Small Non-Profit Tax Exempt Status Could be at Jeopardy

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Monday was the deadline for non-profits that make under $25,000 per year to file a tax return. And apparently, many (around 365,000) missed the memo, which went out 4 years ago. Here’s the unfortunate chain of events that could lead to your favorite local non-profit losing tax exempt status.

1. The 2006 Pension Protection Act had provisions that required all non-profits to file an annual tax return.
2. Non-profits making less than $25,000 annually were previously excluded from having to file a return (those over $25K had to previously).
3. Non-profits that don’t file a return for three consecutive years lose tax exempt status.

Why Should You Care that Your Local Non-Profit is no Longer Tax Exempt?

For starters, they may be hit with a user fee of $850 and have to reapply for tax exempt status. That means that less of your donation is going towards the cause that you intended it to (and towards this fee) and if the non-profit does not receive exempt status again, they might have a hard time surviving at all.

Additionally, your donations may no longer be tax deductible. However, it sounds as though you may be off the hook until the IRS posts a revocation notice that lists the charity as no longer tax exempt. According to Sarah Hall Ingram, IRS commissioner for tax exempt and government entities. When a non-profit loses its tax exemption, the IRS is required to issue a public notice. Until the notice is published, she says, donations to the organization are still deductible. The IRS doesn’t plan to publish the names of non-profits that lose their exemption until January, Ingram says, “So if somebody gives between now and when the name gets on the public list, the donor is protected.”

What Non-Profits Will be Affected?

Want to find out if your charity is impacted? The Urban Institute has published a list of charities at risk of losing tax exempt status. If yours is on the list, give them a heads up. They might not even know what’s at stake for them.

Non Profit Tax Forms

Non-profit’s need to file IRS form 990, and those under $25K in annual revenue can fill out the shortened version: IRS form 990N.

Non-Profit Tax Exempt Discussion

• Is one of your favorite charities on the list?
• Would you still donate to them if your donation was no longer tax deductible?

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