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Reinstating a lapsed nonprofit, what needs to be done?

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Reinstating a lapsed nonprofit, what needs to be done?

The youth organization that I coach has let the 501(c) number lapse. How can we reinstate with our paperwork? The officers have changed without leaving proper paperwork. We rely heavily on sponsorship, therefore, our sponsors need to be able to get tax credit.

This question was submitted and initially answered long before the IRS revoked the tax-exempt status of about 275,000 organizations (of all types and not just charities) that failed to file tax returns for three straight years after the passage of the Pension Protection Act of 2006.
There is no such thing as a 501(c) number, so it was not clear what the questioner thought might have lapsed. Prior to the PPA, tax-exempt status would not have lapsed and would not have been revoked without some formal action by the IRS, although the organization may not have had documentation available to show its status. Now it is possible to check Publication 78 on line to see if the organization is listed as exempt, and to check the IRS website to see if the organization has been listed as one of those that lost its exempt status for failing to file returns. If it lost its exempt status, the IRS has promulgated procedures for recovering exemption, retroactively in some cases. (See Ready Reference Page: "IRS Issues Procedures to Recover Lost Exemption")
If the organization is exempt, it will have to file a tax return, even if it is only the new Form 990-N if its gross revenues are less than $50,000 a year or it will lose its exempt status. (See Ready Reference Page: "Small Nonprofits Must File E-Postcard to Retain Exemption.")
Sponsors do not get tax credits under federal law. They may be eligible for charitable contribution deductions if the organization is recognized under 501(c)(3).
Gifts to some neighborhood organizations may be eligible for state tax credits in some states. If none of the former officers can tell the coach about that, the organization may want to check with its state department of revenue to see if it can or does qualify.
It may also qualify for state sales tax exemption (which, in some states, does entail an exemption number), and that status may lapse if the organization don't renew it. States vary on those requirements.
In some states, an organization may also lose its authority to do business if it has not filed certain annual reports with state authorities. If it might be in this category, the coach should check with a local attorney or the department of state to see how they can revive the corporation.
Tuesday, July 26, 2011

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