The IRS has announced that approximately 275,000 organizations have lost their exempt status due to their failure to file annual reports for three years. While most of these organizations may be defunct, the IRS also announced steps to help organizations that still exist to apply for reinstatement of their tax-exempt status. Organizations that seek to have their exempt status reinstated are required to complete an application and pay a user fee. Small organizations (those with gross receipts of less than $50,000 in 2010) may regain their exempt status as of the date of revocation by paying a reduced fee.
Rev. Proc. 2011-36
The IRS has issued a procedure that modifies section 6.07 of Rev. Proc. 2011-8, I.R.B. 2011-1, 237, to provide a reduced user fee for applications for reinstatement of tax-exempt status filed by certain small organizations following the automatic revocation of their tax-exempt status under Code Sec. 6033(j). The reduced user fee applies only to small organizations that normally have annual gross receipts of not more than $50,000 in their most recently completed tax year and are otherwise eligible for the transitional relief described in Notice 2011-43.
The transitional relief is available to small organizations that have lost their tax-exempt status for failing to file the required annual notices for tax years beginning in 2007, 2008 and 2009. The amount of the reduced user fee is $100 and is effective for applications that are postmarked no later than December 31, 2012. Rev. Proc. 2011-36 is effective June 9, 2011. Rev. Proc. 2011-8, I.R.B. 2011-1, 237, is modified.
The IRS has provided transitional relief in the form of retroactive reinstatement of tax-exempt status where a small exempt organization has had its exemption revoked for failure to file Form 990-N. A small exempt organization, one that normally has annual gross receipts not exceeding $50,000, is not required to file Form 990 like most exempt organizations. However, such an entity is required by Code Sec. 6033(i) to file Form 990-N, the e-Postcard.
The tax-exempt status of any organization that fails to file the required annual return or Form 990-N for three consecutive years is automatically revoked. To regain its exempt status, an organization that has had its exempt status revoked must apply for reinstatement, even if the organization was not originally required to apply for exemption. The organization must show reasonable cause for its consecutive filing failures. Small organizations that are eligible for the transitional relief are also eligible for a reduced user fee of $100 for the application of reinstatement of exempt status.
Under the transitional relief, the IRS will treat a small organization as having established reasonable cause for failing to file Form 990-N if it meets three criteria:
– The organization was not required to file an annual return (such as Form 990 or Form 990-EZ) for years beginning prior to 2007;
– The organization was eligible in each of its tax years beginning in 2007, 2008, and 2009 to file Form 990-N (e-Postcard); and
– On or before December 31, 2012, the organization submits to the IRS a properly completed and executed application for reinstatement of its exempt status.
Any organization meeting these criteria will have its exempt status reinstated retroactively to the date it was revoked. Automatic revocation can occur again if the organization fails to file Form 990-N for three more consecutive years.
An organization seeking reinstatement must apply using the appropriate application form filed by other applicants to obtain tax-exempt status, that is, either Form 1023 (for exemption under Code Sec. 501(c)(3)) or Form 1024 (for most other cases). A small organization seeking transitional relief must write “Notice 2011-43” on the top of the application form and must attach a statement as prescribed in the guidance.
Guidance has been issued on obtaining retroactive reinstatement of tax-exempt status where a tax-exempt organization has had its exemption revoked for failure to file annual information returns for three consecutive years. An exempt organization is required by Code Sec. 6033(a)(1) to file an annual information return, such as Form 990, Form 990-EZ, or Form 990-PF. Small organizations excepted from this requirement must file an e-Postcard, Form 990-N, in lieu of the annual information return.
To regain its exempt status after it has been revoked, the organization is required by Code Sec. 6033(j)(2) to apply for reinstatement, even if the organization was not originally required to apply for exemption. In order for reinstatement to be retroactive to the date of revocation, the organization must show reasonable cause for its consecutive filing failures. The guidance discusses the meaning of “reasonable cause” in this context.
An organization seeking reinstatement must apply using the appropriate application form filed by other applicants to obtain tax-exempt status, that is, either Form 1023 (for exemption under Code Sec. 501(c)(3)) or Form 1024 (for most other cases). The organization must also pay the appropriate user fee. The organization should write “automatically revoked” on the top of the application form and the envelope. Except in the case of small exempt organizations, an application for reinstatement must be made within 15 months of the later of the revocation letter or the posting of the organization’s name on the IRS’s revocation list.
