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Automatic Revocation – How to Have Your Tax-Exempt Status Reinstated

Organizations whose tax-exempt status was automatically revoked because they did not file required Form 990 series returns or notices for three consecutive years can apply for reinstatement of their tax-exempt status.

Revenue Procedure 2014-11 explains the four procedures an organization may use to apply for reinstatement.

Streamlined retroactive reinstatement

Organizations that were eligible to file Form 990-EZ or 990-N (ePostcard) for the three years that caused their revocation may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Have not previously had their tax-exempt status automatically revoked.
  • Complete and submit Form 1023 Form 1023-EZForm 1024 or Form 1024-A with the appropriate user fee not later than 15 months after the later of the date of the organization’s Revocation Letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.

For organizations electronically submitting Form 1023, see Schedule E, Section 4; 1023-EZ see Part V; or 1024-A, see Part VI. For organizations submitting Form 1024, they should write on the top of the form “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure and files properly completed and executed paper Forms 990-EZ for all such taxable years. (For any year for which the organization was eligible to file a Form 990-N, the organization is not required to file a prior year Form 990-N or Form 990-EZ to avoid penalties.) The organization should write “Retroactive Reinstatement” on the Forms 990-EZ and mail them to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0027

Retroactive reinstatement process (within 15 months)

Organizations that cannot use the Streamlined Retroactive Reinstatement Process (such as those that were required to file Form 990 or Form 990-PF for any of the three years that caused revocation or those that were previously auto-revoked) may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Complete and submit Form 1023,  Form 1024 or Form 1024-A with the appropriate user fee not later than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website.
  • Include with the application a statement establishing that the organization had reasonable cause for its failure to file a required annual return for at least one of the three consecutive years in which it failed to file.
  • Include with the application a statement confirming that it has filed required returns for those three years and for any other taxable years after such period and before the post-mark date of the application for which required returns were due and not filed.
  • File properly completed and executed paper annual returns for the three consecutive years that caused the revocation and any following years. The organization should write “Retroactive Reinstatement” on these returns and mail them to:

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027

These organizations should check the box on Schedule E for Section 5 when submitting Form 1023 electronically. For organizations submitting 1024-A electronically, check the box for Section 5 in Part VI. For organizations submitting Form 1024, they  should write on the top of the Form 1024, “Revenue Procedure 2014-11, Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Retroactive reinstatement (after 15 months)

Organizations that apply for reinstatement more than 15 months after the later of the date on the organization’s revocation letter (CP-120A) or the date the organization appeared on the Revocation List on the IRS website may have their tax-exempt status retroactively reinstated to the date of revocation if they:

  • Satisfy all of the requirements described under the “Retroactive reinstatement (within 15 months)” procedure EXCEPT that the reasonable cause statement the organization includes with its application must establish reasonable cause for its failure to file a required annual return for all three consecutive years in which it failed to file.

These organizations should check the box on Schedule E for Section 6 when submitting Form 1023 electronically. For organizations submitting 1024-A electronically, check the box for Section 6 in Part VI. For organizations submitting Form 1024, they should write on the top of the Form 1024, “Revenue Procedure 2014-11, Retroactive Reinstatement,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

In addition, the IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked if the organization is retroactively reinstated under this procedure.

Post-mark date reinstatement

Organizations may apply for reinstatement effective from the post-mark date of their application if they:

These organizations should check the box ) for Section 7 on Schedule E for Form 1023  or Part V for Form 1023-EZ. For organizations submitting 1024-A electronically, check the box for Section 7 in Part VI. For organizations submitting Form 1024, they should write on the top of the Form 1024, “Revenue Procedure 2014-11, Reinstatement Post-Mark Date,” and mail the application and user fee to:

Internal Revenue Service
P.O. Box 12192
TE/GE Stop 31A Team 105
Covington, KY 41012-0192

What’s a reasonable cause statement?

A reasonable cause statement establishes that an organization exercised ordinary business care and prudence in determining and attempting to comply with its annual reporting requirement. The statement should have a detailed description of all the facts and circumstances about why the organization failed to file, how it discovered the failure, and the steps it has taken or will take to avoid or mitigate future failures. For a detailed explanation see Section 8 of Revenue Procedure 2014-11.

