Federal law mandates that most tax-exempt organizations file annual returns with the Internal Revenue Service (IRS). Following the enactment of the Pension Protection Act of 2006, and commencing in the 2007 tax year, tax-exempt organizations which fail to file requisite annual returns for three consecutive years are subject to automatic revocation of their tax-exempt status as of the due date of the third filing. Among other consequences, auto-revocation causes tax-exempt organizations to be ineligible to accept tax-deductible contributions and places once exempt organizations onto the IRS’s publicly available Auto-Revocation List.

With the expiration of the 2009 tax year, the effects of the implementation of auto-revocation became visible. Repeat non-filing organizations scrambled to determine options for reinstatement and to ascertain whether retroactive reinstatement was viable. In response, the IRS implemented IRS Notice 2011-43, which established temporary procedures for auto-revoked organizations to seek reinstatement. To the unpleasant surprise of many, the process was an onerous one which required not only reapplication for exempt status, but formal requests for reinstatement, statements of the facts and circumstances setting forth the reasonable cause for the failure to file, submissions of all then due annual returns, written statements describing safeguards instituted to ensure organizations would not fail to file its annual returns going forward, and all evidence supporting requisite certifications. The process was bungling and inefficient.

In 2014, the IRS adopted Revenue Procedure 2014-11, which attempts to streamline the process by which auto-revoked organizations may apply for retroactive reinstatement of their tax-exempt statuses. To learn more about the change, read business attorney Ben Rackliffe’s informative advisory that outlines the steps nonprofits can follow if their tax-exempt status has been revoked due to failing to file annual returns for three consecutive years. Entitled Automatic Revocation of Tax-Exempt Status: A New Streamlined Process for Retroactive Reinstatement, the essay describes the application process, allowable timeframe to request reinstatement, the required documentation and more. For more information, contact Attorney Rackliffe at 401-824-5100. We welcome your comments, questions and suggestions.

Source: Automatic Revocation of Tax-Exempt Status: A New Streamlined Process for Retroactive Reinstatement