In June 2011, the Internal Revenue Service (IRS) revealed that more than 275,000 tax-exempt organizations lost their exempt status under a provision of the Pension Protection Act of 2006. Those organizations lost their exempt status because they failed to file three consecutive annual information returns. At the same time, the IRS also provided guidance for those organizations seeking to reinstate their tax-exempt status, and provided a grace period through December 31, 2012, to apply.
To obtain retroactive reinstatement (i.e., reinstatement from the date exempt status was revoked for failure to file), an organization generally must:
- File an application for reinstatement via an exemption application (i.e., Form 1023, 1024) regardless of whether the organization was originally required to submit such an application (e.g., organizations that normally have annual gross receipts of not more than $5,000); and
- Show reasonable cause for its failure to file the required annual information returns.
To show reasonable cause, the applicant organization must provide information such as:
- A written statement setting forth all the facts supporting its claim for reasonable cause for failing to file, including steps taken to avoid or mitigate such failures;
- A written statement describing the safeguards the organization has put into place to prevent a failure to file in the future;
- Evidence substantiating the material aspects of such statements; and
- An original declaration dated and signed under penalty of perjury by an officer, director, trustee or other authorized official that such statements are true, correct and complete.
As the December 31 deadline looms, Bricker & Eckler LLP stands ready to assist. Our experienced nonprofit and tax attorneys can help your organization prepare and submit your application to ensure your tax-exempt status is retained and you are not subject to unnecessary IRS fees and fines.
To find out if your organization lost its tax-exempt status, visit the IRS’ Revocation List, which is updated monthly.