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Tax-Exempt Status Revoked? (Part 2 of 2)

An automatically revoked nonprofit corporation exemption status can be reinstated. The IRS has principally three categories of reinstatement: Streamlined Retroactive Reinstatement, Retroactive Reinstatement Process within 15 months and Retroactive Reinstatement after 15 months. Reminder: any donations accepted during the reinstatement period are not deductible for the donor nor tax exempt for the nonprofit corporation.

Streamline Retroactive Reinstatement requires (i) that the tax exempt status has not been previously revoked, (ii) that all required tax returns have been filed within 15 months from the date of the revocation letter or the date the nonprofit corporation appeared on the IRS Revocation List and (iii) all fees to the IRS are paid.

Retroactive Reinstatement within 15 months applies when a nonprofit corporation does not qualify for the Streamline program. The general requirements are (i) file all past due tax returns, (ii) file an exemption application with the IRS, including (iii) a statement of "reasonable cause for failure to file returns", (iv) a statement that the past due returns were filed before the post mark on the application for exemption, and (v) pay all fees to the IRS.

Retroactive Reinstatement after 15 months requires all the items listed under the within 15 months application plus additional requirements related to the reasonable cause for failure to file the tax returns.

A reasonable cause statement "establishes that an organization exercised ordinary business care and prudence in determining and attempting to comply with its annual reporting requirements. The statement needs to be specific and detailed establishing the basis for failure to file the tax returns.

Ariel Bedell is an experienced attorney at The Loftin Firm. For questions relating to this blog or any other California nonprofit compliance, real estate, corporate governance, land use, or estate planning matter, contact Ms. Bedell at (760) 814-9649. 

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