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Monday, April 26, 2010

NY Times: 20%-25% of Charities to Lose Their Tax-Exempt Status on May 15

New York Times, 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. ...

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 IRS to revoke the tax exemptions of groups that failed to file for three consecutive years. Three years have passed, and thus the deadline looms.

(Hat Tip: Ann Murphy.)

http://taxprof.typepad.com/taxprof_blog/2010/04/ny-times-2025.html

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Tracked on Apr 26, 2010 4:44:54 AM

Comments

How will anyone know which charities have lost their tax-exempt status?

Sounds ripe for mischief, no?

Posted by: JohnG | Apr 26, 2010 11:04:05 AM

In an administration that pats tax cheat Tim Geithner on the head and awards him a big fat sinecure without any penalty for his tax cheating, the way to solve this ambush against charities is fully paved and ready to travel. Obama can simply pronounce a benediction on the charities and excuse them their sins, and all will proceed as before.

Unless, of course, that 2006 tax measure was passed by the newly-Democratic Congress which had all sorts of reasons for depriving charities of tax-free contributions, which might otherwise go to the SEIU or ACORN or some more worthy cause. What, pray, was Senator Obama's vote on the issue?

Posted by: Insufficiently Sensitive | Apr 26, 2010 11:19:43 AM

It seems eminently reasonable to require organizations with tax-exempt status to file a return at least every three years, so the IRS knows they are still active. Is this some onerous provision put in as stealth legislation to undercut the small non-profits? That seems a preposterous conclusion to draw, given no evidence at all to that effect.

Also, Republicans still controlled Congress in 2006, although they were on their way to losing it and knew it, which begat some strange legislation. This wasn't among that, though.

Posted by: Estragon | Apr 26, 2010 12:29:35 PM

Obama (D-IL), Yea

Posted by: socal grinch | Apr 26, 2010 12:37:34 PM

That's OK. The only charity we need is the all knowing, all-caring State.

Posted by: West | Apr 26, 2010 12:38:32 PM

What's not explained in this short article, is that charities that are associations (such as associations of garden clubs, Kiwanis clubs, 4H clubs, etc) fall under this law even though the individual clubs themselves do not have revenues anywhere near $25000 yearly. If the larger umbrella organization does, then every club under its umbrella had better file (an E-Postcard, available only electronically - note the average garden club member's age is easily 65+ and they aren't in garden clubs to share computer tips) or the entire organization will lose its tax-exempt status.

Posted by: Garden Club Treasurer | Apr 26, 2010 1:58:42 PM

" Posted by: Insufficiently Sensitive | Apr 26, 2010 2:19:43 PM

It seems eminently reasonable to require organizations with tax-exempt status to file a return at least every three years, so the IRS knows they are still active. Is this some onerous provision put in as stealth legislation to undercut the small non-profits? That seems a preposterous conclusion to draw, given no evidence at all to that effect.

Also, Republicans still controlled Congress in 2006, although they were on their way to losing it and knew it, which begat some strange legislation. This wasn't among that, though."

The first part of your comment is correct. The second part is just uncalled for snark that detracts from your observation.

There is nothing unresonable for the IRS to require any entity that is still active to file a tax return. Either it has taken in revenues or it has not. Either it has made a profit or it has not. Either it has complied with the tax excempt regulations or it has not. I'm no fan of the IRS in general or democrats in particular but a broken clock is right twice a day.

Posted by: cubanbob | Apr 26, 2010 3:11:25 PM

Did this change apply to religious non-profits?

Posted by: Stephanie | Apr 28, 2010 7:46:22 AM