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How Automatic Revocation of Tax-Exempt Status Could Affect You as a GuideStar Customer

revocations-and-guidestar-customersThe IRS is preparing to release the first Nonfiler Revocation List, a compilation of organizations whose tax exemptions have been revoked because they were required to file an annual information return (Form 990, 990-N, 990-EZ, or 990-PF) but failed to do so for three consecutive years. The revocations are automatic and mandatory under the Pension Protection Act of 2006.

As many as 321,000 nonprofits may appear on the list when it is first published. (After the initial publication, the IRS will update the list monthly.) GuideStar's analysis of these organizations shows that as of February 2011, nearly 40 percent no longer appear in the IRS Exempt Organizations Master Listing; we suspect most of the missing nonprofits are defunct. Of the remaining organizations, 56 percent are 501(c)(3) public charities, and the vast majority—82 percent—appear to have incomes of $25,000 or less.

How Will the Revocations Affect Your GuideStar Product(s) and Service(s)?

It depends on which one(s) you have:

GuideStar Premium
Revocation information will be incorporated into GuideStar Premium and will be prominently displayed in the search results, organization detail page, and printable and PDF versions of the organization detail page.

GuideStar Charity Check
Revocation data will be clearly displayed in each GuideStar Charity Check report, including the online, printable, and PDF versions.

GuideStar Nonprofit Compensation Report
We expect the revocations to have minimal impact on the Nonprofit Compensation Report, because the report relies on data reported by Form 990 filers with incomes of $1 million or more, and the majority of at-risk organizations appear to be either defunct or small nonprofits with incomes of $25,000 or less. So, although some organizations included in the first 10 editions of the Nonprofit Compensation Report may have lost their exemptions, we expect that number to be negligible in comparison to the thousands that the report will continue to be cover.

GuideStar CEO Compensation Checkpoint Report
We expect the revocations to have limited effect on this product as well. Obviously, if a nonprofit has lost its exemption, customers won't be able to run a report on its CEO or to include the organization in a peer group. But we expect the number of such organizations to be relatively low, for the same reasons that we believe the revocations will not have a significant impact on the Nonprofit Compensation Report.

Conclusion

The revocations are a significant development for the nonprofit sector. You can, however, continue to rely on GuideStar products and services for accurate, trustworthy nonprofit information.

Suzanne E. Coffman, March 2011
© 2011, GuideStar USA, Inc.

Suzanne Coffman is GuideStar's editorial director and editor of the GuideStar Newsletter.

Topics: Policy