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JOURNAL OF ACCOUNTING AND FINANCE
Is the Loss of Tax-Exempt Status For Previous Filers
Related to Indicators of Financial Distress?
Author(s): John M. Trussel
Citation: John M. Trussel, (2013) "Is the Loss of Tax-Exempt Status For Previous Filers Related to Indicators of Financial Distress?," Journal of Accounting and Finance, Vol. 13, Iss. 4, pp. 60 - 73
Article Type: Research paper
Publisher: North American Business Press
Abstract:
The US Congress passed the Pension Protection Act of 2006 (PPA) that automatically revokes the tax-
exempt status of any organization that does not file with the IRS for three consecutive years. This study
focus on charities that previously filed with the IRS, and it examines whether or not the loss of tax-exempt
status is related to indicators of financial distress. The results show that charities that lost their tax-
exempt status have smaller equity reserves, higher revenue concentration, lower operating margins, more
debt (relative to assets) and are younger and smaller than their counterparts.
