IRS Provides Procedures to Regain Tax-Exempt Status Following Automatic Revocation

Applicable Sections:

26 CFR 1.6033-2. Returns by exempt organizations (taxable years beginning after December 31, 1969) and returns by certain nonexempt organizations (taxable years beginning after December 31, 1980).

SECTION 1. PURPOSE

.01 This revenue procedure provides procedures for reinstating the tax-exempt status of organizations that have had their tax-exempt status automatically revoked under section 6033(j)(1) of the Internal Revenue Code ("Code") for failure to file required Annual Returns or notices for three consecutive years.

.02 Streamlined Retroactive Reinstatement Process. An organization that was eligible to file either Form 990-EZ, Short Form Return Of Organization Exempt from Income Tax, or Form 990-N, e-Postcard, for each of the three consecutive years that it failed to file and that has not previously had its tax-exempt status automatically revoked may use the process described in SECTION 4 of this revenue procedure to apply for streamlined retroactive reinstatement of its tax-exempt status if it applies not later than 15 months after the later of the date of the Revocation Letter or the date on which the IRS posted the organization's name on the Revocation List.

.03 Retroactive Reinstatement Process (Within 15 Months of Revocation). An organization that is not eligible to use the streamlined process may use the process described in SECTION 5 of this revenue procedure to apply for retroactive reinstatement of its tax-exempt status if it applies not later than 15 months after the later of the date of the Revocation Letter or the date on which the IRS posted the organization's name on the Revocation List.

.04 Retroactive Reinstatement Process. If it has been more than 15 months from the later of the date of the Revocation Letter or the date on which the IRS posted the organization's name on the Revocation List, an organization may apply for retroactive reinstatement of its tax-exempt status only under the process described in SECTION 6 of this revenue procedure.

.05 Post-Mark Date Process. An organization may apply for reinstatement of its tax-exempt status effective from the Post-Mark Date at any time, regardless of whether it is eligible to use any of the three retroactive reinstatement processes described in SECTIONS 4 through 6 of this revenue procedure, by using the process described in SECTION 7 of this revenue procedure.

SECTION 2. DEFINITIONS

.01 For purposes of this revenue procedure --

.01 In general, section 6033(a)(1) requires an organization exempt from taxation under section 501(a) or a nonexempt charitable trust treated as a private foundation under section 4947(a)(1) to file an Annual Return. Most small organizations (other than private foundations or section 509(a)(3) supporting organizations) whose annual gross receipts are normally not more than $50,000 ($25,000 for taxable years beginning before January 1, 2010) are not required to file an Annual Return, but are required to file an annual notice, Form 990-N, instead. See I.R.C. § 6033(a)(3) and 6033(i); Rev. Proc. 2011-15, 2011-3 I.R.B. 322.

.02 Currently, an organization (other than a private foundation or supporting organization) may file Form 990-N if the organization normally has annual gross receipts of $50,000 or less. An organization may file Form 990-EZ if the organization has gross receipts of less than $200,000 and total assets of less than $500,000 at the end of the taxable year. However, these dollar thresholds are subject to change.

.03 The Pension Protection Act of 2006, Pub. L. No.109-280, 120 Stat. 780, § 1223 (2006) ("PPA"), added section 6033(j) to the Code, effective for taxable years beginning after 2006.

.04 Section 6033(j)(1) automatically revokes the tax-exempt status of any organization described in section 6033(a)(1) that fails to file a required Annual Return for three consecutive years or any organization described in section 6033(i) that fails to file an Annual Return or notice for three consecutive years. Revocation under section 6033(j)(1) is effective on and after the date set by the Secretary for the filing of the third Annual Return or notice.

.05 In accordance with section 6033(j)(1), the IRS updates the Revocation List monthly. The IRS also mails a letter to the last known address of each organization on the Revocation List to notify the organization that its tax-exempt status has been revoked under section 6033(j)(1).

