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IRS Releases Guidance for Tax Exemption Reinstatement

As you are likely aware, the IRS finally released its long-delayed Nonfiler Revocation List last week.  On it were the names of 275,000 nonprofits that had their 501(c) status revoked (see previous post).  There has been some confusion and some mistakes, as would be expected with anything that impacts up to 20% of all tax-exempt organizations, but by and large, it appears the time the IRS took to get it right may have resulted in just that.

So, now what?  The IRS has issued guidance for those organizations who lost status in the form of 2 Revenue Procedures, 2 official Notices and 1 announcement.  For your reading (and possibly reinstatement) pleasure, here they are (in summary…click on the link for the full text):

Revenue Procedure 2011-33 provides the extent to which contributors may rely on Publication 78 or on the IRS Business Master File extract for purposes of deducting contributions and making grants.  IRS may give notice of revocation in the IRB or on the IRS’s website.  IRS no longer publishes a paper version of Publication 78.

Revenue Procedure-2011-36 modifies section 6.07 of Rev. Proc. 2011-8, 2011-1 I.R.B. 237, to provide for a reduced user fee for applications for reinstatement of tax-exempt status filed by certain small organizations following automatic revocation of their tax-exempt status under section 6033(j) of the Internal Revenue Code.

Notice 2011-43 provides transitional relief for certain small organizations (those that normally have annual gross receipts of not more than $50,000 in their most recently completed taxable year) that have been automatically revoked because they failed to file an annual electronic notice for taxable years beginning in 2007, 2008 and 2009.   The notice provides the criteria that a small organization must satisfy to qualify for the transitional relief and describes how qualifying organizations apply for reinstatement of tax-exempt status and request retroactive reinstatement.

Notice 2011-44 explains how an organization that has had its tax-exempt status automatically revoked for failing to file an annual return or notice for three consecutive years may apply for reinstatement of tax-exempt status and request reinstatement retroactive to the date of automatic revocation.

Announcement 2011-35 indicates that the IRS is required to publish and maintain a list of organizations that have had their federal tax-exempt statuses automatically revoked for failing to file an annual return or notice for three consecutive years.  The IRS will publish this auto-revocation list on its website, however, the auto-revocation list will not appear in the Internal Revenue Bulletin.

We will continue to provide updates to this situation as we become aware of them.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

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