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Automatic Revocation of Tax-Exempt Status


Nutrition Services Division Management Bulletin
Purpose: Policy

To: Commodity Supplemental Food Program Local Agencies

Number: USDA-CSFP-05-2012

Attention: Commodity Supplemental Food Program Administrator

Date: March 2012

Subject: Automatic Revocation of Tax-Exempt Status in the Commodity Supplemental Food Program

Reference: FD-118 Commodity Supplemental Food Program, Title 7, Code of Federal Regulations, Section 247.7(c)

This Management Bulletin (MB) disseminates information regarding the automatic revocation of tax-exempt status requirements for agencies participating in the Commodity Supplemental Food Program (CSFP).

Automatic Revocation of Tax-Exempt Status

On October 13, 2011, the U.S. Department of Agriculture (USDA), Food and Nutrition Service, issued a Food Distribution National Policy Memorandum (FD-118), regarding the automatic revocation of tax-exempt status for certain organizations.

The Internal Revenue Service (IRS) recently changed its filing requirements for some tax-exempt organizations. Under the new requirements, the IRS must automatically revoke the tax exemption of any private nonprofit organization that fails to satisfy its filing requirement for three consecutive years.

Recently, a number of organizations receiving USDA Foods have had their tax-exempt status revoked. Consistent with regulations applicable to the CSFP, including Title 7, Code of Federal Regulations (7 CFR), parts 247 and 250, local and subdistributing agencies must be public or private nonprofit agencies. In order for local agencies to be eligible for CSFP participation, all private nonprofit agencies must either:

IRS Automatic Revocation of Exemption List

When organizations have had their tax-exempt status automatically revoked due to not filing Form 990 series returns or notices annually for three consecutive years, they are placed on the IRS Automatic Revocation of Exemption List (Auto-Revocation List). Organizations can be searched on the IRS Exempt Organizations Select Check Web page at http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

Effective immediately, all local agencies must review the Auto-Revocation List and determine whether any of its CSFP subdistributing agencies are listed. Additionally, if any subdistributing agencies have agreements with other local agencies, they should review the Auto-Revocation List and determine whether any of those agencies are listed. After the initial review, local and subdistributing agencies should check the list annually, to ensure that subdistributing agencies do not appear on the list.

Should any subdistributing agency appear on the Auto-Revocation List, the local agency must notify the organization that it has 30 days to provide documentation that it has applied for reinstatement of tax-exempt status or it will be terminated from the CSFP. Consistent with CSFP regulations in 7 CFR, Part 247.7(c), the organization then must forward documentation of IRS recognition of tax-exempt status to the state within 180 days of the notification. State or local agencies may grant one 90-day extension if the organization can demonstrate that its inability to obtain appropriate status during the initial period was due to circumstances beyond the organization’s control.

Local agencies must also verify that organizations applying to be subdistributing agencies do not appear on the Auto-Revocation List prior to approving the organization’s application.

If you have any questions regarding this MB, please contact Irene Boubalos, CSFP Coordinator, by phone at 916‑323-7181 or by e-mail at iboubalos@cde.ca.gov.

Questions:   Nutrition Services Division | 800-952-5609
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