TERRE HAUTE —
Small nonprofit organizations throughout the Wabash Valley now risk losing their tax-exempt status if they fail to make an electronic filing by Oct. 15, under a one-time relief program from the Internal Revenue Service.
About 190 nonprofit groups in Terre Haute, Sullivan, Brazil, Clinton, Rockville and Clay City would be affected, ranging from agencies such as the Terre Haute Community Band and Otter Creek Township Volunteer Fire Department to the Sullivan County Chamber of Commerce and American Legion Auxiliary Wayne Newton Post 346 in Terre Haute.
Statewide, there are 6,951 small nonprofit organizations at risk of losing their tax-exempt status for not filing an annual information form for 2007, 2008 and 2009, said IRS spokeswoman Jodie Reynolds. A complete list of at-risk organizations can be viewed at www.irs.gov/pub/irs-tege/in.pdf.
“We could not survive without our tax-exempt status,” said James Chesterson, president of the board of directors for the Terre Haute Community Band. “We apply for grants as a nonprofit” organization, he said.
“Every dollar that we receive in grant money frees up money to spend somewhere else,” Chesterson said. “In a grant, you apply for a specific fund for a specific project. It would be difficult to maintain the quality that we do now” without be a tax-exempt status, Chesterson said.
Prior to 2007, tax-exempt organizations with gross receipts of $25,000 or less were not required to submit information returns.
However, the Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations, beginning in 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, Reynolds said. 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.
If an organization loses its tax-exempt status, it will have to reapply with the IRS to regain that status, Reynolds said. Any income a nonprofit receives between the time of losing its tax-exempt status and the reinstatement of that status may be taxable, Reynolds added.
The IRS in 2007 made an extensive outreach to notify tax-exempt agencies of the new legal requirement, sending out 650,000 notices to organizations and distributing several press releases, Reynolds said.
“A lot of organizations were not required to file until this passed. Some may have a changing of the guard in the organization and were not aware of the law and maybe some organizations that are listed has been dissolved,” Reynolds said.
In addition, Reynolds said some addresses for tax-exempt organizations could have changed since the required annual filing that started in 2007.
“I am just stunned by the number of organizations. Some of these organizations are agencies that truly, truly want to exist,” said Beth Tevlin, executive director of the Wabash Valley Community Foundation,
Tevlin said the agencies impacted involve not just charitable organizations, but also groups such as unions, veterans groups, volunteer fire departments and Rotary clubs. “There is a variety [of organizations] listed and people really need to take a look at this to see if any organization that they belong to is listed,” Tevlin said.
Linda Gross, secretary for the Terre Haute American Legion Auxiliary Wayne Newton Post 346, said Wednesday she was not aware of the requirement. “I will be giving our accountant a call to make sure they are aware of it,” Gross said.
Ryan Perkins, certified public accountant for Larrison’s Tax Service, said he annually files a Form 990-N for the Terre Haute American Legion Post 346. “The auxiliary is separate name and I can see the confusion as a lot of veteran groups, almost all of them, have auxiliaries and they usually are a women’s auxiliary,” Perkins said.
Perkins said he now plans to file an additional IRS form for the auxiliary.
Vicki Burke, secretary of the Collett Park Neighborhood Association Inc., said the group receives a very small annual income, yet maintaining a tax-exempt status is important for the association to continue.
“We plan to file everything that is needed before Oct. 15. We definitely want to keep the tax-exempt status,” Burke said, as memberships without a tax-exemption would no longer be tax-deductible.
The IRS requires small organizations to provide a legal name and mailing address, any other names used, a Web address if one exists, the name and address of a principal officer and a statement confirming that the organization’s annual gross receipts are normally $25,000 or less. Organizations can file for the one-time relief with the IRS by going to www.irs.gov and clicking on the button that states “File 990s by Oct. 15.”
Howard Greninger can be reached at (812) 231-4204 or howard.greninger@tribstar.com
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