Home / Resources / What happens when you lose tax-exempt status
Guide for nonprofits · checked 10 October 2026
What happens when a nonprofit loses its tax-exempt status
Updated October 2026
When a nonprofit loses its tax-exempt status, it doesn't close. It's no longer exempt from federal income tax, and it may need to file Form 1120 and pay tax from the revocation date. Gifts made after the IRS publishes its name on the revocation list aren't tax-deductible, and state exemptions may end too. It can apply to get its status back.
What changes, and when
If the IRS letter just landed, start here. Each row links the IRS page that says so.
| What | What changes, and when | Source |
|---|---|---|
| Federal income tax | No longer exempt from the revocation date, the due date of your third missed annual filing. You may need to file Form 1120 (or Form 1041 for a trust) and pay any tax owed. | IRS |
| Donors' deductions | Donors who don't know about the revocation can deduct gifts until the IRS publishes your name on its revocation list. After that, nobody can. | IRS FAQs |
| IRS search listing | Once you're revoked, Tax Exempt Organization Search stops listing you as able to receive deductible gifts and shows you on its revocation list instead. | IRS |
| State exemptions | Property, sales or other state tax exemptions may end. It depends on your state. | IRS |
| The public list | Your name goes on the IRS's revocation list, updated monthly, and stays there even after you're reinstated. | IRS FAQs |
Not sure where you stand? Our free tax-exempt status check looks up your organization by name or EIN in the IRS's own lists.
Does the nonprofit still exist?
Yes. Revocation takes away your federal tax exemption, not your organization. Closing a nonprofit is its own step, done under state law (IRS). Until you take that step, your group keeps going as a taxable organization. You can keep running programs, paying staff and doing the work, and what changes is how you're taxed and what your donors can deduct.
A private foundation that loses its exemption stays a private foundation. It still files Form 990-PF every year and still owes the excise taxes that come with it (IRS FAQs).
Do we have to pay federal income tax now?
You might. Once your status is revoked, you're no longer exempt from federal income tax. The IRS says you may need to file Form 1120, the corporate income tax return, or Form 1041 if you're a trust, and pay any tax due (IRS).
A few other points from the IRS's FAQs (IRS FAQs):
- Old penalties. The IRS says it won't charge late-filing penalties for the three years you missed, or for earlier years. You don't need to file those old returns now, unless your route back asks for them.
- Taxes already owed. Any tax or penalty you owed when you were revoked is still owed.
- Filing from here on. Keep up with every filing that comes due after the revocation, so new penalties don't start.
If your status is later restored for that time, you can ask the IRS to remove the tax or penalty, or file an amended return for a refund (IRS FAQs). Whether you owe tax depends on your income, so this is the point to talk to a CPA.
Are donations still tax-deductible?
Not after the IRS lists you. Gifts made before your name appears on the IRS's revocation list stay deductible for donors who didn't know about the change. Gifts made after that day aren't, unless your status is later restored back to the date you lost it (IRS FAQs).
Tax Exempt Organization Search, the tool donors and funders use to check whether a gift is deductible, stops listing you as able to receive deductible gifts and shows you on its revocation list instead (IRS). Once you're reinstated, gifts are deductible again. Donors can rely on your new determination letter from the date it gives, which for some groups reaches back to the day the status was lost (IRS).
Until then, don't tell anyone a new gift is tax-deductible. Tell donors plainly what happened and what you're doing about it.
What happens to our state tax exemptions?
That depends on your state. The IRS doesn't speak for the states. It says some may end property, sales or other tax exemptions for groups on the revocation list, or ask you to tell state officials or the public about the change (IRS).
Call your state's tax office and its charity regulator, and ask two questions: what changes for you now, and how to restore it once you're reinstated. Our guide to charity registration by state covers many states' charity offices.
What about grants and charity listings?
Expect questions. A funder that checks Tax Exempt Organization Search won't see you there as eligible for deductible gifts (IRS). A funder that gives only to 501(c)(3) groups may have to pause its grant until you're back. Tell your funders before they find out on their own.
