[Updated 2026] It’s a harsh reality check, especially after years of service, when a nonprofit loses its tax-exempt status. Coming hurrying off the IRS auto-revocation list, however, is still an option.
In 2006, the Pension Protection Act gave the IRS strict filing rules, and missing the annual returns, such as Form 990-N, can trigger the process of losing tax-exempt status.
This guide aims to simplify the process by outlining the necessary filings, questions to ask, and expectations from the IRS. It also provides a roadmap for restoring your credibility, financial aid, and donor trust.
Recovering federal recognition is now a possibility; click here and find simple, practical steps that work.
Important Points
- It’s a three-strike-and-you’re-out situation for tax-exempt organizations. They’ll lose their status if they miss three years of annual returns, including Form 990, Form 990-EZ, or Form 990-N.
- Small organizations that went off the grid after May 17th, 2010 can apply for a relatively painless fix, Notice 2011-43, and have until the deadline to apply and cough up a hundred bucks in user fees.
- Larger ones can, however, request relief under Notice 2011-44 by showing a good reason for missing the returns and sending in Form 1023, Form 1024 and the regular fee.
- Revenue Procedure 2014-11 lets eligible charities ask for a retroactive reinstatement that’ll make previously non-deductible donations tax-deductible again.
- Well-known, seasoned lawyers can help you get your paperwork sorted, meet deadlines and shore up your application.
Background on the Pension Protection Act (PPA)
The Pension Protection Act of ’06 basically wanted to make tax compliance and transparency more of a priority, and it did so by requiring all tax-exempt organizations to file an annual return or statement with the IRS, including Form 990, Form 990-EZ, Form 990-N for minuscule groups and Form 990-PF for private foundations.
Tax-exempt status can be automatically revoked when filing is neglected. Simply carrying over information from one year to the next is insufficient. The IRS requires annual filings even if you’re barely scraping by financially.
Organizations that are using fiscal sponsorships or running unrelated businesses will have extra reporting requirements, and must follow the guidelines of Revenue Procedure 2014-11 to stay in the clear.
Consequences of Failing to File: Automatic Revocation
Missing filings of your IRS Form 990, Form 990-EZ, or Form 990-N for three years in a row result in automatic revocation of your tax-exempt status and will land you on the IRS’s public Auto-Revocation List.
Revocation has serious financial implications, such as a halting of tax-deductible donations for your supporters, and, just like a regular business, you may have to pay income tax.
Reinstatement is not guaranteed, and you must file for retroactive reinstatement, usually with Form 1023 or Form 1023-EZ, and pay the prescribed user fee, but then wait for the IRS to decide.
IRS Announcement on Retroactive Reinstatement
The IRS, back in ‘11, gave some flexibility to revoked groups that wanted to regain their status retroactively; however, the rules for doing so depend on the average size of the receipts of the organization, what forms were missed and how quickly the application is made, and smaller charities often are eligible to a more streamlined approach.
More substantial organizations can still apply but need to justify their late filing, and it is worth noting that retroactive reinstatement can send tax-deductible donations rolling back to the date of the revocation and get back donor faith.
Transitional Relief for Small Organizations
Transitional Relief, as outlined in Notice 2011-43, gives a soft touch to tiny non-profits that have gross revenues usually not exceeding $25,000, and who dropped their status because they didn’t file Form 990-N for three years.
Qualifying organizations can use a simplified procedure to request the reinstatement of their tax-exempt status, and often this is done with IRS Form 1023-EZ.
Eligibility Criteria for Transitional Relief
When organizations are looking for transitional relief, they generally need to be able to say that they didn’t have to file full financial returns before 2007 and that they were eligible to file the Form 990-N for the years 2007, 2008 and 2009, and didn’t bring in more than $25,000 in any of those years.
A complete application for retroactive reinstatement had to be submitted by December 31st, 2012, and was put in place to make it much easier for small organizations that lost their tax-exempt status to get back on track.
Application Process for Retroactive Reinstatement
When applying for retroactive reinstatement, smaller organizations use Form 1023 or Form 1024 depending on the type of exemption they’re applying for.
The application is similar to the one used to apply for tax-exempt status and should have “Notice 2011-43” at the top and a confirmation of eligibility.
If the user fee has been paid and the IRS asks for any extra forms, they need to be attached to the application. Larger organizations might also need a reasonable cause statement to explain why they didn’t file their returns, and really well-organised timelines and records can get the review process moving along much faster.
Reasonable Cause Relief for Larger Organizations
Notice 2011-44 provides a backdoor route for larger organizations that don’t fit into the small group relief, requiring them to show that there was a good reason they missed their IRS Form 990, Form 990-EZ, or Form 990-PF for the past three years.
The IRS has a system for evaluating these requests, Revenue Procedure 2014-11, and the application must be complete, accurate, and timely, with the fee paid.
Consider adding calendar reminders to prevent missed deadlines or hiring a new tax preparer, and back up your claims with board minutes, emails with accountants, or internal training records including check-the-box training notes, when fixing the problem.
Criteria for Demonstrating Reasonable Cause
Application for reasonable cause relief can be made by filing Form 1023 or Form 1024 and paying the standard user fee, which is $400 or $850, including a clear and detailed written statement with facts and dates of the delays.
Submit a form 990 for each missed year, or 990-EZ if that’s what you normally filed, and state that Form 990-N was required in case that is the one you’re in the habit of using, but will follow IRS instructions.
The declaration signed by a registered officer will be required for submission. Solid proof can really seal the deal in getting tax-exempt status reinstated.
Reduced Application Fees for Transitional Relief
Those that qualify under Notice 2011-43 can get a significantly reduced application fee of $100 instead of the usual fee. Coming from a small nonprofit, saving is really helpful when rebuilding.
