Nearly 300,000 Small Charities Could Lose Tax-Exempt Status, Study Finds

More than 292,000 nonprofit organizations—about 18 percent of the charities in the United States—may lose their tax-exempt status in the next year for failing to file a tax return with the Internal Revenue Service, according to a report released on Thursday by the Urban Institute’s National Center for Charitable Statistics.

A 2006 law gave charities with less than $25,000 in gross receipts three years—or until May 17, 2010—to file the new Form 990-N, better known as the e-Postcard. Previously, such small charities were not required to file with the IRS.

So far, 196,000 charities have missed their deadline. Another 96,500 charities have deadlines between now and April 15, 2011.

Human-service organizations account for the largest number of organizations that did not file (29 percent), followed by advocacy organizations, fund-raising federations and other so-called public-benefit organizations (22 percent) and education organizations (15 percent).

The report found that most of the organizations that failed to file are run entirely by volunteers, lack a permanent address, and change officers annually.

The center attempted to contact 100 organizations, to get a rough sense of what percentage of the organizations that did not file were defunct. It was able to confirm that only 25 were still operating, and only two of those charities were aware of the new filing requirement.