IRS Form 1023 Schedule E. Effective Date Instructions

Schedule E of the Form 1023 applies to organizations that are applying for tax exemption after more than 27 months have passed since incorporation.

Under normal circumstances, nonprofit organizations have 27 months to apply for tax exemption, and their revenue is exempt retroactively to the date of incorporation. Schedule E also addresses the timeline and conditions for reinstatement of tax-exempt status after automatic revocation.

The questions in this schedule help the IRS determine the effective date of exemption if the organization is either seeking reinstatement after automatic revocation or filing the application more than 27 months after the end of the month in which it was legally formed.

IRS Form 1023 Schedule E: Automatic Revocation and Reinstatement Eligibility

Answer "Yes" if the organization's exempt status was automatically revoked under section 6033(j)(1) for failure to file required annual returns or notices for three consecutive years and the organization is applying for reinstatement.

Revenue Procedure 2014-11 establishes several procedures for reinstating exempt status depending on organizational size, prior revocations, and timeliness of filing for reinstatement. The applicable reinstatement path must be selected based on those criteria.

IRS Form 1023 Schedule E: Streamlined Retroactive Reinstatement

This option applies if all of the following are true:

• The organization was eligible to file either Form 990-EZ or Form 990-N for each of the three consecutive years it failed to file
• This is the first time the organization has been automatically revoked under section 6033(j)(1)
• The application is submitted no later than 15 months after the later of the date of the Revocation Letter or the date the organization was posted on the IRS Auto-Revocation List

By selecting this option, the organization attests that the failure to file was not intentional and that procedures have been implemented to ensure future compliance.

Organizations that have been automatically revoked more than once are not eligible for this option and must apply under a different section.

IRS Form 1023 Schedule E: Retroactive Reinstatement With Reasonable Cause

This option applies if the organization is ineligible for streamlined reinstatement and submits the application no later than 15 months after the later of the date of the Revocation Letter or the IRS posting date.

By selecting this option, the organization attests that required annual returns were filed, the failure to file was not intentional, and procedures have been implemented to ensure future compliance.

The organization must describe how it exercised ordinary business care and prudence in determining and attempting to comply with filing requirements in at least one of the three years of revocation. The explanation must include the facts and circumstances that led to the failure, how the failure was discovered, and the steps taken or planned to avoid future failures.

IRS Form 1023 Schedule E: Reinstatement Filed After 15 Months

This option applies if the organization is applying for reinstatement more than 15 months after the later of the date of the Revocation Letter or the IRS posting date.

By selecting this option, the organization attests that required annual returns were filed, the failure to file was not intentional, and procedures have been implemented to ensure future compliance.

The organization must describe how it exercised ordinary business care and prudence in each of the three years of revocation and provide a detailed explanation of the failure, its discovery, and corrective actions taken or planned.

IRS Form 1023 Schedule E: Prospective Reinstatement Only

This option applies if the organization is seeking reinstatement with an effective date equal to the date the application is submitted.

IRS Form 1023 Schedule E: Effective Date of Exemption for Late Filers

If Form 1023 was not filed within 27 months of formation, the effective date of exemption is generally the submission date of the application.

The IRS may grant an earlier effective date if the organization establishes that it acted reasonably and in good faith and that granting relief will not prejudice the interests of the government.

Select whether the organization accepts the submission date as the effective date of exemption or requests an earlier effective date.

IRS Form 1023 Schedule E: Request for Relief From the 27-Month Filing Requirement

An organization may be eligible for relief from the 27-month filing requirement if it can establish reasonable cause and good faith and demonstrate that granting relief will not prejudice the interests of the government.

Provide a detailed explanation of:

• The reasons for filing late
• How the failure to file was discovered
• Any reliance on professional advice or advice from the IRS
• Any other information supporting the request for relief

The organization may also provide a comparison of aggregate tax liability if the application had been filed within 27 months versus liability if exemption were effective from the formation date.

In evaluating the request, the IRS may consider whether:

• The application was filed before the IRS discovered the failure
• The failure resulted from intervening events beyond the organization's control
• The organization exercised reasonable diligence but was unaware of the filing requirement
• The organization reasonably relied on written advice from the IRS
• The organization reasonably relied on the advice of a qualified tax professional