Ask the Nonprofit Specialists

Title

We Have Lost Our Tax-Exempt Status - What Do We Do?

What is going on?

The IRS has begun to revoke the tax-exempt status for those nonprofit organizations that have not filed some form of a 990 (information report) for three years. Guidestar estimates that 350,000 to 400,000 nonprofits are in danger of losing their exemptions. A large number of these organizations are smaller nonprofits that previously were not required to file an annual return because their gross revenues were $25,000 or less. If your organization has not filed any of the 990 forms for three years, it is likely you will soon receive a revocation notice. For a more complete explanation of the 990, click here.

How will I know if my organization has lost its tax-exempt status?

You will receive a notice from the IRS in the form of a letter, Notice CP120A.  A copy of this notice is posted on the IRS website.

What do we do if we did not file a 990 for three years, and we have had no communication from the IRS?

It is likely that you have not received the notification because the address on record has changed for your organization and they can't "find" you. We recommend contacting the IRS at www.irs.gov and doing a search for your organization.

Click here and type in your corporate name and location. The IRS takes liberal opportunities to change its web site, so if this address isn't correct, go to www.irs.gov and select "Charities and Nonprofits," then "Search for Charities." If you don't find your nonprofit's name on the list, it does not necessarily mean that it does not have its 501(c)(3), and you should go to step 2 below. (It is our experience that sometimes the IRS list is not comprehensive.)

Call the IRS Customer Service for nonprofit organizations at 1.877.829.5500 and provide them with your corporate name (and EIN if you have it). The best time to call them is about 8:35 a.m. (EST). Later in the day, they may be busy and unable to take your call.

What is the effect of my organization's losing its tax-exempt status?[1]

If your organization's tax-exempt status is automatically revoked, it is no longer tax exempt under federal law, and you may be required to file one of the following federal income tax returns and pay any applicable income taxes:

  • Form 1120, U.S. Corporation Income Tax Return, due by the 15th day of the 3rd month after the end of your organization's tax year, or
  • Form 1041, U.S. Income Tax Return for Estates and Trusts, due by the 15th day of the 4th month after the end of your organization's tax year.

May my organization re-instate its tax-exempt status?

Yes. To re-instate your tax-exempt status you will need to re-apply for it, completing either the IRS Form 1023 or 1024 and paying the filing fee, which will range from $400 to $850.  This process can take several months.

If the tax-exempt status of a 501(c)(3)has been revoked, may donors continue to receive a tax deduction?

No. Donations received after official notification of revocation of your tax-exempt status as a 501(c)(3) are no longer tax-deductible.  Further, you will not be listed in Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986.

Only upon official notification of re-instatement of your 501(c)(3) tax-exempt status may your donors receive tax-deductibility.

Sources

[1] Internal Revenue Service

Additional resources

(This list of questions regarding What Are Tax Exempt Organizations has been developed by the many persons and organizations seeking assistance from the Lodestar Center.)

Please note that websites frequently change and while we endeavor to keep links current, some might not work. When you encounter such a problem, you can help us by sending an email to nonprofit@asu.edu so that we might investigate and make changes to our information and links.

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