Two less common cases are urgent if they apply to you (IRS FAQs):
- A 403(b) retirement plan. Only a 501(c)(3) or an educational organization can sponsor one, so losing your status can create an eligibility problem for the plan. The IRS has a correction process.
- Tax-exempt bonds. If you borrowed through qualified 501(c)(3) bonds, the bonds' own tax status can be at risk, and the usual fix must happen within 90 days of the third missed due date, which may already have passed. Call your bond counsel now.
Can we appeal the revocation?
No. When a group misses its filing three years in a row, the law ends its status on its own. Nobody at the IRS decides it, so the IRS can't undo it, and there's no appeal (IRS FAQs).
The one exception is a mistake. If you did file in one of those three years, or you have an IRS letter saying you don't have to file, and nothing has changed since, send the IRS your proof. If it holds up, the IRS takes your name off the list (IRS FAQs).
How do we get tax-exempt status back?
You apply for it again. A 501(c)(3) files Form 1023-EZ ($275) or Form 1023 ($600) on Pay.gov (IRS), using the EIN it already has (IRS FAQs).
Your new status usually starts on the day you apply. It can reach back to the day you lost it in some cases (IRS):
- Small groups, first time, within 15 months. If you could file the 990-N e-Postcard or the 990-EZ in each missed year, have never been revoked before, and apply within 15 months of your IRS letter or the day you were listed, whichever is later.
- Everyone else, with a reason. Other groups can ask for the same, with a reasonable cause statement and the returns they missed. After 15 months, the reason has to cover all three years.
Our step-by-step guide to getting tax-exempt status reinstated walks through all four routes, the forms and the wait.
Will our name stay on the IRS revocation list?
Yes, for good. The list is the IRS's official record of every group that lost its status this way, so your name stays even after you're reinstated (IRS FAQs). The IRS adds your reinstatement date to the entry (IRS). Your new determination letter is your proof, so keep a copy handy for funders.
Wondering how common this is? Our study of the IRS list counts the nonprofits that lost their status in every state.
What to do first
Check where you stand
Run our tax-exempt status check, or search the IRS's Tax Exempt Organization Search. Write down your revocation date and the date you were listed.
Find the IRS letter
The IRS mails a letter to the last address it has for you (IRS FAQs). If it went to an old address, the dates in the search are enough to start.
Rule out a mistake
If you did file in one of those three years, send the proof before you do anything else.
Talk to a tax professional
Ask a CPA whether you owe an income tax return for the time you're not exempt, and which route back fits you.
Tell the people who count on you
Your board, your donors and your funders. Stop calling new gifts tax-deductible until you're back.
Call your state
Ask the state tax office and the charity regulator what changes now, and what to send once you're reinstated.
Apply to get it back
Mark your 15-month date on a calendar. Applying sooner keeps more routes open.
Give the yearly filing one owner
Know your form and your due date, and set a reminder a month ahead. See which Form 990 you file and the Form 990 deadline.
It's a hard letter to open. Take it one step at a time, and your group gets back to the work that matters.
This is general information, not legal or tax advice. Each fact was checked against the IRS source on 10 October 2026. Your situation may differ, so ask a CPA or tax lawyer how it applies to your organization before you file a tax return or tell donors anything about deductions.
Where Ember fitsKeep the 990 on someone's calendar
Ember's Compliance app builds your filing calendar from a few answers about your organization, including your 990. The person who owns a filing gets an email 30 days before it's due, a week before, and on the day. It's free if your budget is under $50K a year.
Sources: IRS: Automatic revocation of exemption (updated 28 Jun 2026), IRS: Automatic revocation FAQs (PDF), IRS: Deductibility of contributions to organizations on the revocation list (updated 9 Oct 2026), IRS: Effect on state rights and obligations (updated 28 Jun 2026), IRS: Reinstatement of tax-exempt status after automatic revocation (updated 28 Jun 2026), IRS: How to have your tax-exempt status reinstated (updated 6 Jul 2026), IRS: Form 1023 and 1023-EZ user fee (updated 9 Oct 2026), IRS: Termination of an exempt organization (updated 28 Jun 2026), IRS: Tax Exempt Organization Search. All read 10 October 2026.