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What Happens If Tax Exempt Status Is Revoked

3. Retroactive reinstatement (after 15 months): Organizations that request reinstatement more than 15 months after the later date on the organization`s revocation letter (CP-120A) or the date the organization is on the revocation list on the IRS website may restore their tax-exempt status retroactive to the date of revocation if they: Donor Relations: Be proactive in communicating with your donors and transparent in the statement that while donations given before the revocation effective date are still deductible, future donations are not deductible until the nonprofit is recognized by the IRS that it is tax-exempt again. If your donors need more information about the deductibility of their donations, refer them to IRS Publication 557. This article was written by Anne Rosenthal, a lawyer at Hurwit & Associates with extensive experience advising nonprofits on how to restore their tax-exempt status. She can be contacted at (617) 630-6900 or for more information. NOTE: According to the IRS, revoked organizations are not required to file missed Series 990 returns. However, the IRS expects organizations to meet the filing requirements after revocation. This usually means that once an organization has been revoked, it must file business returns from the date of revocation of the tax exemption until the date the organization is dissolved or its tax-exempt status is restored. Hopefully, your nonprofit will never be stripped of its status. But if so, learn the lesson and don`t let it happen again. Maintaining adequate compliance is not just a best practice recommendation. It is a legal necessity.

Failure to file Form 990 not only jeopardizes your tax-exempt status, but also publicly telegraphs a disregard for transparency and accountability. Honestly, this is not a good look for a non-profit organization. In addition, the IRS sends each organization a letter to its last known address stating that its exemption status has been automatically revoked because it has not submitted a required annual statement or notice for three consecutive years. The first point concerns data. An automatic revocation will take effect on the original due date of the third missed annual statement or notice. This date will be indicated in the ZPE120A letter we sent, informing the organization that it has lost its exemption status because it has not submitted the required declarations or communications. Note that ZPE120A has a date that indicates when we sent the letter. This date is the date of the withdrawal letter. The third date is when we published the automatic revocation in the automatic blacklist database, which is managed on We will talk more about this data in the next slide. The second point concerns the date of entry into force of reinstatement. If an organization that is automatically revoked requests the reinstatement of the exception, the reinstatement of rights takes effect from the date of revocation or the date of the request for reinstatement of rights.

An organization will almost always want the restoration of rights to be effective, retroactive to the date of automatic revocation. In addition to the fact that the organization is on the automatic blacklist, retroactive reinstatement treats the organization as if it had never lost the exception. Retroactive reinstatement of entitlements is not an option, so we will talk about when this will be the case, the reinstatement of rights will take effect from the date of the postmark on the application. In this case, the organization is considered non-exempt for the period between the date of entry into force of the withdrawal and the date of application. This slide describes the pressure on sales in 2014-2011. The tax procedure describes the conditions for reinstatement of rights and the date of entry into force, depending on various factors. The fourth section of the Income Procedure describes the simplified retroactive reinstatement of available fees if the corporation was eligible to file Form 990EZ or Form 990N for each of the consecutive years it did not file. Only small organizations will be eligible. Nor was the tax-exempt status automatically revoked beforehand. Finally, it must apply within 15 months of the later date of the revocation letter or the date the IRS placed the organization`s name on the revocation list. This process is simplified compared to other reinstatement procedures, as we do not provide the organization with a good reason not to submit missing statements or notices.

We do not require the organization to file missing returns for years if it were to file Form 990EZ instead of Form 990N, and we do not impose a penalty for non-filing. There are limited exceptions to the registration requirement. In general, an organization must have a service decision that it does not have to submit a declaration. This slide shows the registration requirements for most exempt organizations. Exempt organizational returns are processed by the Ogden Service Center in Utah. Instead of a regular tax return, certain tax-exempt businesses whose annual income falls below a certain threshold must file an annual Form 990N, an electronic notice for tax-exempt organizations that are not required to file Form 990 or Form 990EZ. Also known as postcard. The postcard notice must be completed and filed electronically. There is no paper form.

New participants must register via the IRS website via the link on the Charity and Nonprofits page. You can only submit the postcard after the end of your tax year. The three-year period is systematically calculated using the date of incorporation of the employer identification number. However, the effective date of the exemption is the beginning of the first three-year period. The only information we have about the founding date of an explicit organization is the date it received its employer identification number. .