$500 idea · Pattern break · Edition 016
662,000 revoked nonprofits never filed the $275 form that undoes it.
The undoing is not discretionary and it is not hard. Rev. Proc. 2014-11 gives an organization small enough to file a Form 990-N its exemption back retroactive to the revocation date, with the section 6652(c) penalty waived, if it applies “not later than 15 months” after the later of its revocation letter or the day the IRS posted its name. The IRS’s own report on that form: “94% of all Forms 1023-EZ closed to date have been approved,” at an average of 14 days against 97 days for the long Form 1023. And section 6033(j) obliges the IRS to publish, monthly and free, the list of exactly which organizations are inside the window.
The consensus about this list was set on 8 June 2011 by the man who published it. In IR-2011-63, IRS Commissioner Doug Shulman announced that roughly 275,000 organizations had automatically lost tax-exempt status for three years of non-filing, and the release recorded the agency’s belief that “the vast majority of these organizations are defunct.” That sentence has done fifteen years of work. It turned a compliance register into an obituary column, and everyone who has looked at the file since has looked at it as a graveyard.
The count did not stop. Writing in Nonprofit Quarterly on 17 July 2018, Michael Wyland pulled IRS Data Book tables 24, 24a and 25 together with the auto-revocation bulk download and reported that “from the middle of 2010 to the end of 2017, the IRS revoked the tax-exempt recognition of more than 760,000 nonprofit organizations,” and that over the same span “13 percent of all automatically revoked nonprofits have been reinstated by the IRS, totaling just over 98,000 organizations.” Subtract and the figure at the top of this page falls out: 662,000 that did not come back.
Now read the eligibility rule against the death claim, because they contradict each other. The streamlined route in section 4 of Rev. Proc. 2014-11 is open only to an organization that was “eligible to file either Form 990-EZ ... or Form 990-N” for the three years that caused the revocation. That is a size test. The population the IRS called defunct is, by the construction of the remedy, the population of booster clubs, auxiliaries, alumni chapters and volunteer associations too small to have a bookkeeper — which is also precisely the population least likely to read a CP-120A notice, and most likely to still be meeting on a Tuesday with a bank account and a donation box.
The clock is the whole trade. Inside 15 months: one application, one fee, retroactive restoration, and the IRS states it “will not impose the Section 6652(c) penalty” for the three years that caused the revocation. Outside 15 months: the same organization must produce a written reasonable cause statement for all three consecutive years and file every delinquent return. Identical facts, identical form, and a difference in work that is measured in weeks rather than hours. Nothing about the organization changes at month fifteen. Only the price of fixing it does.
And the party holding the clock publishes the names. The Auto-Revocation List carries the revocation date and the posting date for every organization, which means each entry contains its own deadline, arithmetic anyone can do in a spreadsheet, and the IRS “updates the list monthly.” On the other side of the ledger the IRS also publishes, in annual Excel files running 2014 through 2024, the name, EIN and officer names from every approved Form 1023-EZ. One free government file is the prospect list. The other is the competitor’s client list.
Which leaves the question of why a 14-day form is sold as professional work. Foundation Group, whose founder Greg McRay, EA says the firm has taken “over 50,000” organizations through exemption, publishes a reinstatement guide telling nonprofits that IRS review of a Form 1023-EZ runs “2 to 6 months.” The IRS’s own measurement is 14 days. Nobody in the business of selling the remedy has an incentive to correct the estimate, and the agency that could correct it is on record calling the customers dead.
The evidence
8 findingsThe 15-month door, and what is behind it afterwards
Section 4 sets the streamlined route for small organizations: apply “not later than 15 months after the later of the date of the Revocation Letter or the date on which the IRS posted the organization’s name on the Revocation List.” Eligibility is a size test — the organization must have been “eligible to file either Form 990-EZ, Short Form Return Of Organization Exempt from Income Tax, or Form 990-N” for the three years at issue, and must not have been automatically revoked before. The reward is stated plainly by the IRS: “The IRS will not impose the Section 6652(c) penalty for failure to file annual returns for the three consecutive taxable years that caused the organization to be revoked.” Past 15 months the organization drops to the third route, where the reasonable cause statement must establish cause “for all three consecutive years” and every delinquent return must be filed. The procedure is effective “for Applications submitted after January 2, 2014.”
The counterparty is required to publish your lead list
“Organizations that do not file for three consecutive years automatically lose their tax-exempt status,” and the IRS “publishes the list of organizations whose tax-exempt status was automatically revoked.” Cadence, in the agency’s own words: “IRS updates the list monthly.” The authority is not discretionary — the FAQ traces it to “the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780, § 1223 (2006), which added section 6033(j) to the Internal Revenue Code.” The consequences are commercial, not symbolic: the organization is “removed from the cumulative list of tax-exempt organizations, Publication 78,” donors lose deductibility once the publication appears, and the entity “may be required to file” Form 1120 or Form 1041 “and pay any applicable income taxes.” The file carries revocation dates and posting dates, which is to say every row contains its own expiry.
