One-Fourth of Nonprofits are Set to Lose Tax Exemption

Doomsday is coming…Could 18, 2010 to be actual. No, it has nothing to do with the Mayan calendar ending (that is 2012!). Could 18 is the day that just about 1/four of all US nonprofits discover that the IRS has mechanically revoked their tax exempt standing. If you’re doing the mathematics, that’s practically 400,000 nonprofits. At The Basis Group, we have now sounded the alarm quite a few occasions over the previous a number of months. It looks as if individuals do not begin paying consideration till it’s practically too late.

Take into account this quote from Diane Aviv, president of the Unbiased Sector, a nonprofit commerce group: “It’ll be an unholy mess as soon as these organizations notice what’s occurred to them.”

We implore you to concentrate now earlier than it’s too late.

So, why is that this taking place, what does it imply…and how are you going to keep away from being among the many 400,000?

First, the why. In August 2006, Congress handed the Pension Safety Act of 2006. Because the identify suggests, this explicit invoice was an overhaul of the US code relating to the operation of enormous, company pension funds. Slipped into the invoice in convention committee, nevertheless, was 393 pages of laws which have been progressively affecting 501(c)(three) and different tax exempt entities ever since. Whereas most nonprofits have been comparatively unaffected by the PPA till now, that’s about to alter in essentially the most dramatic of how.

Traditionally, solely nonprofits with annual gross income in extra of $25,000 have been required to file Kind 990. The PPA modified all that with the introduction of the Kind 990-N for small, low income organizations. The 2007 tax yr was the primary yr Kind 990-N was required. However Kind 990-N was just the start. The actual kicker within the PPA is the rule that can culminate with the automated revocation of the tax exemption of any nonprofit that fails to file its required Kind 990 for 3 consecutive years. Yr three for many organizations is the due date of their 2009 return: Monday, Could 17 producer company registration.

What does it imply? The IRS is being uncharacteristically blunt relating to the result of the exemption revocations: There is no such thing as a recourse wanting reapplying for 501(c) standing. In different phrases, you’ll have to begin throughout. These revocations are computerized and statutory. Nobody is making a thumbs-up or thumbs-down willpower. Both you fall into the class or you do not. Fairly easy.

What are you able to do about it? File your Kind 990…interval! It is not too late. In case your nonprofit usually recordsdata Kind 990 or Kind 990-EZ, your due date will be delayed by three months, however provided that you get a well timed extension filed. There is no such thing as a extension for Kind 990-N…so failure to file will imply the top of your tax exemption.

Greg McRay is an IRS-credentialed Enrolled Agent and is the CEO and co-founder of Basis Group, Inc. The Basis Group supplies formation and compliance companies to nonprofits, together with nonprofit incorporation and 501(c)(three) purposes, Kind 990 preparation, payroll processing, in addition to schooling and session. Greg resides along with his household in Nashville, Tennessee


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