Avoid being automatically revoked again – file annual returns

An organization can be automatically revoked again if it fails to file required returns for three consecutive years beginning with the year in which the IRS approves the application for reinstatement. Organizations seeking reinstatement of tax-exempt status after a subsequent revocation are not eligible to use the Streamlined Retroactive Reinstatement Process.

Additional information

Revenue Procedure 2014-11 modified and superseded Notice 2011-44, Application for Reinstatement and Retroactive Reinstatement for Reasonable Cause under Internal Revenue Code Section 6033(j).

2021-09-06T15:01:48-07:00July 6th, 2021|Applications for Exemption, IRS News|0 Comments

DOL Proposed Overtime Reforms Impacts Nonprofits

National Council of Nonprofits:  “The U.S. Department of Labor has proposed sweeping new regulations designed to expand overtime protections for millions of workers employed by nonprofits, for-profits, and governments. The draft regulations, which will not go into effect (if at all) until after a period of public comment and analysis, would more than double the minimum salary level that white-collar employees must be paid (from $23,660 to $50,400) to exempt them from overtime pay of time and half of wages for hours worked in excess of 40 in any week. The Labor Department is also proposing raising the minimum salary level for ‘highly compensated employees’ from $100,000 to over $120,000 per year, and seeking comments on whether the government should establish a mechanism for automatically raising these salary levels in the future.  The National Council of Nonprofits encourages all nonprofits to conduct a mission-based analysis of these proposed regulations.

To learn more download the National Council of Nonprofits’ white paper called “DOL Proposed Overtime Reforms and the Impact on Nonprofits.”

2019-05-11T17:53:45-07:00September 26th, 2015|Employment|0 Comments

Starting a Charity? Here’s What to Do, and What Not to Do

Wall St. Journal:  “Underestimating paperwork and placing relatives on the board are among the bungles.  People who are passionate about a cause typically have several options. They can volunteer their time. They can donate money to a charitable organization.  Or, if they are especially passionate and ambitious, they can start a charity. . . . Here are four common mistakes people make when they start a charity—and how to avoid them:”

2018-01-14T10:38:13-07:00September 20th, 2015|Start Up Issues|0 Comments

Tax Exemptions Protect Religious Freedom

Washington Post:  “Instead of asking whether churches and religious organizations deserve to be tax-exempt, we should ask why governments should be able to tax them at all. Taxation, after all, involves interference by the state, and in a free society such interference needs to be justified.  The power to tax involves the power to destroy, as Daniel Webster argued in the Supreme Court nearly two centuries ago. While our government does have the right to levy taxes, it’s only because ‘We the People’ have authorized it to do so — in order to raise the funds needed to provide for the common good. But should we give our government this “power to destroy” over churches and religious institutions?

2015-09-26T08:34:54-07:00September 15th, 2015|Religious Institutions|0 Comments

Executive Compensation – The Legal Issues

Nonprofit Law Blog:  “Determining the appropriate amount of compensation to pay an executive is one of the most important decisions a board is asked to make. Board members must balance budgetary concerns with the need to find a qualified candidate. Traditionally, it was not uncommon for nonprofits to expect executives to work for significantly less than they might earn elsewhere because of their passion for the organization’s mission. However, that’s a poor business strategy to rely on for recruiting or retaining the right person for the most pivotal position to the organization’s success.”

Read the entire article on this very important topic.

2018-01-14T10:38:13-07:00September 10th, 2015|Employment, Legal Issues|0 Comments

What can People Donate to Charity?

Sterling Foundation Management, LLC, has an informative article that explains the six types of assets that people can give to charities.  The article starts with:

“At some point, many wealthy clients will think about contributing something other than cash to charity. This report examines some of the noncash assets donors may want to consider. We’ve high-lighted the main issues, including tax implications, special private foundation considerations, and operational questions. We will look at six  categories of noncash assets: publicly traded securities, nonpublicly traded business interests, tangible personal property, intangible personal property, qualified retirement plans and real estate.

