Since October 2010, formerly tax-exempt organizations across the country have been dropping like flies from the rolls of the Internal Revenue Service Charitable Organizations Bureau. What’s a small non-profit organization to do? Take heart, there are pathways back to tax-exemption.
1. Submit a formal reinstatement request: If, in fact, your organization has been engaged in activities that support its mission and fill a needed void in the community, then the first step is to request reinstatement by the Service through a letter of appeal. This letter should be accompanied by a completed form 1023, and all its requisite schedules and information requests. Upon initial review, the Service may place your request in either its Expedited Review or Accelerated Review Program, classes of review that will ensure that your tax-exemption is reinstated as quickly as possible. Of course, which review class oyu are placed in will determine the timeline you should be prepared to accomodate unitl your tax-exempt status is reinstated. This is why it is key to have knowledgeable legal counsel handle the reinstatement process for your organization: it may make the difference between tax-exempt reinstatement and for-profit treatment by the Service.
2. Form 8734: Many organizations have lost their tax-exept status simply because they failed to inform the Service of their financial activities for the first five years of the organization’s existence. Although submission of Form 8734 was eliminated in 2008, for charities created prior to the revised regulation, the submission requirement remains. And if not complied with, the regulation will prompt the Service to remove your organization’s tax exempt treatment.
3. Keep going!: There is nothing that proves your worthiness of continued tax exempt treatment than the continued provision of worthy charitable services to the community you serve. So keep going! This work should be able to be documented by real numbers (# of children served, # of contirbutions received, # of community events held,…) which you should use in your reinstatement appeal.
Final thoughts: Should you find your tax-exempt status denied, fret not–all is not lost. Do retain knowledgeable counsel to facilitate your pathway back into the fold of tax-exemption, and going forward, assist you with maintaining your tax-exemption through timely compliance with federal and state statutes codified to regulate charitable organizations.