The Senate Finance Committee on Wednesday approved legislation that bond lawyers said would be helpful for nonprofit organizations in the municipal bond market.

The bill would require the Internal Revenue Service to notify a nonprofit before it revokes its tax-exempt status for failing to file annual Form 990 information returns. The proposal, backed by Sens. Dan Coats, R-Ind., and Ben Cardin, D-Md., was one of several bipartisan, noncontroversial bills that the committee approved by voice vote.

Linda Schakel, a partner at Ballard Spahr in Washington, said that there are many small organizations that are unaware of the revocation provision before they receive a revocation notice.

"Obviously the IRS has a system that triggers a notice if three filings have not been made and it would not seem much of a burden on the IRS to send a notice after two years. The notice burden is much less than the amount of time the IRS and organization have had to spend reinstating exempt status," she said.


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Exempt Organizations
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