There is currently no timing requirement for the IRS to perform or complete the review of tax exempt applications sent in by budding nonprofit organizations.
This allows the Internal Revenue Service to avoid the responsibility of performing a timely review or make a timely determination.
For some organizations, the wait can take upwards of two years before a review takes place, and it can be even longer before approval is issued.
To the extent they can, nonprofit are still providing important services to the people in our community, but without tax exempt status these organizations have a diminished capacity to raise public funds or obtain grants from foundations, without which they are in extreme danger of needing to close the doors.
It's happening across our country, and in every community, large and small. In many towns, our neediest citizens don't receive any services unless they come from the generosity of local nonprofits. Without tax exempt status these nonprofits cannot sustain a source of consisten funding. Without funding they can't provide services, and without services, there is a void in the community.
Ultimately, this dynamic effects the economy on the whole, because much of the revenue generated by nonprofits is put back directly into the community where the nonprofit exists.
We propose that Congress enact legislation to change the Internal Revenue Code to include the addition of a well-defined timeline by which the IRS has to review and approve applications for tax exempt status.
We recommend creating a period of 90 days for the IRS EO office to review, assess and approve or deny applications for tax-exempt status.
That is double the amount of time afforded the IRS for other review periods, such as that required by section 4945 of the code, which deals with advance approval of grant procedures for private foundations.
To keep the process moving, there should also be a requirement as to the amount of time the organization has to return documents to IRS in situations where it neither approves nor denies the application, but asks for clarifying information from the nonprofit. 90 days should be sufficient.
The IRS would then have another 90 days to make an ultimate decision on the status of that application.
This brings the maximum waiting time to 270 days, or roughly 9 months. A vast improvement over the current situation, and, while still longer than we believe this process should take, it is a good compromise to complete overhaul.
Approval would be retroactive to the date the IRS received the application, and from that point forward the nonprofit would be subject to normal and existing rules regarding continued documentation and filing requirements.
A system as suggested above gives the IRS specialists sufficient time to review an application and make a determination, and, affords real nonprofit organizations doing real work in our communities the chance to gain sustained funding sources as quickly in their lifecycle as possible.
If you support the proposed suggestions to include a required timeline for the IRS to review and rule on tax exempt applications for nonprofit organizations please take a moment and sign the petition.
We will be interacting with several members of Congress and your voices will be heard.
- United States Congress
- U.S. House of Representatives
- U.S. Senate
Establish a timeline for the IRS review and rule on tax-exempt applications
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