Update: April 21, 2014
Here is a partial reprint taken from the Internal Revenue Service website (click on the link above for the entire message):
"Sometimes, representatives of exempt organizations and practitioners question why certain applications for tax exemption are processed faster than others. Not all applications are the same. While many are complete when received and the IRS does not need more information to process them, others may be incomplete or involve complex issues that require further development. This web page describes the application process and provides information on how to determine the status of an application.
EO Determination Application Process: After you submit your application, we will send you a notice within about 14 days acknowledging receipt. Exemption applications accompanied by the required user fee are separated into three groups:
- Those that can be approved immediately
- Those that need minor additional information to be approved
- Those that require development
If your application falls within the third group, you will be contacted once the application is assigned to an EO agent for further development."
Update: February 11, 2013
While you are waiting for your nonprofit status, you may consider a temporary fiscal sponsorship relationship with an existing active organization. For more information on this type of relationship, go to: http://foundationcenter.org/getstarted/tutorials/fiscal/continuum_4e.html

I call the IRS often with my clients to verify information and get updates. When I asked the agent why she thought there is such a long delay, she hesitated and did not want to provide a definite answer. However, she did say that it was because of the influx of new applications and possibly the surge of organizations that lost their tax exempt status and had to reapply.
Click Here to Find Out How to Keep Your Tax Exempt Status
I thought this was very interesting because the rates for filing nonprofit status (to date) are $400, if under 10,000 and $850 if the budget is over 10,000 and I remember at one point they were planning to implement a new software or web service that would allow filers to submit their paperwork through a "cyber assistant", which would bring the cost down to $200.
My thoughts? Think they would be more efficient if they worked out the cyber assistant, however they would lose a substantial amount of money. In addition, this issue of losing the tax exempt status if you don't file the 990 in three consecutive years is a relatively new thing.
Some of my clients were furious because they never received notification that their status was in jeopardy. I wonder how many still don't know that this rule exists.
Many clients are now choosing to align themselves with existing organizations to use as a fiscal sponsor while their applications are being approved. The best fiscal sponsor relationships I've seen have been with organizations having previous professional or collaborative relationships.
For the status on IRS exempt application processing, go to:
http://www.irs.gov/charities/article/0,,id=156733,00.html