501(c)(3) Revoked? Causes & How to Reinstate Your Status 

Introduction 

Losing one’s tax-exempt status as an organization under section 501(c)(3) is no easy task for any non-profit organization. Such losses are bound to have a negative impact on fundraising and even the running of the organization. Thankfully, in most cases, a loss of tax-exempt status can be reinstated. 

This guide explains why a 501(c)(3) status gets revoked, what happens after revocation, and how nonprofits can reinstate their tax-exempt status step by step. 

What Is a 501(c)(3) Revocation? 

Most 501c3 organizations, other than churches and certain church-related bodies, are legally required to file an annual information return or notice with the IRS. When an organization skips this obligation for three consecutive years, the IRS doesn’t send a warning; it simply removes the tax-exempt status automatically. 

This process is called automatic revocation, and it is governed by Section 6033(j) of the Internal Revenue Code. The revocation takes effect on the original filing due date of the third missed return or notice, meaning there’s no grace period after the third miss. 

Common Causes of Automatic Revocation 

Here are some of the most common real-world reasons nonprofits lose their 501(c)(3) status: 

How to Check If Your Organization Was Revoked   

The IRS keeps a searchable database called “Tax-Exempt Organization Search,” which you will use to confirm your organization’s status. Below is a procedure for determining your organization’s status. 

• Go to the IRS “Tax Exempt Organization Search Tool” 
• Search by EIN or Organization Name 
• Review Your Status  
• Note the Revocation Date  

What Happens After Revocation? 

When a nonprofit loses its tax-exempt status, several consequences follow immediately. 

• Donations May No Longer Be Tax-Deductible 
• The Organization May Owe Taxes 
• Removal From IRS Exempt Organization Listings 
• Loss of Public Trust 

How to Reinstate a Revoked 501(c)(3) Status 

If your organization has had its tax-exempt status automatically revoked, you should seek reinstatement from the IRS, along with payment of the necessary user’s fee. Four methods of reinstatement exist for organizations seeking reinstatement of their tax-exempt status; these four methods are covered by Revenue Procedure 2014-11. 

The four reinstatement options are: 

• Streamlined Retroactive Reinstatement  
• Retroactive Reinstatement (Within 15 Months)  
• Retroactive Reinstatement (After 15 Months)  
• Post-Mark Date Reinstatement  

Each option has different eligibility requirements, filing procedures, and timelines. To understand which reinstatement method applies to your organization, visit our detailed reinstating tax-exempt status page. 

What Is a Reasonable Cause Statement? 

Reasonable Cause provides rationale for the failure of the organization to file tax returns and proof of reasonable business practices.  

The statement should include: 

• The reasons for the failure to file 
• How the problem was discovered 
• Precautionary measures to prevent future failures to file 
• Conditions at the time of the failure 

Examples of circumstances that may qualify as reasonable cause include a key officer’s serious illness or death, a natural disaster, significant financial hardship that prevented hiring help, or reliance on an agent who failed to file. The IRS reviews these explanations carefully before granting retroactive reinstatement. 

What Happens After Reinstatement? 

Upon approval by the IRS of your reinstatement application, the organization will get a new determination letter that confirms your tax exemption status has been reinstated. This also means that the IRS will make changes to the Tax-Exempt Organization Search website, which means making your organization eligible once again to accept tax-deductible donations. 

Caution: If your organization was incorrectly listed as automatically revoked, contact the IRS Tax Exempt and Government Entities Customer Service at 877-829-5500 for assistance. 

Conclusion 

Being revoked of your 501(c)(3) exempt status may present significant problems to your nonprofit organization, but the good news is that you may reinstate your tax-exempt status if you know how to do it. Knowing why it happens, acting fast, and filling out all required documents will help. 
 
Remember that the most critical thing in this matter is being proactive and timely in your annual filings. Your organization is required by the IRS to submit your annual Form 990 returns annually.