501(c)(3) EZ Reinstatement

When a charitable nonprofit is no longer recognized as tax-exempt, it will be required to pay income taxes on revenue, including donations, and donors will no longer be able to deduct contributions to the organization. Additionally, private foundations may not be willing or able to make a grant to the organization.

To have your 501(c)(3) reinstated, you must file an application for exemption and pay the appropriate user fee, even if it was not required to apply for exempt status initially. 

If the IRS determines that the organization meets the requirements for tax-exempt status, it will issue a new determination letter. 

Donors and others may rely upon the new IRS determination letter as of its stated effective date and on the updated Exempt Organizations Select Check and BMF extract listings.

In most cases, the effective date of reinstated exemption will be the date that the organization’s exemption application was submitted to the IRS. However, organizations may choose to request that reinstatement be retroactive to the effective date of revocation. The IRS will grant retroactive reinstatement of exemption under certain limited circumstances. 

According to the IRS website, 3 to 6 months.

1. Streamlined Retroactive Reinstatement

This option is available to organizations eligible to file Form 990-EZ or 990-N for the three years that caused their revocation. If approved, it retroactively reinstates tax-exempt status to the date of revocation.

To qualify for streamlined retroactive reinstatement, the organization must:

• Have not had their tax-exempt status automatically revoked in the past.
• Complete and submit Form 1023 (or Form 1023-EZ) with the user fee of $600 (or $275 for Form 1023-EZ) no later than 15 months after the later of:
  • The date on the organization’s Revocation Letter (CP-120A), or
  • The date the IRS added the organization to its Revocation List (on the IRS website).

With the approval of reinstatement — and provided the 501(c)(3) completes and executes its 990 forms for the three consecutive years it missed — the IRS will not impose additional penalties for failure to file annual returns in those taxable years.

2. Retroactive Reinstatement Process (for filings within 15 months of revocation)

Organizations that previously had their 501(c)(3) status revoked or those required to file Form 990 or Form 990-PF for any of the three years that caused revocation cannot use the streamlined procedure. Instead, they may request retroactive reinstatement using the following process if they complete their filing within 15 months of when their tax-exempt status was revoked.

• Complete and submit Form 1023 (checking the box on Schedule E for Section 5 when submitting Form 1023 electronically), and pay the $600 user fee no later than 15 months after the later of:
  • The date on the organization’s revocation letter (CP-120A), or
  • The date the IRS added the organization to its Revocation List (on the IRS website).
• Include a Reasonable Cause Statement to explain the organization’s reasons for its failure to file its annual return for at least one of the three consecutive years that resulted in revocation.
• File completed paper annual returns for the three consecutive years that caused the revocation and any following years.
• Include a statement to confirm that the organization has filed its required returns for those three years (and any other taxable years after that if failure to file occurred).

3. Retroactive Reinstatement Process (for filings after 15 months of revocation)

This process is for organizations that apply for reinstatement more than 15 months after the later of:

• The date on the organization’s revocation letter (CP-120A), or
• The date the organization was added to the IRS website’s Revocation List.

They must satisfy all of the IRS’s requirements for organizations filing for reinstatement within 15 months. However, there’s one critical difference: the organization’s reasonable cause statement must detail its reasonable cause for failure to file a required annual return for all three consecutive years in which it failed to file.

Another difference is that they should check the box on Schedule E for Section 6 when submitting Form 1023 electronically.

If the IRS approves the retroactive reinstatement, it will not impose additional penalties on the organization for failure to file its returns for the three consecutive taxable years that caused the revocation.

4. Post-Mark Date Reinstatement

Another option is to request reinstatement effective on the post-marked date of the organization’s reinstatement application. To do so, the organization must complete and submit Form 1023 or Form 1023-EZ (checking the box for Section 7 in Schedule E on Form 1023 or Part V on Form 1023-EZ) with the appropriate user fee.

• Complete and submit Form 1023 (or Form 1023-EZ) with the user fee of $275 for Form 1023-EZ) no later than 15 months after the later of:
  • The date on the organization’s Revocation Letter (CP-120A), or
  • The date the IRS added the organization to its Revocation List (on the IRS website).