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The Council on American-Islamic Relations (CAIR) has lost its tax-exempt status from the Internal Revenue Service.

The controversial organization failed to file legally required annual reports for three consecutive years, the federal agency said.  CAIR is one of 275,000 groups targeted by the IRS for being out of compliance with filing requirements.  “The IRS believes the vast majority of these organizations are defunct, but it also announced special steps to help any existing organizations to apply for reinstatement of their tax-exempt status,” the agency said in announcing the action.

The new rules come from congressional action in 2006 under the Pension Protection Act that automatically revokes the tax-exempt status of groups that fail to comply.

The IRS says it made an extensive effort to inform organizations of the changes, including mailing more than 1 million notices to organizations that had not filed.

Last year the agency published a list of at-risk groups and gave smaller organizations an additional five months to file required notices to come into compliance.  About 50,000 organizations filed during this extension period, the IRS said.

“During the past several years, the IRS has gone the extra mile to help make tax-exempt groups aware of their legal filing requirement and allow them additional time to file,” IRS Commissioner Doug Shulman said.  “Still, we realize there may be some legitimate organizations, especially very small ones, that were unaware of their new filing requirement.  We are taking additional steps for these groups to maintain their tax-exempt status without jeopardizing their operations or harming their donors.”

CAIR must now reapply to have its tax-exempt status reinstated and pay a fee of up to $850.

This action “should have little, if any, impact on donors” who made contributions prior to the IRS action, the agency said.

However, if CAIR and other organizations affected are not reinstated, all income they receive going forward will be taxable.

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