...a CPA's random thoughts...
Cornerstone CPA Scores a Huge Compliance Victory for Client
It is rare that I will write about the work my firm or I perform for clients. I will not divulge any confidential information. Still, there are times, however, where a victory is so pleasing that it is worth mentioning.
Eighteen months ago (this post was written 3/28/19), I started working with a 501(c)(3) whose tax-exempt status had been automatically revoked by the IRS for failure to file required Form 990 for three consecutive years. This is not the first time I have seen such action by the IRS, and it will not be the last–a simple search of the IRS EO database reveals just how many non-profit entities have their tax-exempt status revoked. I will not state the causes behind the 990s not being filed, other than to say the 501(c)(3) was not entirely at fault. And before you wonder, it is not a local 501(c)(3).
For protection of my client and others involved that contributed to the automatic revocation by the IRS, I will also say it was not a simple task to prepare the compliance and Form 1023 filings under Revenue Procedure 2014-11, Section 6. An unbelievable amount of information had to be gathered and sorted through. Five years of 990s had to be prepared and filed. Form 1023 and user fee had to be prepared and filed. A lengthy reasonable cause statement had to be prepared and signed to under penalty of perjury. Contributors were not allowed to deduct their charitable contributions during the period the automatic revocation was active. A serious mess? Absolutely. Did unknowns exist as to how the IRS would respond? Certainly, and the unknowns were concerning.
The primary concern with resolving this automatic revocation was not that the IRS would deny tax-exempt status, though it definitely remained a remote possibility. It was that they would deny the request for retroactive reinstatement under Rev. Proc. 2014-11, and instead make it effective the filing date of Form 1023. This would have been very harmful for the 501(c)(3) and its received contributions, which were not deductible by donors during the period. This amounted to a large sum of money. Fortunately, we were able to file and provide such sufficient reasonable cause and support that, even more than 15 months past the initial automatic revocation posting date, the IRS granted our request for a retroactive reinstatement. While the entire process took 18 months, it took 10 months to gather required information and prepare all forms, and 8 months for the IRS to process and grant a decision. Several times during this process, I was traveling and spent hours of time in Delta Sky Club Lounges remotely accessing information while filing Powers of Attorney and having discussions on the phone with the IRS.
Yes, this is a large compliance victory for Cornerstone CPA Solutions. It is a big victory for our client. It is a relief for contributors that were unable to claim charitable deductions, and now they can by amending their tax returns.
Proud? Absolutely. This just reinforces why Cornerstone CPA has earned its reputation, and client retainage remains so high.
Greg Bennett, CPA