Friday, May 18, 2012

Reminder: Small Organization Transitional Relief - Only Until December 31, 2012

The number of tax-exempt organizations that have had their exempt status automatically revoked by the IRS since May 15, 2010 because they failed to file required annual information returns (Form 990, 990-EZ, or 990-N) is now approaching nearly 440,000(!).  While many (most?) of these organizations have been dead for a long time, there are many organizations that are not dead yet, and who will want to have their exempt status reinstated. The burden is now on those organizations either to show that the revocation was a mistake, or to file an application for reinstatement.

As noted previously on the Exempt Organizations Blog, the IRS has put in place certain procedures whereby tax-exempt organizations that have had their exempt status can apply for reinstatement of tax-exempt status and request retroactive reinstatement. For small organizations, in particular, Notice 2011-43 and Rev. Proc. 2011-36 provide "transitional relief" in the form of a reduced filing fee of $100 and a lesser burden for showing reasonable cause for filing failure, thereby allowing reinstatement back to the date of revocation. In order to qualify for small organization transitional relief under Notice 2011-43/Rev. Proc. 2011-36, an organization must:
  • Not have been required to file Form 990 or 990-EZ for tax years beginning before 2007
  • Been eligible to file Form 990-N for 2007, 2008, and 2009
  • Submit its application for reinstatement for exempt status by December 31, 2012.
Although December is months away yet, the time required to prepare and submit a Form 1023 or 1024 application is fairly substantial. There is no "short" Form 1023/1024 and the amount of financial and other information required to complete these applications is significant. Now is the time for small organizations to submit applications under the transitional relief provisions. As Benjamin Franklin said, "You may delay, but time will not." And neither will the IRS.