.06 Section 6033(j)(2) provides that any organization that has had its tax-exempt status automatically revoked under section 6033(j)(1) must apply to the IRS in order to obtain reinstatement of its tax-exempt status, regardless of whether the organization was originally required to apply for recognition of its tax exemption. For example, if the tax-exempt status of a subordinate organization included in a group exemption letter is automatically revoked under section 6033(j)(1), the subordinate organization must apply for reinstatement of its tax-exempt status on its own behalf. If the Application is approved, the effective date of the organization's reinstated tax-exempt status generally will be the Post-Mark Date. However, section 6033(j)(3) provides that if, upon application for reinstatement, an organization "can show to the satisfaction of the Secretary evidence of reasonable cause for the failure described in [section 6033(j)(1) ], the organization's exempt status may, in the discretion of the Secretary, be reinstated effective from the date of the revocation."

.07 Section 6652 provides for penalties for failure to file certain information returns. Section 6652(c)(1)(A)(i) imposes a penalty for failure to file a return required under section 6033 on the date and in the manner prescribed by section 6033. Section 6652(c)(1)(E) provides that the penalty does not apply to the notice required under section 6033(i) (Form 990-N).

SECTION 4. STREAMLINED RETROACTIVE REINSTATEMENT OF TAX-EXEMPT STATUS FOR SMALL ORGANIZATIONS WITHIN 15 MONTHS OF REVOCATION.

.01 An organization that was eligible to file either Form 990-EZ or 990-N for each of the three consecutive years that it failed to file, and that has not previously had its tax-exempt status automatically revoked pursuant to section 6033(j), may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does both of the following:

.03 The Service will not impose the penalty under section 6652(c) for failure to file Annual Returns for the three consecutive taxable years for which the organization was required, but failed, to file Form 990-EZ, if the organization that is retroactively reinstated under this SECTION 4, files properly completed and executed paper Forms 990-EZ for all such taxable years. For any year for which the organization was eligible to file a Form 990-N, the organization is not required to file a prior year Form 990-N or Form 990-EZ for such year. The Forms 990-EZ must be mailed to the following address:

SECTION 5. RETROACTIVE REINSTATEMENT OF TAX-EXEMPT STATUS WITHIN 15 MONTHS OF REVOCATION.

.01 An organization that is not eligible to apply under SECTION 4 of this revenue procedure may apply to have its tax-exempt status retroactively reinstated effective from the Revocation Date if it does all of the following:

SECTION 6. RETROACTIVE REINSTATEMENT MORE THAN 15 MONTHS AFTER REVOCATION

.01 An organization that applies for reinstatement of its tax-exempt status more than 15 months from the later of the date of the Revocation Letter or the date on which the IRS posted the organization's name on the Revocation List may have its tax-exempt status retroactively reinstated effective from the Revocation Date only if it satisfies all the requirements of SECTION 5.01 of this revenue procedure, except that it must provide the Reasonable Cause Statement described in SECTION 8.02 of this revenue procedure (in place of the one described in SECTION 8.01) for the requirement described in SECTION 5.01(3).

.02 The Service will not impose the penalty under section 6652(c) for the failure to file Annual Returns for the three consecutive taxable years for which the organization was required, but failed, to file Annual Returns, if the organization's Application is approved, it satisfies all the requirements of SECTION 6.01 of this revenue procedure, and the organization is retroactively reinstated effective from the Revocation Date. The organization should write "Retroactive Reinstatement" on the Annual Returns.

SECTION 7. REINSTATEMENT OF TAX-EXEMPT STATUS FROM POST-MARK DATE

.01 An organization may apply for reinstatement of its tax-exempt status effective from the Post-Mark Date by completing and submitting the appropriate Application to the address provided in the instructions to the Application and including the appropriate user fee with the Application. To facilitate processing, the organization should write "Revenue Procedure 2014-11, Reinstatement Post-Mark Date" on the top of the Application.

