Help Desk FAQ: What to Do if Your Nonprofit Status Has Been Revoked
Nonprofit boards – especially those of small, volunteer-driven organizations – can be caught off guard to learn that their tax-exempt status has been revoked. Most tax-exempt nonprofits must file an annual return or notice with the IRS, and failure to file for three consecutive years results in the automatic revocation of tax-exempt status. The IRS provides a lot of information about auto-revocation, including FAQs.
Checking Your Tax-Exempt Status
You can search the auto-revocation list,which is updated monthly, using the EO (Exempt Organization) Select Check search. The EO Select Check tool can also be used to search the list of nonprofits officially approved to receive tax-deductible contributions, which is helpful if your organization cannot find your original determination letter from the IRS and your current board is unsure whether 501(c)(3) status was ever granted.
What If Our Tax-Exempt Status Has Been Revoked?
The National Council of Nonprofits provides a thorough overview of the implications of auto-revocation, as well as what to do next. In short, if your tax-exempt status has been revoked for failure to file for the past three years, you will need to do one of the following if you want to regain your status:
- Reapply for tax-exempt status with the IRS using either Form 1023 or the new Form 1023-EZ.
- Explore self-declared 501(c)(3) status, which only applies if your organization is very small (annual gross receipts under $5,000.)
- Explore fiscal sponsorship as an alternative.
If you believe your organization’s status was erroneously revoked, the IRS provides details on how to proceed on their website.
Additional Resources to Help You Regain Your Tax-Exemption
- National Council of Nonprofits resource page on auto-revocation
- MANP’s Starting a Nonprofit Checklist
- The IRS page on regaining your tax-exempt status (re-filing) and FAQs about the process
- Pros + Cons of Nonprofit Tax-exempt Status
Don’t Forget the State Side
In most cases, a tax-exempt organization is also a nonprofit corporation registered with the Maine Secretary of State. Organizations whose tax-exempt status have been revoked because of failure to file may have also failed to file Annual Reports, which can jeopardize this corporate status.
To look up your corporate status visit Maine’s Interactive Corporate Services site and use the Corporate Name Search.
If your organization is not in good standing, there are two possible next steps.
- If it has been less than six years since you last filed an Annual Report with the Secretary of State’s office, then you can apply for reinstatement.
- If it has been longer than six years, you’ll need to re-incorporate.
If you’re not sure which applies to your organization, you can call the State at 624-7736 and ask. They can look up your last filing date, if any, and advise you.
Lessons to Learn
Loss of tax-exemption has far-reaching implications for your organization, which can include back-taxes and penalties, loss of eligibility for grants, erosion of public trust, and more. The best way to protect your organization is to invest the time and energy to build a strong board aware of its fiscal responsibilities.
- MANP’s free Principles + Practices tools outline required and recommended practices for nonprofit management.
- Our Board Boot Camp, offered twice a year, is an excellent opportunity for both new and experienced board members to equip themselves to serve.
- Our free Answer Center includes a wealth of articles + guides on governance + leadership, as well as other topics.