IRS NOTICE 2011-43: TRANSITIONAL RELIEF FOR SMALL ORGANIZATIONS

The Internal Revenue Service (IRS) recently issued Notice 2011-43, which describes how not-for-profit organizations that lost their exempt status by not filing a required electronic notice annually (Form 990-N e-Postcard) may have their tax-exempt status reinstated. This required filing was mandated by the Pension Protection Act of 2006 (for tax years after 2006) for those small organizations with annual gross receipts of not more than $50,000 ($25,000 for tax years beginning before 2010). Under the Act, organizations that failed to file either the required form or an information return for three consecutive years would have their tax-exempt status automatically revoked.

In June of this year, as a result of this automatic revocation process, the IRS reported that 275,000 not-for-profit organizations had lost their tax-exempt status.

To provide relief for those organizations that failed to file the electronic notice for taxable years beginning in 2007, 2008 and 2009, and thus had their tax-exempt status automatically revoked, Notice 2011-43 describes the criteria the affected organizations must satisfy in order to apply for reinstatement of their exempt status. According to the Notice, an organization "...that qualifies for the transitional relief under this notice and applies for reinstatement of tax-exempt status by December 31, 2012, will be treated by the IRS as having established reasonable cause for its filing failures and its tax-exempt status will be reinstated retroactive to the date it was automatically revoked".

To establish reasonable cause for failing to file the Form 990-N e-Postcard an organization must meet the following criteria:

• The organization was not required to file annual information returns for taxable years beginning before 2007.


• The organization was eligible in taxable years beginning in 2007, 2008, and 2009 to file the Form 990-N e-Postcard (rather than an annual information return).


• The organization submits the completed and executed application for reinstatement of tax-exempt status on or before December 31, 2012.

To apply for reinstatement, the organization must complete either Form 1023 (for Section 501(c)(3) organizations) or Form 1024 (for most other organizations). Organizations that seek reinstatement of tax-exempt status must submit the appropriate application, even if it was not originally required to submit such an application.

To read the complete Notice 2011-43, click here.