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State of California Franchise Tax Board

Active Versus Inactive Status

An active organization must meet the operational test under California Revenue and Taxation Code Section 23701 in order to be granted tax-exempt status or to maintain its tax-exempt status.

Active organizations may engage in the following activities to support their exempt purpose:

  • Perform their exempt activities.
  • Seek donations.
  • Hold board of directors meetings.
  • Carry out activities that help to establish the organization's operations.

We may revoke an inactive organization's tax-exempt status from the date of inactivity. The organization may then be subject to tax that amounts to the greater of its California income multiplied by the appropriate tax rate or $800 minimum franchise tax.

To avoid revocation, the organization may formally dissolve. For more information, get Publication 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity.

Back to Charities and Nonprofits (Exempt Organizations)

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