How to Regain a Charitable Exemption

Provisions of the Pension Protection Act

By Children’s Home Society of Florida Foundation

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Under provisions of the Pension Protection Act and other statutes, charities that failed to file the required IRS Form 990, Form 990EZ or Form 990-N for three years have lost exempt status. Most organizations impacted by this rule failed to file for years 2007, 2008 and 2009.

Smaller Organizations

Because many smaller organizations did not file the required Form 990-N ePostcard, their exemptions were automatically revoked. As a result of the large number of revocations, the IRS published guidance on methods to reinstate charitable exempt status.

Larger Organizations

Some larger organizations with receipts over $50,000 in 2010 failed to file IRS Form 990 or 990EZ. Rev. Notice 2011-44 explains the steps these organizations must take for reinstatement. The organizations are required to file IRS Form 1023, “Application for Recognition of Exemption Under Sec. 501(c)(c) of the Internal Revenue Code.” If there is a request for a retroactive reinstatement, reinstatement is available by showing reasonable cause for failure to file a return. However, this reasonable cause must exist for all three years of the failure to file.

A reinstatement request is permitted within 15 months after the publication of an IRS revocation letter or the date the IRS posts the organization name on the IRS website.

Lost Exempt Status

For small organizations that have lost exempt status, the requirements are specified in Notice 2011-43. These small organizations typically failed to file Form 990-N ePostcards for years 2007, 2008 and 2009. The small organization also must submit IRS Form 1023. A small organization must write “Notice 2011-43” on the top of the form. The small organization is permitted a reduced user fee of $100 for the application for reinstatement of its tax exemption.

Assessment

The IRS also published Rev. Proc. 2011-36 to specify the $100 reduced fee for small organizations. In addition, it published frequently asked questions (FAQ) on automatic revocation and reinstatement procedures on www.irs.gov.

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