I recently wrote about organizations losing their nonprofit status. I’m following up with some more information on how to restore it. If your organizations tax exempt status was automatically revoked, you must apply to have its nonprofit status reinstated. This rule applies to an organization even if they weren’t originally required to file an application for exemption. The IRS determines if the organization meets certain requirements for tax-exempt status. The IRS will issue your organization a new determination letter. Your reinstated organization should appear in the next update of the Exempt Organizations. Let’s see how we can get back to that nonprofit exempt status.
If you had a nonprofit organization that was eligible to file either Form 990–EZ or 990–N for each of the three consecutive years that it failed to file, and had not previously had its tax-exempt status automatically revoked. You can apply to have the tax-exempt status retroactively reinstated effective from the Revocation Date.
Complete and submit Form 1023 Application for recognition of exemption under section 501 (C)(3), 1023 EZ, or Form 1024 Application for recognition of exemption under section 501 (a). The application should be completed before the 15 months after the date of the Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List, whichever is later. On the top of the form write “Revenue Procedure 2014–11, Streamlined Retroactive Reinstatement”. Ensure you mail it to the proper location. IRS has a ton of addresses and PO Boxes. Wrong addresses can extend an already long wait. If you are not sure check Irs.gov before mailing it off.
Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192
Finally Include the appropriate user fee along with the Application. You have to pay the same application fees you did when you first filed for the tax exempt organization. The IRS has a user fee chart have the amount you need to pay. Expect to pay at least $400-$850.
Under Section 4 of Revenue Procedure 2016-11 you must demonstrate reasonable cause by attesting that the organization’s failure to file was not intentional and that your organization now has procedures in place to file in the future. After such date, reasonable cause may be demonstrated through that attestation. The organization can avoid the IRS penalty under section 6652(c) for failure to file Annual Returns for three consecutive taxable years. Look at the chart below to see the amounts you could be penalized for. It is also a penalty for the managers in charge of filing as well.
|Scenario||Daily Penalty||Maximum Penalty|
|Organization (§ 6652(c)(1)(A))||$20||Lessor of $10,000 or 5% of gross receipts of the organization for the year.|
|Organization with gross receipts exceeding $1,015,500 (§ 6652(c)(1)(A))||$100||$50,500|
|Managers (§ 6652(c)(1)(B))||$10||$5,000|
If you can be retroactively reinstated under Section 4 it’s a good idea. Your organization must still file properly completed Forms 990–EZ for all the past taxable years. The organization should write “Retroactive Reinstatement” on the Forms 990–EZ. Any year the the organization was eligible to file a Form 990–N, your organization is not required to file a prior year Form 990–N or Form 990–EZ for that year. The prior year returns are sent to a different IRS address than the application. This is the address provided on the IRS website. If you are not sure check Irs.gov before mailing it off.
Department of Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027