Slim relief for getting exemption back after automatic revocation for very small organizations

As discussed here, not filing any returns with the IRS for three years now results in automatic revocation of exempt status. This is a very bad place to be. Without exempt status an organization cannot accept deductible contributions, would have to file an 1120 income tax form, and would not be able to do other things that only exempt organizations can do.

If you get in this situation there is no appeal or reversal. Your organization will have to apply for exempt status from scratch. The whole 1023 thing.

The IRS announced some special rules, called transition relief, for very small organizations.

What is the transition relief?

Following items available for certain small organizations who want to get their exemption back.

  • User fee to apply for an exemption on form 1023 will be reduced to $100.
  • Retroactive reinstatement instead of losing exemption from the effective date which is May 15, 2010 through the date of a new application. This means there will not be a gap of time where the organization was not exempt.

Not much, but it is something.

Who qualifies for the transition rules?

Only organizations who are eligible to file a form 990-N, the so-called e-Postcard for tax years 2007, 2008, and 2009. That means the organization wasn’t required to file a 990-EZ in any of those years.

Application must be filed by 12-31-11.

More information

The IRS has an easy to read description here.

If you want the technical details, they are found in Notice 2011-43.

Like I said, that’s not much, but it is something.

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