12.1%
Colorado 5,139 1.8%
Connecticut 3,332 1.2%
Delaware 852 0.3%
District of Columbia 3,879 1.4%
Florida 13,903 5.0%
Georgia 7,655 2.7%
Hawaii 1,525 0.5%
Idaho 1,407 0.5%
Illinois 13,218 4.7%
Indiana 6,152 2.2%
Iowa 2,952 1.1%
Kansas 3,002 1.1%
Kentucky 3,180 1.1%
Louisiana 4,222 1.5%
Maine 1,323 0.5%
Maryland 6,196 2.2%
Massachusetts 6,877 2.5%
Michigan 8,932 3.2%
Minnesota 5,129 1.8%
Mississippi 2,233 0.8%
Missouri 6,222 2.2%
Montana 1,241 0.4%
Nebraska 1,672 0.6%
Nevada 1,748 0.6%
New Hampshire 1,175 0.4%
New Jersey 7,877 2.8%
New Mexico 2,201 0.8%
New York 19,408 6.9%
North Carolina 6,363 2.3%
North Dakota 767 0.3%
Ohio 10,645 3.8%
Oklahoma 3,857 1.4%
Oregon 3,733 1.3%
Pennsylvania 10,492 3.8%
Rhode Island 1,031 0.4%
South Carolina 3,047 1.1%
South Dakota 889 0.3%
Tennessee 4,473 1.6%
Texas 21,468 7.7%
Utah 1,990 0.7%
Vermont 913 0.3%
Virginia 6,274 2.2%
Washington 7,189 2.6%
West Virginia 1,989 0.7%
Wisconsin 5,131 1.8%
Wyoming 664 0.2%
U.S. Territories/Foreign 1,355 0.5%

Source for charts and table: GuideStar analysis of June 8, 2011, Automatic Revocation of Exemption List

Chuck McLean and Suzanne E. Coffman, June 2011
© 2011, GuideStar USA, Inc.

Chuck McLean is GuideStar's vice president, research. Suzanne Coffman is GuideStar's editorial director and editor of the GuideStar Newsletter.

Topics: Policy