Achieving tax-exempt status is a foundational step for nonprofit organizations. It goes beyond mere legal requirements—it's essential for receiving tax-deductible donations, a critical funding source for their missions.
However, failing to comply with IRS regulations, not filing necessary reports, and other tax-related issues can lead to the automatic revocation of your nonprofit's tax-exempt status. If your organization faces this challenge, Chisholm Law is here to assist you in understanding the cause of the revocation and navigating the process to regain it.
Our attorneys have deep experience in nonprofit law and the regulations and requirements for tax-exempt status in Georgia. Whether your tax exemption was lost due to missed filings, compliance issues, or other factors, we can provide thorough support to help you through the reinstatement process.
Common Causes of Losing Tax-Exempt Status
To take steps to restore your tax-exempt status, you need to pinpoint the exact reason for its revocation. Different causes require different solutions. Some common reasons your Georgia nonprofit may lose its status include:
- Failure to File Annual Returns: Nonprofits must file annual returns, like IRS Form 990, 990-EZ, or 990-PF. Not filing these forms for three consecutive years leads to automatic revocation.
- Excessive Lobbying: Nonprofits can lobby to some extent. However, too much lobbying can jeopardize their tax exemption. The IRS monitors lobbying activities to ensure nonprofits remain within legal limits.
- Engaging in Prohibited Political Activities: Nonprofits in Georgia must avoid participating in political campaigns or supporting political candidates. Violating this rule can result in losing tax-exempt status.
- Exceeding Limits on Unrelated Business Income: Generating significant income from activities not related to the organization's primary mission can lead to the loss of tax-exempt status. The IRS has strict limits to prevent misuse of nonprofit status.
- Noncompliance with Charitable Distribution Requirements: Some nonprofits are required to distribute a portion of their income for charitable purposes. Failing to meet these requirements can cause revocation of tax-exempt status.
At Chisholm Law, we can help you identify the cause of revocation and create a tailored plan to get your organization's tax-exempt status reinstated. We'll ensure your organization quickly becomes compliant and continues its essential work without unnecessary delays.
Impact of Losing Your Tax-Exempt Status
The loss of tax-exempt status can have serious financial impacts on your nonprofit organization. Your ability to attract donations, secure funding, and allocate resources to your mission can all be affected.
Loss of Tax-Deductible Donations
Without tax-exempt status, donors cannot deduct their contributions on their tax returns. This can reduce your fundraising effectiveness as donors often prefer to contribute to nonprofits where their donations remain tax-deductible.
Increased Tax Liability
Losing tax-exempt status means your organization may be subject to federal income taxes on revenue, including donations. This increased tax burden can divert funds away from your programs and services, limiting your ability to achieve your mission. Your organization may also face other taxes and fees that were previously exempt.
Challenges in Securing Grants
Many grant providers require recipients to have tax-exempt status. Losing this status can make it difficult to secure grants, which are often a vital source of support for nonprofit organizations. This can further strain your financial resources and hinder your ability to carry out your projects and initiatives effectively.
Steps to Regain Your Georgia Nonprofit’s Tax-Exempt Status
Navigating the reinstatement process can be complex and requires careful attention to detail. Here are the basic steps:
- Identify the Cause of Revocation: Determine why your tax-exempt status was revoked. Whether it was due to missed filings, engaging in prohibited activities, or other reasons, identifying the cause is necessary for addressing the issue effectively.
- Take Corrective Actions: Once you’ve identified the cause, take the necessary corrective actions. This might involve filing overdue forms, adjusting your organization’s activities to comply with regulations, or making other changes to address the reason for revocation. Your organization may also be eligible for retroactive reinstatement, which allows it to regain its tax-exempt status as if it had never been revoked, provided it meets specific criteria and follows the application procedures.
- File Reinstatement Applications: To regain your tax-exempt status, you must file a reinstatement application with the IRS and an exemption request.
- Work with the IRS: After submitting your applications, work closely with the IRS to resolve any outstanding issues. This might involve providing additional documentation or clarification as requested. If the IRS determines your organization has met all compliance requirements, a new IRS determination letter will be issued.
Benefits of Hiring a Nonprofit Attorney
While it is possible to navigate the reinstatement process independently, hiring a qualified nonprofit attorney offers several advantages that can streamline the process and improve your chances of success.
An attorney with experience in nonprofit tax law understands the complexities specific to this area. They are knowledgeable about tax regulations and can provide precise, current advice tailored to your organization’s needs. And they can ensure every aspect of your reinstatement application is managed correctly.
Nonprofit attorneys are familiar with the reinstatement process and the specific requirements for tax-exempt reinstatement. They guide you through each step, helping to identify and rectify any issues that led to the revocation of your tax-exempt status—saving you time and preventing costly mistakes.
Legal representation during communications with the IRS can be invaluable. An attorney can manage these interactions effectively, addressing any concerns or requests for additional information promptly and accurately. Professional representation can make the process smoother and less stressful for your organization.
Why Choose Chisholm Law for Reinstating Your Tax-Exempt Status?
Choosing Chisholm Law means working with a firm that has a thorough understanding of nonprofit law and an unwavering commitment to your organization's success. Our team is deeply familiar with the reinstatement process and the IRS requirements and knows how to navigate the intricacies involved.
We handle each case with meticulous attention to detail. From identifying the cause of your revocation to taking the necessary corrective actions, we ensure every step is addressed comprehensively and legally. Our approach involves close communication with the IRS, effectively managing any inquiries or additional documentation requests to facilitate a smooth reinstatement process.
We understand the unique challenges faced by nonprofit organizations in Georgia and are dedicated to providing clear, actionable advice. Our team is here to guide you through the complexities of regaining your tax-exempt status, offering support and clarity at every stage. When you choose Chisholm Law, you can focus on your mission while we handle the legal intricacies.
Restore Your Tax-Exempt Status with Chisholm Law
Tax-exempt status is essential for nonprofit organizations, allowing them to secure vital funding to fulfill their missions. Chisholm Law is dedicated to helping you protect and restore this critical status, ensuring your nonprofit continues to flourish.
Reach out to our team today to start your journey toward reinstating your tax-exempt status with confidence and efficiency.
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