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There are many reasons why a 501(c) tax-exempt organization might consider restructuring. For example, a financially struggling nonprofit might decide to join forces with another organization to cut costs and share resources. Or a nonprofit might decide to change its state of organization. Such changes generally qualify for a simplified restructuring process. However, it\u2019s important to follow certain\u00a0steps.<\/p>\n
An easier process<\/strong><\/p>\n Tax-exempt organizations making certain changes to their structure used to be required to file a new exemption application \u2014 and create a new legal entity. But IRS Revenue Procedure\u00a02018-15 changed the rules regarding nonprofit restructuring. Now, in many cases, nonprofits can simply report a restructuring on their Form\u00a0990. To be eligible for this simpler process, your restructuring must satisfy certain conditions:<\/p>\n First, your organization must be a U.S. corporation or an unincorporated association; be tax exempt as a 501(c) organization; and be in good standing in the jurisdiction where it was incorporated (or, in the case of an unincorporated association, where it was\u00a0formed).<\/p>\n Second, your restructuring must involve one of the following:<\/p>\n Your \u201csurviving\u201d organization is required to carry out the same exempt purpose that the original did. Its new articles of incorporation must continue to satisfy the IRS\u2019s organizational\u00a0test.<\/p>\n When the rules don\u2019t apply<\/strong><\/p>\n There are some additional limitations to using Form\u00a0990 to report a restructuring. For example, the new rules don\u2019t apply if your surviving organization is a \u201cdisregarded entity,\u201d limited liability company (LLC), partnership or foreign business\u00a0entity.<\/p>\n Also, surviving organizations still have reporting obligations \u2014 for instance, to report the restructuring on any required Form\u00a0990 for the applicable tax year. And these rules apply only to federal income tax exemptions. Your state\u2019s laws could require you to file a new exemption application.<\/p>\n Will you qualify?<\/strong><\/p>\n Even though nonprofit restructuring can be straightforward, you should talk to your tax advisors before making a move. It\u2019s possible your plans won\u2019t qualify under Rev. Proc.\u00a02018-15 and that you\u2019ll need to apply for a new exemption and clear other hurdles. Contact us for guidance.<\/p>\n \u00a9 2024<\/em><\/p>\n <\/body> There are many reasons why a 501(c) tax-exempt organization might consider restructuring. For example, a financially struggling nonprofit might decide to join forces with another organization to cut costs and share resources. Or a nonprofit might decide to change its state of organization. Such changes generally qualify for a simplified restructuring process. However, it\u2019s important […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,15],"tags":[8,11,12],"class_list":["post-16917","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-not-for-profit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16917"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16917\/revisions"}],"predecessor-version":[{"id":16918,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16917\/revisions\/16918"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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