Alert to Non-Profit Organizations!

The following article by Alexander “Sandie” Pendleton sounds an alarm to many non-profit organizations including those related to sport and recreation. Many are not aware of the new regulation requiring an annual filing by all non-profit organizations. Failure to comply will prove costly.  Go to http://www.irs.gov/charities/article/0%2C%2Cid=225889%2C00.html to find out if yours is in jeopardy.

Many Non-Profit Sports Organizations in Danger of Losing Tax-Exempt Status

By Alexander “Sandie” Pendleton

According to the Internal Revenue Service, over 300,000 non-profit organizations in the U.S. have failed to comply with a relatively new law that requires all non-profit organizations to make annual filings with the IRS. Organizations that have failed to comply will automatically lose their tax-exempt status, unless they act by October 15th of this year.

Many of the organizations that are at risk are non-profit sports organizations. This week, the IRS released lists for each state showing all non-compliant organizations, and there are many sports organizations on the lists. For example, a review of the Wisconsin list (identifying roughly 6000 organizations), reveals that there are hundreds of Wisconsin-based sports organizations that have failed to comply. Inclusion on the list indicates that the organization has failed to file the required annual return/notice even once in the last three years.

The good news is that the IRS has announced a one-time deadline extension to October 15, 2010, to enable small non-profit organizations (those organizations with gross receipts of less than $25,000) to make the filing. For further information from the IRS regarding the extension, go to http://www.irs.gov/charities/article/0,,id=225705,00.html.  At that webpage, you can find out if your organization is one of the organizations that is at risk for losing its tax exempt status, and also find the information an organization needs to make the necessary online filing.

The loss of tax-exempt status can have significant financial and tax ramifications for an organization, and can have a severe impact on the ability of the organization to raise funds from donors. Loss of tax-exempt status means that the organization must file income tax returns and pay tax, and also—and for many organizations more importantly— it means that donors cannot take tax deductions for contributions. The ability to claim a deduction often plays a significant role in an individual’s or corporation’s decision to makea charitable donation; without it, many potential donors may decide to find another nonprofitorganization to which to donate (or decide not give at all). That means for many organizations it is vital to meet the October 15th deadline, and that it is important to have a procedure in place so that in future years the organization meets the normal May 15th deadline for this filing.

If you or your organization have questions regarding this matter, contact us, or consult with a lawyer or qualified tax advisor knowledgeable about these issues.

Photo credit:  Simon Strandgaard. http://www.flickr.com/photos/[email protected]/