The sentence that built the consensus: “vast majority ... are defunct”
The release that created the list also created the reading of it. Approximately 275,000 organizations had lost exemption, and the IRS recorded its belief that “the vast majority of these organizations are defunct,” while allowing that some legitimate groups, particularly very small ones, may not have known they had a filing requirement. Commissioner Doug Shulman: “During the past several years, the IRS has gone the extra mile to help make tax-exempt groups aware of their legal filing requirement and allow them additional time to file.” The agency simultaneously offered small organizations a reduced reinstatement fee of $100 against the then-standard $400 or $850 — an odd courtesy to extend to the dead.
760,000 revoked, 98,000 reinstated
Wyland’s count is assembled from IRS Data Book tables 24, 24a and 25 for 2007–2017 plus the automatic revocation bulk download file. “From the middle of 2010 to the end of 2017, the IRS revoked the tax-exempt recognition of more than 760,000 nonprofit organizations.” The first wave was the bulk of it: the FY2010 and FY2011 revocations hit “more than 450,000 nonprofits,” including the 275,000 charities and private foundations in Shulman’s release. And the recovery rate: “For the years 2010 through 2017, 13 percent of all automatically revoked nonprofits have been reinstated by the IRS, totaling just over 98,000 organizations.” The same piece records what the easy form did to application volume — 501(c)(3) approvals went from “37,000 in 2013 to 94,000 in 2014.”
94% approved, 14 days, five denials in 87,954
The agency’s own assessment of the instrument it is selling. “Overall, 94% of all Forms 1023-EZ closed to date have been approved.” On speed: “the average processing time for the form has been 14 days, as compared to the average processing time of 97 days for the traditional, longer Form 1023.” On volume and outcome across FY2014–FY2016: 87,954 Forms 1023-EZ received, “about 55% of the aggregate Forms 1023 and Forms 1023-EZ received”; 4,152 rejected, of which 1,722 (41%) reapplied; and 5 denials. Even inside the pre-determination review sample — 2,440 applications pulled for scrutiny — approximately 79% were approved. This is not a document that gets argued. It gets processed.
The whole priced input is $275
“The user fee for Form 1023-EZ is $275” against “$600” for the long Form 1023, paid “through Pay.gov when the application is filed.” There is no licence, no bond, no registration and no approved-preparer list anywhere in the transaction; the fee is the transaction. And the agency publishes the other half of the market too: from the 1023-EZ approvals page, annual Excel files covering 2014 through 2024 carry organization name, EIN, officer, director and trustee names, organizing documents, state of incorporation and stated purpose for every approved application. Who was revoked and who was restored are both free downloads from the same website.
The clearing price today: $350, ten-day delivery
A live listing for precisely this service, not a quote from a brochure. One tier at $350, ten-day delivery, covering IRS auto-revocation resolution, Form 990 catch-up strategy, compliance review and corrective action planning, with 30 consulting minutes attached. The seller shows 44 orders completed and a 5.0 rating on a single review. Set that against the incumbent framing: Foundation Group, founded by Greg McRay, EA, states it has taken “over 50,000” organizations through exemption and “helped thousands of nonprofits get reinstated,” and its published reinstatement guide tells the reader IRS review of a Form 1023-EZ runs “2 to 6 months” — against the agency’s own measured 14 days. The spread between those two numbers is the margin in this trade.
14.3 jobs a month, or 0.33% of one month’s revocations
The plotted figures first. Exit bands are drawn at 0.5 px per percentage point: 13% → 6.5 px, 87% → 43.5 px, and the tap at 0.0221% → 0.011 px, below the renderer’s useful minimum, so it is stroked at 0.5 px and labelled as such. Now the stock and flow. Headline residual: 760,000 − 98,000 = 662,000 never reinstated; 98,000 ÷ 760,000 = 12.89%, which the source rounds to 13%. Monthly inflow: the FY2010–2011 wave of 450,000 is a one-off backlog, so 760,000 − 450,000 = 310,000 revocations across FY2012–FY2017, six years, giving 310,000 ÷ 6 = 51,667 a year and 51,667 ÷ 12 = 4,306 a month. Standing stock inside the cheap remedy: 4,305.6 × 15 months = 64,583 organizations. The ladder: $5,000 ÷ $350 = 14.3 jobs a month, $60,000 ÷ $350 = 171 a year. As a share: 14.29 ÷ 4,305.6 = 0.332% of each month’s new revocations, or 14.29 ÷ 64,583 = 0.0221% of the standing window. Client economics: $275 user fee + $350 service = $625 to restore exemption retroactively and have the three-year penalty waived. The $500: nothing in this trade is for sale, so the stake is float — $275 fronted to Pay.gov for the first client, $225 left over. Three figures are soft and are not hardened here. The 760,000 and 98,000 counts are measured through the end of 2017 and are the most recent whole-programme totals found; the IRS bulk revocation file itself was not reachable from this run, so the monthly flow assumes the FY2012–2017 pace has continued. The $350 is one live marketplace listing, not a published rate card — the large compliance firms publish no price for reinstatement at all, which is itself informative. And the 14-day processing average is from the IRS’s second-year review of Form 1023-EZ, not from a current measurement.
