The IRS this month revoked hundreds of Richmond nonprofits’ tax-exempt status.
The agency announced June 9 that 275,000 nonprofits nationwide lost their tax-exempt status for failing to submit an annual information return for three consecutive years. The IRS revoked 6,277 nonprofits from Virginia and 724 from Richmond.
The revocations stem from a law designed to keep up with groups that qualify for tax-exempt status.
The 2006 Pension Protection Act required most tax-exempt organizations to file an annual information return or notice, such as a Form 990, with the agency. Churches and other religious groups are excluded because they are not required to file an annual return.
The IRS said on its website that most of the groups whose statuses were revoked this month are no longer in existence.
An organization must fill out a lengthy application to have its tax-exempt status reinstated, even if it was not originally required to file an application for exemption.
(You can explore the entire Excel spreadsheet here.)
And it could come at a hefty price.
It can cost organizations up to $850, according to the IRS, to apply for reinstatement. Nonprofits with average annual gross receipts over $10,000 a year for a four-year period must fork over $850 if they want to be reinstated.
If the organization’s gross receipts do not exceed $10,000 for that same time period, then they are only required to pay a $400 user fee.
Smaller organizations, or those with annual revenue of $50,000 or less for 2010, are only required to pay a $100 application fee to be reinstated. The law didn’t apply to these groups until a year after Congress passed the PPA.
Without tax-exempt status, charities can lose tax benefits, and donors who make contributions to their organizations cannot claim a deduction on their tax returns. People who donated to the organizations before their status was revoked can still claim the deductions, according to the IRS.
Some of the Richmond organizations whose statuses were revoked are the Association of Camps Farthest Out, the Digital Literacy Foundation, Youth Connections, A Child’s Worth and the Safety Council of Virginia.
Darcy Oman, president and chief executive of the Community Foundation, said a national chapter’s status could determine the fate of local chapters regardless of their status.
“Local chapters of national organizations lose their group exemption even if the local chapter has filed and the national organization has not,” Oman said.
She said the foundation, which works with donors to award grants to nonprofits, couldn’t award funds promised to the local chapter of Black Data Processing Associates because the national organization’s status had been revoked.
“The program helps youth gain experience for a career path in information technology,” Oman said. “Since the national Black Data Processing Associates is on the revocation list, we are unable to grant to the local chapter until such time as their exempt status is reinstated.”
Oman said the foundation is taking steps to make local nonprofits aware of what they need to do to keep from being revoked.
“TCF staff is checking each grant recommendation against the IRS revocation list and is documenting its research in the foundation’s database,” Oman said. “This additional step helps to ensure that no grant checks will be issued to ineligible organizations.”
The number of nonprofits on the revocation could grow beyond the 275,000 that have already lost their statuses. The IRS recently announced it will be sending out updated monthly lists of organizations that have lost their tax-exempt status.
The IRS this month revoked hundreds of Richmond nonprofits’ tax-exempt status.
The agency announced June 9 that 275,000 nonprofits nationwide lost their tax-exempt status for failing to submit an annual information return for three consecutive years. The IRS revoked 6,277 nonprofits from Virginia and 724 from Richmond.
The revocations stem from a law designed to keep up with groups that qualify for tax-exempt status.
The 2006 Pension Protection Act required most tax-exempt organizations to file an annual information return or notice, such as a Form 990, with the agency. Churches and other religious groups are excluded because they are not required to file an annual return.
The IRS said on its website that most of the groups whose statuses were revoked this month are no longer in existence.
An organization must fill out a lengthy application to have its tax-exempt status reinstated, even if it was not originally required to file an application for exemption.
(You can explore the entire Excel spreadsheet here.)
And it could come at a hefty price.
It can cost organizations up to $850, according to the IRS, to apply for reinstatement. Nonprofits with average annual gross receipts over $10,000 a year for a four-year period must fork over $850 if they want to be reinstated.
If the organization’s gross receipts do not exceed $10,000 for that same time period, then they are only required to pay a $400 user fee.
Smaller organizations, or those with annual revenue of $50,000 or less for 2010, are only required to pay a $100 application fee to be reinstated. The law didn’t apply to these groups until a year after Congress passed the PPA.
Without tax-exempt status, charities can lose tax benefits, and donors who make contributions to their organizations cannot claim a deduction on their tax returns. People who donated to the organizations before their status was revoked can still claim the deductions, according to the IRS.
Some of the Richmond organizations whose statuses were revoked are the Association of Camps Farthest Out, the Digital Literacy Foundation, Youth Connections, A Child’s Worth and the Safety Council of Virginia.
Darcy Oman, president and chief executive of the Community Foundation, said a national chapter’s status could determine the fate of local chapters regardless of their status.
“Local chapters of national organizations lose their group exemption even if the local chapter has filed and the national organization has not,” Oman said.
She said the foundation, which works with donors to award grants to nonprofits, couldn’t award funds promised to the local chapter of Black Data Processing Associates because the national organization’s status had been revoked.
“The program helps youth gain experience for a career path in information technology,” Oman said. “Since the national Black Data Processing Associates is on the revocation list, we are unable to grant to the local chapter until such time as their exempt status is reinstated.”
Oman said the foundation is taking steps to make local nonprofits aware of what they need to do to keep from being revoked.
“TCF staff is checking each grant recommendation against the IRS revocation list and is documenting its research in the foundation’s database,” Oman said. “This additional step helps to ensure that no grant checks will be issued to ineligible organizations.”
The number of nonprofits on the revocation could grow beyond the 275,000 that have already lost their statuses. The IRS recently announced it will be sending out updated monthly lists of organizations that have lost their tax-exempt status.
Non-profits around America are being hammered by the recession, but they’re not being hammered enough for the federal government. When revenues are down the greedy government wants more taxes. Yet another reason why government must shrink, not grow.
This development has been nearly five years in the making, starting with passage of the Pension Protection Act of 2006 which included a provision calling for automatic revocation of tax-exempt status for exempt organizations that fail to file the requisite Form 990 returns (including the new Fom 990-N “e-postcard” applicable to smaller exempt organizations) for three consecutive years. To its credit, the IRS waged a significant outreach campaign in recent years to alert the nonprofit community of this impending crisis, going so far as to grant an amnesty extension period last year for deliquent organizations to avoid losing their tax-exempt… Read more »
Just do the paperwork! This is not evil governement harassing decent people: this is a little paperwork designed to ensure that fake charities don’t scam money from decent people.
The Transitional Relief the IRS is offering small revoked groups is one of the best deals I have seen in my four decades of professional involvement with non-profit taxes. If you can honestly say there is still a need for your non-profit, and you feel you can muster the human and other resources needed to sustain it, don’t pass up this opportunity to regain your tax exempt status. There are no shortcuts. You will have to fill out a new exemption application and pay an IRS User Fee. But for organizations with annual gross receipts normally less than $50,000, the… Read more »