Special Tax Exempt Reinstatement Program

Under the Pension Protection Act of 2006, all tax exempt organizations have to file an annual information return with the IRS. (Previously, a return was only required if the organization had gross income of $25,000 for the year.) For 2011, organizations with a gross income under $50,000 a year just needed to file the 990-N (electronic postcard.) Everyone else files one of the other 990 returns. If any group doesn’t file a return for 3 consecutive years, the IRS will pull their tax exempt status.

Until the end of the year, the IRS will allow small organizations who have lost their tax exempt status for failing to file for 2007, 2008 and 2009 tax years to apply for reinstatement under special criteria:

• The organization wasn’t required to file a form 990 prior to 2007.
• In 2007, 2008 and 2009, their gross income was less than $25,000 and they qualified to use the 990-N electronic postcard.
• Finally, the organization applies for reinstatement before the end of the year (12/31/12).

An organization wishing to take advantage of the program needs to file either Form 1023 (for 501(c)(3) status) or Form 1024 (everyone else) by Dec. 31, 2012. Notice 2011-43 should be written on the top of the 1023/1024 and on the envelope used to mail the application. They will also need to include a special statement with the request. The statement is included in Notice 2011-43. The organization will also qualify for a reduced application fee of $100 which should be included with the paperwork. If they qualify for reinstatement, the group will be issued a new determination letter.

The tax exempt status of an organization that qualifies for reinstatement under this program will be retroactively reinstated to the date it was revoked. The date of the new determination letter also restarts the 3 consecutive year requirement for filing returns. For example, an organization that lost their tax exempt status for not filing 2007, 2008 and 2009 gets it reinstated on August 1, 2012 won’t have to worry about losing their status again for not filing 2008, 2009 and 2010 (3 consecutive years.) But if they don’t file for 2012, 2013 and 2014 they would again lose their status. If an organization doesn’t take advantage of this program and applies later they will have to pay the full fee and show reasonable cause why they didn’t file the missing years.

All the detail of the program are in Notice 2011-43.

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