Not-for-Profit Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.

How to Regain Tax-Exempt Status after Automatic Revocations

If your organization neglects to file the required annual forms with the IRS for three consecutive years, you will lose your tax-exempt status. Loss of your tax-exempt status will likely mean loss of donors, so it is imperative that you take action to reinstate your status immediately. Use the steps we’ve outlined below to reclaim your nonprofit designation.

Submitting the Correct Form

Tax FormAssuming you lost your exempt status due to one of these automatic revocations, you can regain your status by filing:

  • Form 1023,“Application for Recognition of Exemption Under Section 501(c)(3),” or
  • Form 1024,“Application for Recognition of Exemption Under Section 501(a).”

Unless you apply for retroactive reinstatement, all of your organization’s activities between the revocation and the reinstatement date will be considered taxable. As a result, all contributions made during that period won’t be deductible by donors.

To qualify for retroactive reinstatement, you must file the applicable form within 15 months or the later of the date of 1) the IRS revocation letter, or 2) the date the IRS posted your organization’s name on its website. You can begin this process the same date of the automatic revocation.

Document Evidence

When you file the form, you must attach the following five items:

  1. A detailed statement that provides reasonable cause for failing to file required returns in each of the three consecutive years. It should state the facts that led to each failure and the continual failure, discovery of the failures and steps taken to avoid or mitigate them.
  2. A statement that describes safeguards put in place and steps taken to avoid future failures.
  3. Evidence to support all material aspects of those two statements.
  4. Properly completed and executed paper tax returns for all taxable years during and after the three-year period your organization failed to file.
  5. An original declaration dated and signed by an authorized person such as an officer or director. (See IRS Notice 2011-44 for the required wording.)

Writing “AUTOMATICALLY REVOKED” on the top of the form and envelope of your application could expedite the process. Be sure to include the specified fee.

Don’t Delay

As mentioned, without your tax-exempt status, you’re likely to lose donations and other funding. So make reinstatement a top priority. The tax professionals in our Not-For-Profit Group can help. Contact us today.