Responding to Loss of Tax Exempt Status: Automatic Revocation and For-Cause Termination

Nonprofit exempt organizations can lose their tax exempt status due to failure to file required information returns for three consecutive years. These terminations, required by operation of law with no prior exceptions, are referred to as “automatic revocations.” While the IRS sends notification of the status revocation via Notice CP120A, an exempt organization may be unaware of the loss of exempt status, leading to potentially serious consequences.

Tax exempt organization officers and advisers must proactively monitor the nonprofit entity’s exempt status. However, in cases of a revocation of federal tax exemption, particularly when the revocation is due to failure to make required filings, the IRS has established procedures for reinstatement, including retroactive restoration of exempt status.

Tax advisers serving nonprofits must have a thorough understanding of the steps to request reinstatement of an organization’s exempt status, as well as the critical steps for the organization during the time the exempt status is lapsed.

During the period of revocation, donors to the organization may not claim a tax deduction for any contribution made to the nonprofit. Also, many states tie their treatment of nonprofits to the organization’s federal tax exempt status. Nonprofits must be aware of their state’s notice requirements in case of revocation and reinstatement of tax exempt status.

Listen as our experienced panel provides a thorough and practical guide to responding to revocation of tax exempt status, including reinstatement procedures and notification requirements to state and local authorities and donors.

1. Most common causes of loss of tax exempt status
   1. Impact of revocation and actions needed during lapse period
   2. Verifying state status as nonprofit corporation
   3. Notifying donors of loss of exempt status
   4. Additional tax filing requirements
2. Impact on private foundation donors
3. Automatic revocation
4. Categories of automatically revoked exempt organizations
5. Rev. Proc. 2014-11
6. Requesting reinstatement
7. Retroactive reinstatement and streamlined procedures
8. Challenging “for cause” revocation

The panel will discuss these and other important topics:

• IRS resources to verify that an exempt organization’s 501(c)(3) status has not been revoked
• Grounds for automatic revocation of tax exempt status
• How to claim retroactive reinstatement of exempt status
• Challenging loss of tax exempt status for reasons other than automatic revocation due to non-filing
• What an exempt organization must do upon notification of loss of exempt status

Learning Objectives

After completing this course, you will be able to:

• Identify processes for verifying that nonprofit organization’s exempt status is current or discovering lapse or automatic revocation
• Determine what relief is available for reinstatement of exempt status based on size and type of organization
• Discern what notification and other steps a 501(c)(3) organization must take during the period between revocation and reinstatement of exempt status
• Ascertain when an organization should request a retroactive reinstatement of exempt status
• Recognize steps to take when exempt status is revoked due to reasons other than an automatic revocation for failure to file required returns

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of exempt organization filing requirements and rules for maintaining tax exempt status

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).