Number of Charities and Foundations Drops

In 2011, the number of charities and foundations registered with the IRS dropped by 16% mostly as a result of over 272,000 organizations losing their tax exempt status. According to new figures, the number of organizations classified under Section 501(c)(3) of the Code totaled almost 1.1 million last year, down from close to 1.3 million in 2010. The decrease in the number of US charities will likely continue as only 55,319 groups applied for charity status last year, a 7.7% decrease from 2010 and a 35% decreased from 2007.

The decrease of tens of thousands of charities came after Congress passed a law in 2006 that required organizations with an annual revenue of $25,000 or less to file informational tax forms. In June, the IRS announced the names of the organizations that failed to file the mandatory documents—banning those organizations from claiming a charitable deduction for their gifts.

The IRS states that the new procedures make it easier for charities to provide required information to regulators. Ninety percent of the organizations that sought charity status in 2001 were approved and less than 1% were rejected. In 2010, only 82% of charities were approved.

The recession’s impact is another reason for the decreased number of charities because the number of wealthy individuals creating foundations has declined. Very few foundations have been created as of late. In 2009, only 950 new foundations were created, down from a peak of 6,400 in 2000.

See Noelle Barton, Number of Charities and Foundations in U.S. Drops Sharply as New Law Goes Into Effect, The Chronicle of Philanthropy, Mar. 29, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.