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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have a non-profit that never filed for a 501(c)(3). Its

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I have a non-profit that never filed for a 501(c)(3). It's now many many years later--how would I go about getting the retroactive 501(c)(3)? Is there any precedent as to getting the IRS to be lenient?

Megan C :

Thanks for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Megan C :

Unfortunately, you have to file form 1023 within 27 months of incorporation to get 501(c)(3) status retroactive to the date of incorporation.

Customer:

I'm ok. How are you?

Megan C :

There is no leniency on this

Megan C :

I'm great! Beautiful fall day here!

Customer:

There is no means to request a retroactive date?

Megan C :

You can still file for 501(c)(3) status, but it will be effective only to the date of application

Megan C :

No, there's no means. It's a strict rule with a 27 month deadline.

Customer:

So what happens to the last 11 years?

Customer:

We pay a penalty?

Customer:

Any leniency there?

Megan C :

No, you just aren't a 501(c)(3)

Megan C :

You can still be a nonprofit and not be a 501(c)(3)

Customer:

My organization is a 501c3.

Customer:

And they *mistakenly* thought that they were filing a group filing

Customer:

including a "subsidiary"

Customer:

However, the auditor made a mistake

Customer:

and did not file it correctly...so it never got that group status

Customer:

So we're trying to figure out if we can get that group status retroactive to when the organization started.

Megan C :

Let me see if there have been any exceptions

Megan C :

Now, you only need the 501(c)(3) if you are generating enough revenue for it to be taxable if you were not tax exempt?

Customer:

The problem is....the non-profit (parent company) is a 501c3. So they filed a 990

Megan C :

Ok I see, and they would have needed to exclude you if you did not have the proper status

Customer:

And the auditor put this Properties organization under it...as a subsidiary, as part of the group.

Megan C :

But you didn't get group status

Customer:

So technically they claimed the $...but under a 501c3 because they mistakenly didn't get group status before they filed it.

Megan C :

And it took 11 years to figure this out...how was it determined?

Customer:

So we just paid an atty A LOT of $...to figure this out, and he says that he thinks he can request the IRS go back retroactively to add Properties as a "group"

Customer:

And I'm not sure he knows what he's doing.

Megan C :

Is he a tax or nonprofit attorney?

Customer:

Non-profit attorney...I believe.

Megan C :

Or just a general attorney?

Customer:

And it took 11 years...because it wasn't until an auditor came in and checked our financials that anyone figured it out.

Customer:

So the IRS still doesn't know.

Megan C :

Now, I have never seen anyone personally get the status granted 11 years retroactive, but if there is cause the IRS may on a case by case basis make a determination.

Megan C :

It's the exception, not the rule and it would take a lawyer to work all this in your favor. I can say that if you tried to do this yourself, you would find yourself at a dead end road.

Customer:

Geez.

Customer:

So we do need an attorney...one who most likely knows the ground rules.

Megan C :

Yes, you do need an attorney - especially if you're looking at significant taxes and penalties on any profits

Customer:

But getting any sort of retroactivity on a group application---have you ever heard of something like that?

Megan C :

I've personally never seen that, and I've been around a lot of non profits.

Megan C :

I've been fortunate not to have anyone come to me with that issue before.

Customer:

Oh goodness....only this place has issues like this.

Megan C :

No, I

Megan C :

I'm sure lots of other places have this issue as well

Megan C :

I'm sorry you are going through this

Customer:

It's a-ok.

Customer:

Thanks for all your help.

Megan C :

You're welcome

Megan C :

Is there anything else I can help you with?

Megan C :

If there's nothing else I can help you with, please rate as "excellent" so that I may receive credit for assisting you today

Customer:

I think that's it.
Thanks!

Megan C :

You're welcome

Megan C and other Finance Specialists are ready to help you
Thanks, for Melissa for your positive rating. Please come back and visit me any time you need a question answered. It was a pleasure working with you today . Thanks again!

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