Several small nonprofit organizations in central Kansas, including the Barton County 4-H Holding Board in Great Bend and Central Kansas Thread Benders Quilt Guild in Radium, are at risk of losing their tax-exempt status because they missed a tax filing deadline. These organizations can still preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program, the Internal Revenue Service announced last week.
Thousands of small charities in danger of losing their tax exempt status because they failed to file required returns for 2007, 2008 and 2009 have been given a reprieve. The IRS posted on a special page of IRS.gov the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance.
“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”
A 2006 law required nonprofit organizations with receipts of less than $25,000 to file tax returns for the first time in 2007. If charities failed to file for three years, they were going to lose their tax-exempt status. The law excludes churches.
The IRS has identified 325,000 charities that did not file, but many may be defunct. That may be the case with Great Bend’s Downtown Development. City Administrator Howard Partington said the group has received funding from the city in the past but hasn’t been active in recent years.
“We may see if there’s an interest,” Partington said. It may be that a new organization will step in to fill the role of the old Downtown Development group.
Other area agencies on the list included Prairie Arts Unlimited in Larned, LJW Developmental Services in Timken, the Russell Cemetery Association and the St. John Scientific Museum Inc. Several of the state’s American Legion posts or auxiliaries are on the list, including Post 131 in Stafford.
According to Shulman, small organizations can come into compliance online by filing Form 990-N on the IRS Web site. Others may need to pay a compliance fee.
The IRS will keep the list of at-risk organizations on IRS.gov until Oct. 15, 2010. Organizations that have not filed the required information returns by that date will have their tax-exempt status revoked, and the IRS will publish a list of these revoked organizations in early 2011. Donors who contribute to at-risk organizations are protected until the final revocation list is published.
The Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations, effective the beginning of 2007. First, it mandated that all tax-exempt organizations, other than churches and church-related organizations, must file an annual return with the IRS. The Form 990-N was created for small tax-exempt organizations that had not previously had a filing requirement. Second, the law also required that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status. The IRS conducted an extensive outreach effort about this new legal requirement but, even so, many organizations have not filed returns on time.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
The Associated Press contributed to this report