The IRS List Is Out, And You Want to Get Off It

Please Pay Here by stevendepolo from Flickr
The Internal Revenue Service released its list of 275,000 organizations that have lost federal tax-exempt status because they failed to file with the Service for three consecutive years.

The Chronicle of Philanthropy reported it yesterday. The New York Times reports it today.

I’d like to go deeper. What do you do to get tax-exempt status back if you’re listed and still operating?

Start on the IRS website.

Small Organizations
You’ll get preferential treatment if your organization “normally has annual gross receipts of not more than $50,000 in its most recently completed taxable year.” That’s from Notice 2011-43 which will guide you through the reinstatement process. If you fit that criteria, you’re a “small organization” for purposes of reinstating tax-exempt status.

If a small organization submits an application for reinstatement (Form 1023 for 501(c)(3) charities; Form 1024 for others) by December 31 of next year, and meets the criteria on page 3 of Notice 2011-43, IRS will reinstate tax-exempt status retroactive to the date of revocation.

As if that weren’t enough. Small organizations get a substantially reduced fee of $100, down from $850 for others. That’s an 88% discount. Where you gonna find that kind of bargain?

Plus, there are three phone numbers at the bottom of the notice for “further information.” I wonder how many calls Ms. Rosenbaum and Messrs. Quesenberry and Giuliano will get this week. (It’s nice to see an italian in the bunch.)

Be sure to write “Notice 2011-43” on top of your application and on your envelope.

Non-small Organizations
Your guidance is in Notice 2011-44 and the news isn’t as good as the small folks’.

You submit Form 1023 or 1024, but the standard for award of retroactive reinstatement is more stringent. It includes “a detailed description of all the facts and circumstances that led to each failure and the continuous failure [to file annually], the discovery of the failures, and the steps taken to avoid or mitigate the failures” along with evidence to substantiate.

I love this, too. Government can be burdensome when it puts a mind to it: “. . . showing reasonable cause for failing to file a required return or notice for the first of the three years by the date it was due would be insufficient; an organization also would have to show reasonable cause for not filing that return or notice at any later time during the three-year period, and for not filing required returns or notices for the second and third years . . .” (Notice 2011-44, page 8). Again, that’s the standard for retroactive reinstatement, not for regaining current tax-exempt status.

As if that weren’t enough: you’ll pay the full $850 application fee.

But, you get the same three nice people to call.

This post is not legal advice. Do not construe it as legal advice. Seek the counsel of an attorney. This is my interpretation of IRS methodology without the benefit of technical explanations, court opinions, revenue procedures and other official guidance.

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