SECTION 8. REASONABLE CAUSE STATEMENT

.01 To be retroactively reinstated under SECTION 5 of this revenue procedure, an organization must establish reasonable cause with respect to its failure to file a required Annual Return or notice for at least one of the three consecutive years in which it failed to file.

.02 To be retroactively reinstated under SECTION 6 of this revenue procedure, an organization must establish reasonable cause with respect to its failure to file a required Annual Return or notice for all three years that it failed to file such Annual Returns or notice.

.03 To establish reasonable cause under this section of this revenue procedure, an organization must establish that it exercised ordinary business care and prudence in determining and attempting to comply with its reporting requirements under section 6033. In determining whether the organization establishes reasonable cause, the IRS will take into account all pertinent facts and circumstances.

.04 The Reasonable Cause Statement under paragraph .01 or .02 must provide all of the facts that support a claim for reasonable cause for failing to file a required Annual Return or notice for the relevant tax year or period, including a detailed description of all the facts and circumstances that led to the failure, the discovery of the failure, and the steps that have been or will be taken to avoid or mitigate future failures.

.05 The following factors would weigh in favor of finding reasonable cause (with no single factor being either necessary or determinative):

.01 An organization whose tax-exempt status has been automatically revoked and reinstated may have its tax-exempt status automatically revoked again under section 6033(j)(1) if it fails to file required Annual Returns or notices for another three consecutive taxable year period beginning with the taxable year in which the IRS approves its application for reinstatement of tax-exempt status. For example, if an organization reporting on a calendar year basis has its tax-exempt status automatically revoked for failing to file required Annual Returns or notices for 2009, 2010, and 2011 and receives a determination letter dated September 1, 2013, reinstating its tax-exempt status, the organization must file an Annual Return or notice for 2013, 2014, and 2015 by the due date of the 2015 Annual Return or notice to avoid having its tax-exempt status automatically revoked again. An organization seeking reinstatement of its tax-exempt status as a result of a subsequent revocation may apply for reinstatement of its tax-exempt status under SECTION 5, SECTION 6, or SECTION 7 of this revenue procedure by following the applicable requirements.

SECTION 10. EFFECTIVE DATE

.01 In general. This revenue procedure is effective for Applications submitted after January 2, 2014.

.02 Transition Relief --

Notice 2011-44, 2011-25 I.R.B. 883, is modified and superseded.

SECTION 12. PAPERWORK REDUCTION ACT

The collection of information contained in this revenue procedure has been submitted to the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and approved under OMB control number 1545-2206. The collection of information in this revenue procedure is in SECTIONS 5 and 6. In order to have its tax-exempt status retroactively reinstated under section 6033(j)(3), an organization must show to the satisfaction of the IRS evidence that it exercised ordinary business care and prudence in determining and attempting to comply with its reporting obligations under section 6033 for one or more of the three years that it failed to meet such requirements. This information is necessary for inspection by the IRS in determining whether reasonable cause exists. The collection of information is required to meet the reasonable cause standard under section 6033(j)(3). The likely respondents providing the information required in SECTIONS 5 and 6 of this revenue procedure are tax-exempt organizations that have had their tax-exempt statuses automatically revoked under section 6033(j)(1), have applied for reinstatement of such status under section 6033(j)(2), and are requesting that the reinstatement be made retroactive to the date of revocation under section 6033(j)(3).

Estimated total annual reporting burden: 6,206 hours.

Estimated average annual burden per respondent: 1 hour.

Estimated number of respondents over the next three years: 18,618.

Additional collection of information is proposed in SECTIONS 4, 5, 6, and 7 of this revenue procedure, which will be reported and approved through Forms 1023 and 1024 (OMB approval numbers 1545-0056 and 1545-0057, respectively). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

SECTION 13. FOR FURTHER INFORMATION CONTACT:

For additional information, please contact Timothy Berger at 202-317-8533 or Melinda Williams at 202-317-8532. These are not toll free numbers.