The ladder
From $500 to $5,000 a monthSeven rungs. Every input except one is published by the agency that is also the counterparty.
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Sort the file by posting date, not by name
Rev. Proc. 2014-11 runs its 15 months from the later of the revocation letter and the day the IRS posted the name. The Auto-Revocation List carries both dates, so every row on it contains a computable expiry. Build the list the only way it is worth building: ordered by how little time is left. An organization at month 13 is a different product from one at month 2.
15 months · from the later of letter or posting -
Take the list the counterparty is obliged to publish
Section 6033(j), added by the Pension Protection Act of 2006, requires the publication. The IRS updates the list monthly and charges nothing for it. Prospecting cost in this trade is not low because you are resourceful; it is zero because Congress ordered somebody to post the names, addresses and dates of every organization in distress.
6033(j) · monthly · $0 -
Fish only in the 990-N tier
The streamlined route is limited to organizations that were eligible to file Form 990-EZ or Form 990-N for the three years that caused the revocation, and that have not been auto-revoked before. That size test is the filter. It also tells you who these entities are: too small for a bookkeeper, which is why they missed the notice, and why nobody has called them.
990-EZ or 990-N · no prior revocation -
Sell the deadline, not the expertise
The IRS approves 94% of these forms in an average of 14 days and denied five of 87,954. You are not selling difficulty. You are selling the difference between section 4 of Rev. Proc. 2014-11 and section 6 of it — one form against three reasonable cause statements plus every delinquent return. Price the clock. The clock is the asset.
94% approved · 14 days · 5 denials -
Know the line you are not allowed to cross
The application is signed by an officer, director or trustee of the organization, not by you, and preparing a document somebody else signs is not practice before the IRS. Representing the organization in correspondence with the agency is a different activity and is restricted to attorneys, CPAs and enrolled agents. Build the service so the officer signs and the officer answers. That boundary is also what keeps the work fast.
officer signs · representation needs a credential -
Price against free, not against a law firm
Your client can do this themselves for $275 at Pay.gov and some will. The live marketplace rate for having it done is $350, and the incumbents publish no price at all while telling readers the IRS takes two to six months. You are competing with an information gap, not with a cost structure, so the fee has to sit where a treasurer will pay it without convening a board.
$275 DIY · $350 market · $625 all-in -
Spend the $500 on the first fee, not on equipment
There is no licence to buy, no bond to post, no software to subscribe to and no registry to join. The only cash that moves before you are paid is the user fee, so the stake is one fronted $275 payment to Pay.gov with $225 behind it. If a cost in this trade has a logo on it, you have been sold something the statute does not require.
$275 fronted · $225 float · $0 licence
Sources
11 primary documents- IRS, Rev. Proc. 2014-11 — effective 2 Jan 2014
- IRS, Automatic revocation — how to have your tax-exempt status retroactively reinstated — current
- IRS, Automatic revocation of exemption — current
- IRS, Automatic Revocation of Exemption for Non-Filing: FAQs — current
- IRS news release IR-2011-63 (Commissioner Doug Shulman; ~275,000 organizations) — 8 Jun 2011
- Michael Wyland, "How Many Nonprofits Are There?", Nonprofit Quarterly — 17 Jul 2018
- IRS, Form 1023-EZ Update Report (94% approved; 14 days vs 97) — second-year review
- IRS, Form 1023 and 1023-EZ: amount of user fee ($275 / $600) — reviewed 28 Jun 2026
- IRS, Exempt Organizations Form 1023-EZ approvals data (2014–2024) — current
- Fiverr, seller preservevets ("Dr. Maxine") — nonprofit reinstatement, $350, 44 orders — listed 2026
- Foundation Group (Greg McRay, EA), An Essential Guide to Reinstating A Nonprofit — 2026
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