Streamlined Reinstatement Under Rev. Proc. 2014-11

Purpose and eligibility limits

Rev. Proc. 2014-11 provides procedures for reinstating organizations whose tax-exempt status was automatically revoked under section 6033(j)(1) after three consecutive years of filing failures.

The streamlined retroactive process is available only if the organization was eligible to file Form 990-EZ or Form 990-N in each of the three missed years and has not previously been automatically revoked. Both conditions limit access to the streamlined procedure.

Practically, preparers should confirm filing eligibility separately for each missed year and verify that the organization has no prior automatic revocation before proceeding under the streamlined process.

The 15-month submission requirement

The organization must submit its application no later than 15 months after the later of two events: the date of the Revocation Letter or the date the organization’s name appeared on the Revocation List.

Practically, preparers should identify both dates and calculate the deadline from whichever occurred later. Using only the Revocation Letter date could produce the wrong filing cutoff when the Revocation List posting occurred later.

To facilitate processing, the organization should place “Revenue Procedure 2014-11, Streamlined Retroactive Reinstatement” at the top of its application. The submission must also include the appropriate user fee.

Retroactive effect and reasonable cause

When the IRS approves a qualifying streamlined application, the organization is treated as having reasonable cause for all three filing failures. Its exempt status is reinstated retroactively to the Revocation Date.

Automatic revocation under section 6033(j)(1) takes effect on and after the filing date set for the third required annual return or notice.

The procedure includes a transition for demonstrating reasonable cause. Until Forms 1023 and 1024 are revised to permit the prescribed attestation, qualifying organizations receive the deemed-reasonable-cause treatment; after that revision, reasonable cause may be demonstrated through the specified attestation.

Missed returns and penalty treatment

For missed years in which the organization was required to use Form 990-EZ, the IRS will not impose the section 6652(c) penalty under the streamlined reinstatement process if the organization files properly completed and executed paper Forms 990-EZ for all such years.

Different treatment applies to a missed year for which the organization was eligible to file Form 990-N. It does not need to file either a prior-year Form 990-N or a Form 990-EZ for that year.

Practically, preparers should classify each of the three missed years by the form the organization was eligible to file. Paper Forms 990-EZ are necessary to obtain the stated penalty relief for missed Form 990-EZ years, while no prior-year filing is required for a missed Form 990-N year.

Effective date and pending applications

Rev. Proc. 2014-11 generally applies to applications submitted after January 2, 2014. The IRS also applies the revenue procedure’s beneficial provisions to applications that it had already received and that remained pending.

• Confirm that the organization was eligible for Form 990-EZ or Form 990-N in each missed year and has no previous automatic revocation.
• Submit the application within 15 months after the later of the Revocation Letter date or the Revocation List posting date.
• Add the requested Rev. Proc. 2014-11 heading to the application and include the appropriate user fee.
• To obtain relief from the section 6652(c) penalty, file properly completed and executed paper Forms 990-EZ for all missed Form 990-EZ years; prior-year Forms 990-N or Forms 990-EZ are not required for missed years in which the organization was eligible for Form 990-N.