IRS Still Trying to Weed Out Defunct Non-profits
June 28, 2011 (USA TODAY) "Only a handful" of non-profit groups have contacted the IRS since it announced it was revoking the tax-exempt status of 275,000 non-profits across the country, according to a top IRS official.
"I think it takes time for people to sit down and think, 'What do we do now?'" Lois Lerner, director of the IRS Exempt Organizations Division, said this week.
IRS officials released a list June 8 of non-profits that have lost their tax-exempt status because they hadn't filed a Form 990 tax return for at least three consecutive years.
Contributions made after June 8 to the listed charitable and civic organizations are no longer tax-deductible. And those organizations can no longer legally claim an exemption from state and local sales taxes for office equipment, food or other items.
"We expected that there would be a significant number of organizations that were defunct because we had not heard from them in 20 or more years," Lerner said. "But we did not know the number. And we didn't know which ones."
At least some of the non-profits on the IRS list do appear to be defunct.
Carlo Sclafani, a spokesman for the Westchester Coalition of Italian American Organizations in Crompond, N.Y., said he's never heard of two groups on the list the Italian Mutual Aid Society of Yonkers and the Italian Arts and Culture Council of Bronxville.
"It must be years ago they stopped operating," Sclafani said.
The charitable and civic groups on the IRS revocation list include high school Key Clubs, Kiwanis International chapters, Knights of Columbus councils, B'nai B'rith lodges, Lions clubs, Veterans of Foreign Wars posts and Little League baseball leagues.
Revocations by state are available at www.irs.gov/charities.
Leslie Lenkowsky, professor of philanthropic studies at Indiana University, says the IRS program mandated by the 2006 Pension Protection Act misallocates resources. He said the revocations cover 18% of registered charities.
"This is pretty trivial, and yet it's going to take a lot of IRS manpower," he said. Tax evasion by community non-profits is small compared with the potential fraud involved in giving tax-exempt status to large real estate developments, urban-renewal projects or new sports stadiums, Lenkowsky said.
IRS officials say the program will allow them to clean up their master list and notify active charities about changes to laws governing their operations. And the updated list available at www.irs.gov/app/pub-78 will be useful for people claiming deductions after making donations.
Small non-profits with annual receipts under $50,000 can restore their tax-exempt status retroactively by paying a $100 fee and filling out Form 990-N on the IRS website, Lerner said.
About 2,000 of the American Legion's 14,500 posts are on the IRS revocation list, according to Philip Onderdonk, the American Legion's national general counsel. He estimates that at least 200 of those posts have had their charters canceled. Others have acquired multiple IRS identification numbers because of turnover in volunteers preparing tax returns.
The American Legion reached an agreement with the IRS earlier this week allowing local posts to send their tax information to the legion's national headquarters in Indianapolis. Legion officials there will submit a master list to the IRS for restoration of tax-exempt status.
Joseph Granieri, adjutant at Robert Ferguson Crandall Post 129 in Bedford Hills, N.Y., said restoring the post's tax-exempt status isn't worth the paperwork. "We are not involved with much money,"' said Granieri, a World War II Navy vet. He said dues-paying members have dwindled from almost 200 to about 10.