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Nonprofit Law/501c3 tax reinstatement

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Question
Hope can answer my 501c3 question

We are a 22 year old 501c3.  In 2011 our Treasurer missed filing a report that had been an every 5 year filing, that changed to an every 3 year filing.

All required forms and back up papers (over 60 pages) were acknowledged received by the IRS early Nov 2012 and IRS said reinstatement would be handled within 90 days.



Our financials are very simple because we have received approx. $2,000 - $3,000 a year, and spent about $8,000 - $10,000 per year. ALL of our funds go directly to client expenses.  We have no salary, or overhead, no travel, entertainment, etc. expenses. So our forms are very simple and clean.  In the 20 years prior we have been a 501c3 with no issues what-so-ever.



#1 Is the IRS held accountable for the timeframe that they established of 90 days?  It has been about 8 months since they said it would be 90 days.



About $100,000 equipment is being donated to us so that we can expand our services.  We have big upcoming expenses to build the space that has been donated to us to accommodate the donated equipment. This has generated a sudden interest in our organization and a flurry of interest in fundraising for us so that we can help many unserved needs. We have a major event coming up with required deposits that we have paid for out of our limited funds. We have also received donated professional services and a significant grant to set up the equipment to use to provide our free service to those in need. Our reputation is stellar, since our organization is so pure, with all money spent on clients.

We proceeded with this with assurance that our 501c3 would be reinstated within or in a reasonable time in or near the 90 day timeline established by the IRS. We have since applied for and were denied expedited reinstatement. We thought it would be coming any day and just applied for the expedited reinstatement to make doubly sure there would not be a timing problem.


We have been told by the state that donors can still receive their tax exemptions for donations, but that we should not seek donations.  I have read about the retroactive recognition and surely our 501c3 will come through before 2013 tax filings are due and with the retroactive clause, so there should be no problem. We based our actions and decisions on the IRS' 90 day specifically written timetable in their correspondence with us, or would have never have proceeded fundraising.  

Can you clarify if we can accept donations. Will those donations be tax deductible for the donors? Are we in danger of being fraudulent for not revealing our 501c3 #temporary# issues?  For 20 years we have been a 501c3 and it has been in all of our materials over all these years. Should we get the help of a tax expert? a tax attorney?

Losing this funding could very well end our 22 year old organization and services because it appears that without the 501c3 we have no way to receive donations. We stand to lose funds for the deposits on the fundraiser.  No one has any intent to donate to an organization that is not a 501c3.  Any advice, suggestions, information would be greatly appreciated. This is an urgent and desperate situation.

The service we provide is not available here at no charge from any other group. Those we serve will be in a desperate situation without our vital service. We have a long history of providing amazing services, have never wasted a penny on anything other than then needs of the growing population we serve. All we need to keep going is our 501c3 restored quickly, and our organization and our supportive community will do the rest. What can we do to get this accomplished? We should not be in the pool of new applicants for 501c3. Is there no accountability for the IRS' own timetable?

Please answer quickly. Thank you!

MJ Brown

Answer
I think that you may have mis-read the notice that you received by the IRS as I don't believe that they wrote that they would have their decision within 90 days. If you want to send me a copy of that notice I will read it and then comment on the time for processing.

Your organization may, under federal law, accept donations. The IRS has published:
--- Start of Excerpt ---
Contributors to the organization do not have advance assurance of
deductibility while the organization's application is pending. If
the organization ultimately qualifies for exemption for the period
in which the contribution is made, the contribution will be tax
deductible by the donor.  Alternatively, if the organization
ultimately does not qualify for exemption, then the contribution
will not be tax deductible.
---End of Excerpt---
http://goo.gl/3qdCG

See http://www.irs.gov/pub/irs-drop/n-11-43.pdf which may be what you read about retroactive reinstatement, but, in any case, from what you wrote, you would be eligible for that.  The State, however, has its own charitable solicitation regulations.  Charitable Solicitations are discussed on the State page at:
http://www.800helpfla.com/socbus.html

As I have written in my profile, this free forum is only for federal exemption questions, but I did give you the link for Florida information above.  You may want to contact that office to inquire whether they will give you some allowance considering your filing with the IRS for reinstatement. The states will determine whether you are legally allowed to solicit donations in the states where you are soliciting.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

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

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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 Harvey108@hotmail.com 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 "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

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.

Education/Credentials

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

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


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