Rev. Proc. 2014-11 - Processes for reinstating tax-exempt status 

January 2: The IRS today released an advance copy of Rev. Proc. 2014-11 that provides procedures for reinstating the tax-exempt status of organizations that have had their tax-exempt status automatically revoked for a failure to file required annual information returns or notices for three consecutive years.

Rev. Proc. 2014-11 [PDF 48 KB] describes three processes through which an organization many apply for retroactive reinstatement of its tax-exempt status.

  • A streamlined retroactive reinstatement process that is available for any organization that: (1) is eligible to file either Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, or Form 990-N, e-Postcard, for each of the three consecutive years that it failed to file; (2) has not previously had its tax-exempt status automatically revoked; and (3) applies for retroactive reinstatement on Form 1023 or Form 1024 within 15 months of the date of revocation.

  • A retroactive reinstatement process that is available for an organization not eligible for the streamlined retroactive reinstatement process that: (1) applies on Form 1023 or Form 1024 for retroactive reinstatement within 15 months of the date of revocation; (2) establishes that it had reasonable cause with respect to its failure to file a required annual return or notice for at least one of the three consecutive years in which it failed to file; (3) files completed and executed paper returns for all tax years in the consecutive three-year period (and for any other tax years after such period) for which the organization was required, and failed, to file; and (4) includes a statement with its request for reinstatement confirming that it has filed the required annual returns.

  • A retroactive reinstatement process (substantially similar to the process described immediately above) that is available for an organization that applies for retroactive reinstatement more than 15 months after the date of revocation. The organization must establish that it had reasonable cause with respect to its failure to file a required annual return or notice for each of the three years that it failed to file.

Penalty relief

In each situation, Rev. Proc. 2014-11 provides that the IRS will not impose a failure-to-file penalty for the three consecutive years for which the organization was required, but failed, to file required annual returns if: (1) the organization’s application for retroactive reinstatement is approved; (2) the organization satisfied all the requirements for reinstatement; and (3) the organization is retroactively reinstated.

An organization eligible for the streamlined process is not required to file a prior year Form 990-N or Form 990-EZ for any year in which the organization was eligible to file a Form 990-N.

Rev. Proc. 2014-11, which modifies and supersedes Notice 2011-44, is effective for applications submitted after January 2, 2014; however, certain transition relief is provided for applications submitted prior to that date.

Rev. Proc. 2014-11 also discusses, among other things, how an organization can establish reasonable cause for its failure to file.

Rev. Proc. 2014-11 will be published in the Internal Revenue Bulletin 2014-3, dated January 13, 2014.

For more information, contact:

Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084

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