To access this reduction, fill out the correct application, attach the necessary forms, such as Form 1023-EZ or a part of the Form 990 series, and meet the required deadlines.
When a nonprofit’s application for reinstatement is being processed you’ll need to submit the correct paperwork, such as Form 1023-EZ or a part of the Form 990 series, and adhere to the deadlines, which are well-known for helping smaller organizations return to good standing more quickly so that donors can once again make tax-deductible donations.
Impact of IRS Announcements on Nonprofits
The IRS actions announced in 2009 and 2011 granted a much-needed second chance to many small charities by laying out clear rules for retroactive reinstatement and reduced user fees under Revenue Procedure 2014-11, and enabled these organizations to get back on track after missing annual filings like Form 990-N or Form 990-EZ.
Announcement 2011-35 further improved the situation; the Auto-Revocation List has made checking the status of organizations far easier for donors, accountants and boards. This clarity has meant that charities can zero in on fixing their filing issues and restoring the public’s faith in their organization.
Role of Nonprofit Lawyers in the Reinstatement Process
Non-profit lawyers who specialize in the reinstatement process can make a huge difference by reviewing the missed returns, writing a clear, honest explanation, and basically guaranteeing that the application adheres to IRS regulations and deadlines.
A lawyer will also be able to explain how the automatic revocation affects the deductibility of donations and cash flow, and in doing so, you can prevent mistakes and delays.
Coming from the IRS, this information is just general in nature, and it is advisable to get professional advice from a certified lawyer to address your specific case.
Additional Resources for Revoked Nonprofits
The IRS publications and official guidelines are available to check your status, understand the possible options, and prepare your filings.
They’re invaluable assets in your quest to regain tax-exempt status and stay on top of future annual returns.
Announcement 2011-35: Auto-Revocation List
Announcement 2011-35 released the IRS Auto-Revocation List in June 2011 which is a comprehensive list of charities that had their tax-exempt status revoked after three missed annual filings, namely Form 990-N and Form 990-EZ.
Notice 2011-43: Small Organization Transitional Relief
Notice 2011-43 makes it possible for smaller organizations to apply for reinstatement; this is for those who lost their status after May 17th, 2010, when the IRS revoked the tax-exempt status of a nonprofit.
Eligible organizations can use Form 1023-EZ or Form 1024 with a much lower fee and don’t have to provide a thorough justification for the missing filings. What is necessary is that they file on time and meet all the requirements set out by the IRS.
Notice 2011-44: Reasonable Cause Relief
Coming from the other side of the spectrum, Notice 2011-44 guides larger organizations that don’t qualify for the small-scale exemption; they can reapply for retroactive tax-exempt status, proving that their failure to file forms such as the 990 or 990-PF was not their fault.
The application, consisting of a compelling argument for why the filings were missed, the user fee, and every single piece of paperwork requested by Revenue Procedure 2014-11 must be included, and the IRS takes a hard look at the sequence of events and the steps taken to rectify the problem.
If the IRS approves the application, these larger organizations can once again accept tax-deductible contributions.
Revenue Procedure (2011-33)
Revenue Procedure 2011-33 is basically the instruction manual for classifying an organization as a public charity, using information from their returns, such as Form 990 and Form 990-EZ, it’s also an explanation of what happens when the IRS reviews the charity’s past filings after restoring tax-exempt status.
Organizations that have had their tax-exempt status automatically revoked need to know the classification rules and the data the IRS considers, which is exactly what this procedure explains.
Executives and advisors use this to double-check that the charity’s filings do match its status once its back on the straight and narrow.
Conclusion
Well-known methods for regaining tax-exempt status, including retroactive reinstatement, Notice 2011-43 and the reasonable cause relief, provide both small and large charities with a clear path back to the world of tax-exempt status.
Gather records, choose the correct forms, and submit a complete package, often Form 1023 or Form 1023-EZ, with the proper user fee. Use Revenue Procedure 2014-11 as your roadmap. With steady steps, you can restore tax-deductible donations and return to strong nonprofit compliance.
FAQs
1. What causes automatic revocation of tax-exempt status for a nonprofit organization?
A nonprofit organization loses its tax-exempt status automatically if they fail to file their annual returns or submit the Form 990-N, Form 990-EZ, or IRS Form 990 for three consecutive years.
2. How can a revoked group seek retroactive reinstatement of tax-exempt status?
A revoked group can ask for retroactive reinstatement by sending the appropriate form, for example, Form 1023-EZ, Form 990-PF, and enclosing any missing tax returns, plus paying the applicable fee.
3. What is a reasonable cause statement and why is it needed?
A reasonable cause statement is basically a justification for why the nonprofit couldn’t file on time, something that the IRS will take into consideration when deciding on relief under Revenue Procedure 2014-11 in the course of reinstating tax-exempt status.
4. Can donors still make tax-deductible donations while an organization’s exemption is revoked?
No, when an organization’s exemption is revoked, their donors can no longer claim tax-deductible donations.
5. What steps help with ongoing nonprofit compliance after regaining exempt status?
Well-known methods for ongoing non-profit compliance are after getting back their tax-exempt status, charities should stick to all the filing requirements and watch out for deadlines to avoid further run-ins with the IRS and automatic revocation.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations. Ellis is licensed to practice in Washington and Arizona and advises nonprofits on federal 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.
Additional Resources:
- Announcement 2011-35, Publication of the Auto-Revocation List
- Notice 2011-43 “ Small Organization Transitional Relief
- Notice 2011-44 “ Reasonable Cause Relief
- Revenue Procedure 2011-33