This very helpful Procedure sets forth streamlined processes organizations whose tax-exempt status has been automatically revoked for failure to file required annual returns or notices for 3 consecutive years to regain their tax-exempt status retroactive to the date of of revocation.
The Washington Post has identified over 1,000 nonprofit organizations that have reported a significant diversion of assets. Its important to note that there are over 1,616,000 tax-exempt nonprofits in the U.S. today; thus, these filings represent less than 1% of tax-exempt nonprofits. It’s also interesting to note that a quick review of Arizona’s list includes only 21 organizations – most of which reported the diversions in a clear, transparent, and confidence inspiring manner.
In general, 1023 exemption applications are processed in the order of receipt by the IRS, and expedited processing is available only if there is a compelling reason for it. There are reports that over 80% of requests for expedited processing are denied. If the organization needs its determination letter in a hurry because of circumstances that are within its control, the IRS is not likely to feel that the situation justifies expedited handling.
Although there are many reasons a nonprofit organization may be selected for an audit, several things heighten the chance of being selected. Things like irregularities on Form 990s, failure to file a Form 990, citizen complaints, having a relationship with another taxpayer currently being audited or receiving negative media attention can all increase your chance of being audited beyond the random internal IRS computer process.
As the IRS Exempt Organizations division indicated in its 2013 work plan, it is conducting a compliance check of self-declared tax-exempt organizations. The IRS recently mailed over 1,300 questionnaires to self-declared Section 501(c)(4), 501(c)(5), and 501(c)(6) organizations. The project is part of the IRS’ plan to gather information about self-declared exempt organizations, determine whether self-declared exempt organizations are complying with applicable tax-exempt law, and increase voluntary compliance.
Non-profit organizations that are tax-exempt from federal and state income tax are not necessarily exempt from state and local taxes. In lieu of a sales tax, Arizona imposes a Transaction Privilege Tax (TPT) on seventeen separate business classifications. Certain tangible personal property and retail sales transactions are exempt from Arizona’s TPT.
The general rule is that sales made to churches, schools, and other non-profit organizations are taxed. However, under the Arizona Revised Statutes (A.R.S.) the following types of transactions are not subject to the State of Arizona’s Transaction Privilege Tax: