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Lost Your Tax-exempt Status? Get it Back.
For most tax-exempt organizations, Form 990, 990-EZ, 990-PF or 990-N (e-Postcard) is required to be filed each year with the Internal Revenue Service. If an organization fails to file for three consecutive years, it will automatically lose its tax-exempt status on the original filing due date of the third annual return or notice.
If an organization loses its tax exempt status, it is no longer exempt from federal income tax, meaning that it may be required to file Form 1120, U.S. Corporation Income Tax Return or Form 1041 U.S. Income Tax Return for Estates and Trusts, and pay applicable income taxes. In addition, donations made to the organization are not tax-deductible once the organization’s name appears on the Automatic Revocation List on the IRS website.
There are four ways that an organization may have its tax-exempt status reinstated, as explained in Revenue Procedure 2014-11, all of which include filing a new Form 1023 or 1024 Application for Recognition of Exemption.
A small organization (990-EZ or 990-N filers) can have its exempt status retroactively reinstated if it completes and submits an Application and pays the appropriate user fee no later than 15 months after the date of the Revocation Letter or the date the IRS posted the organization on the Revocation List, whichever is later.
- An organization that files Form 990 may have its exempt status retroactively reinstated if it completes and submits an Application and pays the appropriate user fee no later than 15 months after the date of the Revocation Letter or the date the IRS posted the organization on the Revocation List, whichever is later. In addition, it must paper file the annual returns for all missing tax years. Included in the Application must be a Reasonable Cause Statement and a statement that the annual returns have been filed. The reasonable cause statement must establish the facts and circumstances with respect to its failure to file the required annual return for at least one of the three consecutive years.
- If an organization is filing for reinstatement more than 15 months after revocation, it will qualify for retroactive reinstatement if it completes and submits an Application, pays the appropriate user fee, paper files the missing annual returns, and includes a Reasonable Cause Statement and a statement that the missing annual returns have been filed with the Application. The reasonable cause statement must establish the facts and circumstances with respect to its failure to file the required annual returns for all three years that it failed to file.
- An organization can also apply for reinstatement from the post-mark date by completing and submitting an Application and paying the user fee.
For more information, please refer to the Automatic Revocation of Exemption page on the IRS website and contact your Yeo & Yeo Non-Profit professional.
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