Premature Revocation

The Internal Revenue Service (IRS) mistakenly revoked tax-exempt status from more than 30,000 organizations for failure to file three consecutive information returns. The error occurred because the IRS automated systems were not properly updated to account for the extension of information return filing dates due to the COVID-19 pandemic.

In the IRS EO Update (October 26, 2020), the IRS announced:

The charity reform subtitle of the Pension Protection Act of 2006revokes the exempt status of an organization that fails to file the required Form 990 for three consecutive years (“auto-revocation”). Under the pandemic, this year the IRS extended filing dates from April 1 through July 14 to July 15, 2020, by Notices 2020-23 (PDF) and 2020-35 (PDF). Due to systemic limitations, we were unable to update this deadline in the program that automatically issues notices of revocation. This caused some revocation notices to be issued prematurely. Nevertheless, the IRS prevented eligible organizations that attempted to file electronically by July 15 from being listed as automatically revoked on, where they are still shown as tax exempt. At the same time, we are processing paper filings which allow the reversal of auto-revocation for those filers. The IRS is reviewing the cases and corresponding with organizations that received the premature notice. Additionally, we have dedicated fax number (855) 247-6123 to receive correspondence from organizations in this situation that wish to present documentation of their applicable filings.

The House Ways and Means Committee prompted the IRS to review the revocations with a letter to Treasury Secretary Steven T. Mnuchin dated October 20, 2020 that began:

We write today to find out why the Trump Administration automatically revoked the tax-exempt status of, and sent erroneous revocation notices to, more than 30,000 nonprofit organizations around the country, including nearly 28,000 charities as we enter the most popular time of year for Americans to make charitable contributions. We urge you to investigate this apparent error by the Internal Revenue Service (IRS) and take corrective action immediately. These organizations do critically important work for our communities—especially during this difficult time for our nation—and we must ensure that the IRS is not wrongfully terminating their exempt status.

As you know, the IRS automatically revokes the exempt status of organizations that do not file the required Forms 990 for three consecutive years. Such revocation is effective as of the due date for the filing, which generally is May 15 for calendar year organizations. However, due to the coronavirus pandemic, the IRS extended the filing date this year to July 15. In other words, organizations that would have had their exempt status revoked on May 15, 2020 were given until July 15, 2020 to file and, in doing so, retain their exempt status.

For organizations that have had their exemptions revoked in error, they should fax send a fax to the IRS to support that they had timely filed an information return so should not have been auto-revoked. However, it would not be surprising to learn that this may take more time to resolve than would optimally be desired. While the following may or may not be indicative of how expectations should be managed, fax applications for Employer Identification Numbers (EINs), which this IRS website still states will take 4 business days, is reportedly now taking 45 days.