Automatic Revocation of Tax Exemption

Posted on Tuesday, June 28, 2011

On June 9, 2011 the Internal Revenue Service announced that it had released a listing of about 275,000 organizations that automatically lost their tax-exempt status due to not having filed the required annual reports in the past three years.

If your organization was listed or received a notice from the IRS saying its exempt status was revoked, there is more to getting the exemptions back than just filing the missing returns. The organization must reapply by filling out IRS Form 1023 – Application for Recognition of Exemption under Section 501(c)3 of the Internal Revenue Code or IRS Form 1024 – Application for Recognition of Exemption under Section 501(a), depending on the type of tax exemption it originally had. The appropriate form is required even if your organization did not have to file it originally. There is also a fee that needs to be paid ranging from $400-$850. Currently the IRS is processing forms received in December 2010.

The IRS has issued guidance on how organizations can apply for reinstatement of their tax-exempt status. If your organization is considered a small organization, one that normally has annual gross receipts of not more than $50,000 in their most recently completed taxable year, it may qualify for reinstatement retroactive to the date of the automatic revocation and be able to pay only $100. See IRS Notice 2011-43 for additional information.

If your organization does not qualify as a small organization IRS notice 2011-44 explains how to apply for reinstatement. The reinstatement will only be retroactive if you can show reasonable cause for failing to file the returns. Otherwise, it will be effective the date the organization filed its new form 1023 or 1024.

The IRS notices can be found by visiting http://www.irs.gov/.

Posted by: Susan Berghoff, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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