Speaking of tax-exempt organizations, new IRS rule is cutting them off, at least those without high paid "representatives" in Congress:
Small non-profits risk losing tax-exempt status
An IRS rule change announced four years ago hits on Monday.
By: John Myers, Duluth News Tribune
Hundreds of small organizations across the Northland, most formed years ago to do good deeds in their community, face the wrath of the Internal Revenue Service next week if they don’t update their federal tax status in the next few days.
An IRS crackdown on “deadwood’’ charities, those that aren’t really doing anything, has been in the works since 2006. It’s hitting home this month with as many as 400,000 groups nationwide in danger of losing their nonprofit status, some 4,400 in Minnesota alone.
According to the Minnesota Council of Nonprofits, about 557 groups in Northeastern Minnesota hadn’t filed as of May 1 — including the Askov Rutabaga Festival, Bennettville Cemetery Association near Aitkin, the Independent Order of Oddfellows in Babbitt and the Two Harbors Kayak Festival.
“I’ve never heard of this. I haven’t seen anything on it,’’ said Lori Bergman, business manager of the Kayak Festival. The event, in its 13th year, routinely handles less than $25,000. Bergman said she’s not sure why the IRS hasn’t notified her. “We’ll have to figure this out quick.’’
It’s not clear how many of the groups that haven’t yet complied are defunct. But across the state, still-active 4H clubs, veterans’ organizations, labor unions, Little Leagues, parent-teacher groups and many more may need to act quickly to hold their status and avoid a costly reapplication fee.
“We’ve been trying to contact as many of these groups as possible over the past two weeks. But we aren’t getting through to all of them,’’ said Christine Durand, spokeswoman for the nonprofits council. “It’s the small groups run by volunteers, where the leadership and contact information changes often, that we and the IRS are having a problem finding. And they are the groups that may be hardest hit if they have to reapply.’’
The Lake Superior Chapter of Muskies Inc. also was listed by the Minnesota Council of Nonprofits as not having filed with the IRS. But Dustin Carlson, president of the group, said they’ve resolved the issue.
The small sporting group with an annual budget of less than $10,000 holds educational seminars, take-a-kid fishing events and veteran fishing events, as well as helping to pay for conservation and resource efforts.
“We definitely don’t want to lose that tax-exempt status,’’ he said. “A lot of local businesses and people donate to us and we need that (status) to keep it going.’’
The leaders of nonprofit groups can file with the IRS online any time of day. It only takes a few minutes, Durand said.
Starting Monday, any nonprofit that hasn’t filed a new tax form will lose the federal status that enables groups to raise money tax-free and encourages contributions because they are tax-deductable for donors.
If they miss Monday’s deadline, the groups will have to start paying taxes on the money they raise. Once nonprofit status is revoked, it will cost each group $750 to reapply. That might be a huge cost for small groups.
“And, in addition to the cost, it’s a really long form and process to fill out to reapply,’’ Durand said.
Until Congress changed the law in 2006, most nonprofits that raised less than $25,000 a year didn’t have to file tax returns. Of Minnesota’s 35,000 nonprofit groups, about 15,000 needed to file the new tax forms in 2010. At the start of this month, 4,474 501(c)(3) nonprofits in the state still hadn’t filed, Durand said. |
