43-1212. Denial of exempt status due to prohibited transactions; restoration of exempt status

A. An organization that is denied exemption from federal income tax for engaging in prohibited transactions as provided by section 503 of the internal revenue code is also denied exemption under section 43-1201. The denial applies to taxable years after the taxable year during which the organization is notified by the department or by the United States internal revenue service that it has engaged in a prohibited transaction, unless the organization entered into the prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purposes and the transaction involved a substantial part of the corpus or income of the organization.

B. An organization that is denied an exemption pursuant to subsection A of this section with respect to any taxable year following the taxable year in which the notice was received may have its exempt status under section 43-1201 restored at the same time the organization's exempt status is restored for federal income tax purposes under section 503 of the internal revenue code.