2018-01-14T10:38:13-07:00December 17th, 2014|Donations|0 Comments

Tips from IRS for Year-End Gifts to Charity

The Internal Revenue Service today reminds individuals and businesses making year-end gifts to charity that several important tax law provisions have taken effect in recent years. Some of the changes taxpayers should keep in mind include:

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.

Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

The IRS offers the following additional reminders to help taxpayers plan their holiday and year-end gifts to charity:

  • Qualified charities. Check that the charity is eligible. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
  • Year-end gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014 as long as they are mailed in 2014.
  • Itemize deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
  • Record donations. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
  • Special Rules. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

IRS.gov has additional information on charitable giving, includingPublication 526, Charitable Contributions.

2018-05-13T12:19:38-07:00December 12th, 2014|Charitable Organizations, Donations, IRS News|0 Comments

Must a Corporation Notify the IRS Its Charter Was Revoked?

Question:  Must an organization whose corporate charter is reinstated after being administratively revoked or suspended by the state submit a new exemption application?

Answer:  No.  If a corporation is reinstated by the state after an administrative suspension or dissolution of its corporate charter, its exempt status may be reinstated without the need for the corporation to reapply.  The organization must submit evidence from the state that its charter has been reinstated, indicating the effective date of reinstatement.  In addition, the organization should provide evidence that it has complied with any filing requirement for annual returns during the period during which its corporate status was administratively suspended or dissolved.

If, however, an organization’s exempt status has been automatically revoked for failing to file annual returns, exempt status cannot be reinstated unless it submits a new exemption application, even if the state reinstates its corporate status.

2014-12-17T23:30:30-07:00July 22nd, 2014|FAQs|0 Comments

IRS Announces New Form 1023-EZ that Simplifies Exemption Applications

The following is the text of a July 1, 2014, IRS press release:

The Internal Revenue Service today introduced a new, shorter application form to help small charities apply for 501(c)(3) tax-exempt status more easily.

“This is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well,” said IRS Commissioner John Koskinen. “The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”

The new Form 1023-EZ, available today on IRS.gov, is three pages long, compared with the standard 26-page Form 1023. Most small organizations, including as many as 70 percent of all applicants, qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

“Previously, all of these groups went through the same lengthy application process — regardless of size,” Koskinen said. “It didn’t matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”

The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months.

Following feedback this spring from the tax community and those working with charitable groups, the IRS refined the 1023-EZ proposal for today’s announcement, including revising the $50,000 gross receipts threshold down from an earlier figure of $200,000.

“We believe that many small organizations will be able to complete this form without creating major compliance risks,” Koskinen said. “Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”

The new EZ form must be filed online. The instructions include an eligibility checklist that organizations must complete before filing the form.

The Form 1023-EZ must be filed using pay.gov, and a $275 user fee is due at the time the form is submitted. Further details on the new Form 1023-EZ application process can be found in Revenue Procedure 2014-40, posted today on IRS.gov.

There are more than a million 501(c)(3) organizations recognized by the IRS.

Related Item: Information on Form 1023-EZ

2020-03-08T07:06:44-07:00July 1st, 2014|Applications for Exemption, IRS News|0 Comments

When an Exempt Organization Must Report Changes to the IRS

An exempt organization must report name, address and structural and operational changes to the IRS. If an organization files an annual return (such as a form 990 or 990-EZ), it must report the changes on its return.  If the organization needs to report a change of name, see Change of Name- Exempt Organizations.  If it needs to report a change of address, see Change of Address – Exempt Organizations. The EO Determinations Office can issue an affirmation letter showing an organization’s new name and/or address and affirming the section of the Internal Revenue Code under which IRS records show the organization as tax-exempt and whether contributions to the organization are deductible.

An organization may request a determination letter regarding the effect of certain changes on its public charity status or private foundation status.   For example, a determination letter will be issued to reclassify an organization as a public charity or a private foundation.  An organization may also request a determination letter showing whether it is exempt from filing annual information returns in certain situations.

If an organization is unsure about whether a proposed change in its purposes or activities is consistent with its status as an exempt organization or as a public charity, it may want to request a private letter ruling. However, the IRS will not make any determination regarding any completed transaction.

 

2018-05-13T12:21:23-07:00June 18th, 2014|Legal Issues, Miscellaneous|0 Comments
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