New Guidance for Charities Seeking to Change Exempt Status

Change Tax Exempt Status

The IRS has announced a new procedure, Rev Proc 2024-5, facilitating the issuance of determination letters to existing 501(c)(3) organizations aiming to change their recognized exempt status under a different section of Code Sec. 501(c).

Under these guidelines, current 501(c)(3) organizations wishing to obtain a determination letter under a new Code Sec. 501(c) must assert that, by the date of application submission, they have:

  1. Distributed their assets to another Section 501(c)(3) organization or government entity, and
  2. Satisfied the criteria for the requested Section 501(c) status.

Additionally, the organization must consent to have its new determination letter take effect only from the submission date of the new application.

These required affirmations can be included alongside the organization’s supplemental responses within a single PDF file submitted with either Form 1024 (Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code) or Form 1024-A (Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code).

Rev Proc 2024-5 also extends to cover situations where a 501(c)(3) organization seeks retroactive reinstatement following the automatic revocation of its exempt status due to the failure to file annual returns for three consecutive years.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form

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