Have a Finance Question? Ask a Financial Expert Online.
Thanks for your question, and thanks for using JustAnswer.com
How are you today?
Unfortunately, you have to file form 1023 within 27 months of incorporation to get 501(c)(3) status retroactive to the date of incorporation.
I'm ok. How are you?
There is no leniency on this
I'm great! Beautiful fall day here!
There is no means to request a retroactive date?
You can still file for 501(c)(3) status, but it will be effective only to the date of application
No, there's no means. It's a strict rule with a 27 month deadline.
So what happens to the last 11 years?
We pay a penalty?
Any leniency there?
No, you just aren't a 501(c)(3)
You can still be a nonprofit and not be a 501(c)(3)
My organization is a 501c3.
And they *mistakenly* thought that they were filing a group filing
including a "subsidiary"
However, the auditor made a mistake
and did not file it correctly...so it never got that group status
So we're trying to figure out if we can get that group status retroactive to when the organization started.
Let me see if there have been any exceptions
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?
The problem is....the non-profit (parent company) is a 501c3. So they filed a 990
Ok I see, and they would have needed to exclude you if you did not have the proper status
And the auditor put this Properties organization under it...as a subsidiary, as part of the group.
But you didn't get group status
So technically they claimed the $...but under a 501c3 because they mistakenly didn't get group status before they filed it.
And it took 11 years to figure this out...how was it determined?
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"
And I'm not sure he knows what he's doing.
Is he a tax or nonprofit attorney?
Non-profit attorney...I believe.
Or just a general attorney?
And it took 11 years...because it wasn't until an auditor came in and checked our financials that anyone figured it out.
So the IRS still doesn't know.
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.
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.
So we do need an attorney...one who most likely knows the ground rules.
Yes, you do need an attorney - especially if you're looking at significant taxes and penalties on any profits
But getting any sort of retroactivity on a group application---have you ever heard of something like that?
I've personally never seen that, and I've been around a lot of non profits.
I've been fortunate not to have anyone come to me with that issue before.
Oh goodness....only this place has issues like this.
I'm sure lots of other places have this issue as well
I'm sorry you are going through this
Thanks for all your help.
Is there anything else I can help you with?
If there's nothing else I can help you with, please rate as "excellent" so that I may receive credit for assisting you today
I think that's it. Thanks!