An organization (other than a small organization) seeking to have its tax-exempt status reinstated retroactively must include, along with its application, a request for retroactive reinstatement. The request must include the following:
– A written statement with facts supporting its claim of reasonable cause for failing to file required returns or notices for three consecutive years;
– A written statement describing the safeguards the organization has implemented to ensure that there will be no future failures to file required returns;
– Evidence to substantiate all material aspects of the above statements;
– Properly completed and executed annual information returns for all years during and after the three-year period in which the organization failed to file required returns;
– Properly completed and executed Forms 990-EZ for all years during and after the three-year period that the organization was eligible to file Form 990-N but failed to file either that form or an annual return; and
– An original declaration as specified in the guidance.
The IRS and the Treasury Department are requesting comments on this guidance, which must be submitted by August 19, 2011.
The IRS will publish the list of organizations that have had their federal tax-exempt status automatically revoked for failing to file an annual return or notice for three consecutive years as required by Code Sec. 6033(j) on its website at http://www.irs.gov. The auto-revocation list will not appear in the Internal Revenue Bulletin.
Rev. Proc. 2011-36, 2011FED ¶46,383
Notice 2011-43, 2011FED ¶46,384
Notice 2011-44, 2011FED ¶46,385
Announcement 2011-35, 2011FED ¶46,386
Code Sec. 401
CCH Reference – 2011FED ¶17,507.042
CCH Reference – 2011FED ¶17,507.0425
CCH Reference – 2011FED ¶17,507.2531
Code Sec. 403
CCH Reference – 2011FED ¶18,282.41
Code Sec. 408
CCH Reference – 2011FED ¶18,922.0216
CCH Reference – 2011FED ¶18,922.0459
CCH Reference – 2011FED ¶18,922.116
CCH Reference – 2011FED ¶18,922.272
CCH Reference – 2011FED ¶18,922.40
CCH Reference – 2011FED ¶18,922.722
Code Sec. 408A
CCH Reference – 2011FED ¶18,930.19
Code Sec. 412
CCH Reference – 2011FED ¶19,125.465
Code Sec. 431
CCH Reference – 2011FED ¶20,181.0273
Code Sec. 501
CCH Reference – 2011FED ¶22,604.10
CCH Reference – 2011FED ¶22,660.10
Code Sec. 503
CCH Reference – 2011FED ¶22,683.87
Code Sec. 507
CCH Reference – 2011FED ¶22,780.15
Code Sec. 509
CCH Reference – 2011FED ¶22,812.026
CCH Reference – 2011FED ¶22,812.50
Code Sec. 511
CCH Reference – 2011FED ¶22,825.101
Code Sec. 521
CCH Reference – 2011FED ¶22,882.196
Code Sec. 4971
CCH Reference – 2011FED ¶34,324.021
CCH Reference – 2011FED ¶34,324.50
Code Sec. 6033
CCH Reference – 2011FED ¶35,425.068
CCH Reference – 2011FED ¶35,425.24
CCH Reference – 2011FED ¶35,425.25
CCH Reference – 2011FED ¶35,425.33
Statement of Procedural Rules Sec. 601.201
CCH Reference – 2011FED ¶43,360.031
CCH Reference – 2011FED ¶43,360.173
CCH Reference – 2011FED ¶43,360.205
Tax Research Consultant
CCH Reference – TRC RETIRE: 30,404.10
CCH Reference – TRC RETIRE: 51,050
CCH Reference – TRC RETIRE: 51,400
CCH Reference – TRC RETIRE: 63,056.10
CCH Reference – TRC RETIRE: 66,650
CCH Reference –
TRC IRS: 12,200
CCH Reference – TRC IRS: 12,200.60
CCH Reference – TRC IRS: 12,230.20
CCH Reference – TRC IRS: 12,230.25
CCH Reference –
TRC IRS: 12,302
CCH Reference – TRC EXEMPT: 12,054.20
CCH Reference – TRC EXEMPT: 12,056
CCH Reference – TRC EXEMPT: 12,102
CCH Reference – TRC EXEMPT: 12,102.05
CCH Reference – TRC EXEMPT: 12,252.10
CCH Reference – TRC EXEMPT: 12,252.15
CCH Reference – TRC EXEMPT: 18,156