YOUR 501(C)(3) STATUS HAS BEEN REVOKED – WHAT NOW?
April 16, 2014
Many nonprofit corporations are exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code. Until relatively recently, many of those tax-exempt nonprofits were not required to file annual Form 990 series returns. That all changed with the Pension Protection Act of 2006. Now, all tax-exempt nonprofits are required to file an annual Form 990 series return. If a tax-exempt organization fails to do so for three consecutive years, then its federal income tax exemption is automatically revoked – – no questions asked.
HOW DO YOU KNOW IF YOUR TAX-EXEMPT ORGANIZATION HAS LOST ITS
The IRS maintains a list of organizations that have had their 501(c)(3) status revoked. Use thisLINK to search for specific organizations.
WHAT ARE THE CONSEQUENCES?
The Organization Will Have Tax Liability. If your nonprofit has its 501(c)(3) status revoked, then it will no longer be exempt from federal income tax. As a result, the nonprofit may be subject to corporate income tax and required to file IRS Form 1120 (U.S. Corporation Income Tax Return).
Donations Will Not Be Tax Deductible. Any donations received after the official notification of the revocation will not be tax deductible. This can be a major issue for donors who made donations and claimed tax deductions based on the belief that your organization was a valid 501(c)(3) organization.