The I.R.S. has kicked 275,000 nonprofits off the rolls of the tax-exempt after concluding the organizations had failed to file returns or, in many cases, had simply ceased to exist, The New York Times reports. The action singlehandedly shrinks the U.S. nonprofit pool by 17 percent.
More than 1 million charities, unions, trade associations, and other membership groups remain tax-exempt, and the I.R.S. says some de-certified organizations can reapply for tax-free status.
Some in the field welcomed the culling as painful but necessary. Tim Delaney of the National Council of Nonprofits said the long-run effect is positive “because academics, researchers, policy makers and others will have more accurate data on the nonprofit sector.”
The shakeout results from a single tax provision buried within the 393 pages of a five-year-old law that deals mainly with another subject: pensions. Many nonprofits didn’t realize the Pension Protection Act of 2006 extended the filing requirements to all tax-exempt groups. Previously, organizations with annual income below $25,000 didn’t have to submit returns.
Others nonprofits apparently went out of business and didn’t notify the government. An I.R.S. official says the agency believes most of the 275,000 organizations on the list are in fact defunct, and many cannot be reached at their given addresses.
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