Automatic Revocation of 501(c)(3)
Has the IRS revoked your tax-exempt status? We know this can be a stressful situation, do not worry; we can help you through it. At BryteBridge Nonprofit Solutions, we have helped thousands of Nonprofits get reinstated, and over 30,000 receive their 501(c)(3) tax exemption status.
About a half a million tax-exempt entities have had their 501 statuses revoked due to failure to file their tax form 990s for three consecutive years. The procedure to reinstate this status is different based on the organization’s unique circumstances, including what states they are in.
Understanding 501(c)3 Reinstatement and Automatic Revocation
If a 501(c)(3) organization has not filed its annual tax returns for 3 consecutive years, they risk losing their tax-exempt status with the IRS. In fact, the IRS will automatically revoke the status for non-compliance. This is often referred to as auto-revocation. If the organization wishes to be reinstated with the IRS as a 501(c)(3) tax-exempt organization, it must file an updated application for exemption and pay the appropriate fees.
Your 501(c)(3) Status Reinstated
To get your organization reinstated, it must reapply for 501(c)(3) tax exempt status with a new 1023 form and filing fee, and back file all missing tax returns since tax exempt status was revoked.
There are four ways to be reinstated:
- Streamlined Retroactive Reinstatement
- Retroactive Reinstatement (within 15 months of revocation)
- Retroactive Reinstatement (over 15 months past revocation)
- Post-mark Date Reinstatement
If the IRS determines the organization has fulfilled all compliance requirements to meet the tax-exempt status again, they will issue a new 501(c)(3) determination letter. Your donors and others may rely upon the new IRS determination letter as of its stated effective.
How can BryteBridge Nonprofit Solutions help toward your reinstatement?
- A dedicated Nonprofit Specialist will assess your organization’s tax-exemption revocation impacts at a state and federal level.
- Together we will review and discuss your current situation.
- Provide expert advice and a plan of action to regain status.
- Prepare your reinstatement documents to regain your 501(c)(3) status.
- Prepare and file past tax 990 forms by mail
- Prepare all state documents to ensure compliance with your state(s).
- We will present your case to the IRS and answer any questions on your behalf.
- We address any remaining compliance concerns.
Did you know?
If your organization lost the tax-exempt status, it will be placed on their automatic revocation list. The automatic revocation list is an IRS official record of organizations whose tax-exempt status has been automatically revoked for failing to file a required return or notice for three consecutive years. For organizations that applied for and received reinstatement, the list gives the date of reinstatement.
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Frequently asked Questions
The new tax-exempt status is granted as of the day the old tax exemption was revoked so that there is no lapse in tax exemption.
We recommend they seek retroactive reinstatement to ensure they do not have a past tax liability.
If you have earned income and do not get retroactive reinstatement, then they are considered taxable during the lapse. Contributions received during the lapse are also not tax-deductible for your donors.
Per the IRS, a Nonprofit organization must apply to have its tax-exempt status reinstated.
Steps to getting reinstated:
- Apply for recognition of tax exemption by filing Form 1023 or Form 1023-EZ, as applicable.
- Complete updated tax returns to submit with the 1023 application.
- Pay the appropriate user fee for the IRS 1023 application through pay.gov.
To avoid late filing penalties, you should file completed tax forms 990-EZ for all missed years
- Your nonprofit is no longer considered charitable.
- Donations to your nonprofit are no longer tax-deductible to the donor.
- You may lose donors.
- Your nonprofit will now be taxed and treated as a for-profit company.
- May risk penalties and unnecessary fees to be reinstated.
Yes. The Automatic Revocation List is an IRS official record of organizations whose tax-exempt status has been automatically revoked for failing to file a required return or notice for three consecutive years. For organizations that applied for and received reinstatement, the list gives the date of reinstatement.
Just as individual taxpayers and for-profit corporations must file annual tax returns, so must nonprofits. To prevent being revoked, you must file your annual tax returns or 990s.
Yes, there is a streamlined retroactive option for nonprofits less than 15 months old. To be eligible for the streamlined reinstatement process, you must meet the following criteria.
- It is your first automatic revocation.
- Your nonprofit is less than 15 months old.
- Your annual operating income is less than 50k annually.
- 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.