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Nonprofit Law/Auto revocation for diregarded entity


Dear Harvey,

I am writing about what I believe is a common situation, but that the IRS doesn’t seem to be responding to.  A 501c3 is related to another tax exempt entity.  This other tax exempt is properly considered a disregarded entity,   and its financial transactions are included in the 990 of the 501c3, and all required disclosures are made on 990 Schedule R.
But because the IRS does not receive a separate filing for the disregarded entity for three years, it revokes the tax exempt status of the disregarded entity.
Does the disregarded entity have to apply again for tax exempt status via Form 1023 (or 1024)? Or is there a way to reinstate the tax exempt status without reapplying?
If the tax exempt status is reinstated, should the disregarded entity file the 990-N even though they are included on the 990 of the 501c3?

On page 5 of the IRS publication at
we see that:
--- Start of Excerpt ---
•  Disregarded entities. Except for reporting of disregarded entities
in Schedule R, Part I, disregarded entities are treated as part of the
organization rather than as separate entities for Form 990 reporting
---End of Excerpt---

More on point, the IRS has published:
--- Start of Excerpt ---
A disregarded LLC whose sole owner is exempt from federal income tax under
section 501(a) of the Code is not required to pay federal taxes or file a federal tax or information return; that is the responsibility of its sole owner. See Announcement 99-102. 1999-43 I.R.B. 545.  The disregarded entity receives the benefit of its owner’s tax-exempt status,
---End of Excerpt--- (on page 1)
The key phrase there is "information return". The automatic revocation procedures apply to information returns (990, 990-ez, 990-N).,,id=239696,00.html
is the IRS web page regarding automatic  revocation of exemption.

The law adding the provision for automatic revocation is available at:

Therefore, I suggest that an officer of the disregarded entity call the IRS Exempt
Organizations unit in Cincinnati at 1-877-829-5500 and inquire about what appeared to be a mistake in the IRS revoking the exempt status of that entity.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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