Hi listers:
I assume we’re all in compliance by filing 990s or the
eform, but just in case……. This NY Times article was just
sent by our local NFP Foundation group, and since I hadn’t seen anything
about it recently on Museum-L I thought I should pass it on.
Lucy Sperlin
MILLIONS OF CHARITIES WILL LOSE
TAX EXEMPTION
One-Fourth of Nonprofits Are to Lose Tax
Breaks
By STEPHANIE STROM
As many as 400,000 nonprofit organizations are weeks away from a
doomsday. At midnight on May 15, an estimated one-fifth to one-quarter of
some 1.6 million charities, trade associations and membership groups will lose
their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed
at pension reform.
"It's going to be an unholy mess once these organizations realize what's
happened to them," said Diana Aviv, president of the Independent Sector, a
nonprofit trade group.
The federal legislation passed in 2006 required all nonprofits to file tax
forms the following year. Previously, only organizations with revenues of
$25,000 or more - or the vast majority of nonprofit groups - had to file.
The new law, embedded in the 393 pages of the Pension Protection Act of 2006,
also directed the Internal Revenue Service to revoke the tax exemptions of
groups that failed to file for three consecutive years. Three years have
passed, and thus the deadline looms.
Bill Solomon, who founded Titan Youth Development in
"It was merged with another nonprofit - or I guess more like operated
under the other nonprofit," Mr. Solomon said. "I let this one be
dormant for a while."
He said Titan had brought in about $100,000 in revenue in 2009 through fees for
service and private donations, so although he did not know about the law, he
has an accountant working to prepare tax forms.
The I.R.S. has long complained it lacks adequate data on nonprofit groups
because so many of them did not file tax forms. Without basic facts about
organizations, the agency has little chance of overseeing one of the most
generous tax breaks the federal government offers.
Donors, whose appetite for information about nonprofit groups has increased
exponentially in recent years, also struggle, said Robert G. Ottenhoff, who
runs GuideStar, an online database of nonprofit tax forms and analysis that
many donors rely on. "This is a good thing for the nonprofit sector, even
though it will no doubt create a hardship for a pretty significant number of
organizations," Mr. Ottenhoff said.
Ms. Aviv agreed, though she said she wished Congress had asked the I.R.S. to
suspend, rather than revoke, the exemptions of nonprofits that miss the
deadline.
"We need some way of tracking organizations," she said. "The
system we have right now gives you no real idea of who's in and who's not - and
how can you manage a system if you don't know who's in or out of it?"
The I.R.S. would rather not revoke exemptions, either, and it has made a
Herculean effort to let organizations at risk know it. For example, in 2007, it
sent 665,000 letters to nonprofit groups that fell below the $25,000 threshold
and those above that level that had not filed.
Lois G. Lerner, director of the exempt organizations division of the I.R.S,
said that while groups would lose their exemptions effective May 16, the I.R.S.
would probably not send out notices until January to give nonprofits a chance
to bring themselves into compliance with the law. Donors to affected groups
will be able to take a deduction for gifts until formal notification is received
by the recipient organization.
Small organizations are the most likely to be hit. Experts say it is likely
that many of them are inactive and were unaware of the requirement that they
inform the I.R.S. when they closed their doors.
"We are moving very cautiously," Ms. Lerner said. "The last
thing we want to do is revoke the exemption of someone who has already
filed."
Originally Published: New York Times April
22, 2010
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