About 1,700 New York nonprofits saw tax-exempt status revoked since May

Members of the House of Representatives questioned whether a recent uptick in nonprofits losing tax-exempt status may be the result of an Internal Revenue Service error in a letter sent to the U.S. Department of the Treasury on Tuesday. 

The number of nonprofits that automatically lost their tax-exempt status between May 1 and Oct. 8 rose by 20% compared with the same time period last year. Approximately 1,700 organizations in New York saw their tax-exempt status revoked since May 15, according to the letter.

If a nonprofit doesn’t file the required Form 990 for three years in a row, the IRS will automatically revoke its tax-exempt status. Nonprofits generally must submit this information by May 15, but that deadline was pushed back to July 15 this year because of the pandemic. The signatories, including Rep. Thomas Suozzi from New York, expressed concern that that IRS’s systems didn’t properly account for the extension and that the agency’s processing backlogs may have affected their review of Forms 990 that were in fact filed on time. 

“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,” the letter reads.