The Internal Revenue Service (IRS) has issued a new Revenue Procedure, Rev. Proc. 2014-11, which explains the four reinstatement procedures available to an organization that has had its tax-exempt status automatically revoked.
Organizations that are exempt from taxation are required to file annual information returns (or notices, if annual gross receipts are less than $50,000). If an organization fails to file its required return or notice for three consecutive years, then the IRS [under Section 6033(j)(1) of the Internal Revenue Code of 1986, as amended (Code)] automatically revokes the tax-exempt status of the organization. Revenue Procedure 2014-11, available by clicking here, explains the four possible methods for reinstating an organization's tax-exempt status.
Each of the four procedures requires:
- Completion and submission of Form 1023 or Form 1024 to the IRS at P.O. Box 12192, Covington, KY 41012-0192; and
- Submission of the appropriate user fee ($850; or $400 for organizations whose gross receipts do not exceed $10,000 annually).
The four procedures are identified and summarized below.
For more detail regarding reinstatement of tax-exempt status, see the IRS's website explaining Automatic Revocation – How to Have Your Tax-Exempt Status Retroactively Reinstated.
If you have questions regarding reinstatement of tax-exempt status after revocation or any other matter concerning tax-exempt organizations, please contact a Faegre Baker Daniels attorney in the exempt organizations group.
1. Streamlined Retroactive Reinstatement
- Organization cannot have previously had its tax-exempt status revoked.
- Organization must have been eligible to file Form 990-EZ or Form 990-N.
- Organization must submit a new exemption application not later than 15 months after the later of the date of the revocation or the date on which the IRS posted the organization's name on the Revocation List.
- Write "Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement" on the top of the application.
- Include the required user fee (currently $850 for most organizations).
- Organization must file the missing Forms 990-EZ for every year required in order to avoid failure-to-file penalties.
2. Reinstatement Process (Within 15 Months)
- Available to organizations that are not eligible for the streamlined process described above.
- Organization must submit its new exemption application not later than 15 months after the later of the date of the revocation or the date on which the IRS posted the organization's name on the Revocation List.
- Write "Revenue Procedure 2014-11, Retroactive Reinstatement" on the top of the Application.
- Include the required user fee.
- Organization must submit a Reasonable Cause Statement for at least one of the three consecutive years it failed to file a return.
- The Reasonable Cause Statement must establish that the organization "exercised ordinary business care and prudence in determining and attempting to comply with its reporting requirements," and it must include a detailed description of all the facts and circumstances that led to the failure to file, the discovery of the failure, and the steps that have been or will be taken to avoid future failures.
- Organization must file the missing returns for every year required and include a statement confirming this in its exemption application.
- IRS will not impose penalties for failing to file annual returns if the application is approved.
- "Retroactive Reinstatement" must be written on the returns.
3. Retroactive Reinstatement (More than 15 Months after Revocation)
- Organization must comply with all of the requirements in Section II above, except that:
- The exemption application may be submitted later than 15 months after the revocation.
- Organization must submit a Reasonable Cause Statement for all three years in which it failed to file returns.
4. "Post-Mark Date" Reinstatement
- This procedure only reinstates the tax-exempt status back to the post-mark date of the new exemption application, and the IRS does not explicitly state that it will waive penalties for failing to file annual returns.
- The only actions the organization must complete are those two that are required for all four procedures.
- Write "Revenue Procedure 2014-11, Reinstatement Post-Mark Date" on the top of the exemption application. Include the required user fee.
All returns must be mailed to Department of Treasury, Internal Revenue Service Center, Ogden, UT 84201-0027, with "Retroactive Reinstatement" written on the returns.