501(c)(3) Revoked? More common than you think.

by Jennifer Meckling, Director of Community Engagement for Central and Northwest Oklahoma

The IRS insists on a form-990 filing for every 501(c)(3) except some church-affiliated organizations and governmental organizations. IRS Form 990 was first available for tax year 1941. The intervening 75 years has seen numerous changes to the form, bringing us to today’s 990 series including the “long form” 990, 990-EZ, and 990-N. The form 990 is due on the 15th day of the 5th month after the close of an organization’s tax year.

Late filings can rack up penalty fees of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization’s gross receipts, whichever is less. For organizations with gross receipts in excess of $1,000,000, the penalty increases to $100 per day. Failure to file for three consecutive years results in an automatic revocation of an organization’s tax exempt status. A Nonprofit organization can suddenly find itself not only owing taxes and fees, but unable to accept tax deductible donations.

As of this writing, November 2016, 562 organizations in Oklahoma, and more than 41,000 in the country, have been listed by the IRS this calendar year as having their exempt status automatically revoked. That’s bad news for a lot of organizations and, presumably, the individuals they serve. But if nothing else, the IRS is strong on process and there is a process for requesting reinstatement of tax exempt status. If an organization had previously qualified for filing 990-EZ or 990-N and applies within 15 months of revocation, the path to reinstatement is relatively painless and can generally be retroactive to the date of revocation.

For more complex organization that do not qualify for the 990-EZ or 990-N, or are past the 15-month mark, the process is more tedious but still pursuable.

How would you know if your favorite charity has properly filed its 990s? Internal revenue Code 6104(d) regulations state that an organization must provide copies of its three most recent Forms 990 to anyone who requests them, whether in person, by mail, fax, or e-mail. Additionally, requests may be made via the IRS using Form 4506-A, and PDF copies can often be found online through such online tools as Guidestar.org or IRS.gov. The easiest way for an organization to show its compliance and transparency is to publish 990s on their own website. If you are a board member, it is among your legal duties to view your 990 before submission to the IRS and the Form 990 actually asks if the organization provided a complete copy of the Form 990 to all members of its governing body before filing the form and further allows Schedule O for the explanation the process, if any, used by the organization to review Form 990.

If you find your organization on the automatic revocation list, please download our helpful guide in the Nonprofit Resources section of our website and reach out for assistance.

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