Last week we talked about ways to determine if an organization is tax-exempt. If you find out that the organization is not tax-exempt or had its exemption revoked, this podcast will cover the steps that can be taken when applying for tax-exempt status and some general guidelines.
SO WHAT DOES AN ORGANIZATION DO IF THEY WERE EXEMPT, BUT IT HAS BEEN REVOKED?
- Consequence of losing tax-exempt status is having to file tax returns and paying tax.
- File an application for exemption and IRS will issue a new determination letter.
- Effective date of reinstatement –
-
- date that the organization’s exemption application was submitted to the IRS
- organizations may choose to request that reinstatement be retroactive to the effective date of revocation
HOW DO WE APPLY FOR THE FIRST TIME
- More than just applying with the IRS
- Determine the state registration requirements
- Get an Employer Identification Number
- Prepare legal formation documents –
- Can be trust, corporation or association
- Bi-laws
- Must contain certain language
- File Form 1023, 1023-EZ, or 1024
- Completion of the form will take time and require three year’s worth of financial data (actual or projected)
- User fee is required
- Once submitted the IRS will take time to process and will probably come back with questions
- IRS will issue a determination letter that can be provided to others showing the tax-exempt status
- Effective date
WHAT TYPES OF TAX-EXEMPT ENTITIES NEED TO APPLY?
- Tax-exempt organizations where contributions are deductible
- Public charities
- Private Foundations
- Tax-exempt organizations where contributions are not tax-deductible
- Social clubs, Fraternal Societies, political organizations
Be sure to talk to a tax professional if you have any questions about applying for tax-exempt status.
As a partner, I have thorough experience providing tax services to individuals, privately held businesses, nonprofit entities and estates and trusts. I also provide compilation and review services.
