More than 292,000 nonprofit organizations—about 18 percent of the charities in the United States—may lose their tax-exempt status in the next year for failing to file a tax return with the Internal Revenue Service, according to a report released on Thursday by the Urban Institute’s National Center for Charitable Statistics.
A 2006 law gave charities with less than $25,000 in gross receipts three years—or until May 17, 2010—to file the new Form 990-N, better known as the e-Postcard. Previously, such small charities were not required to file with the IRS.
So far, 196,000 charities have missed their deadline. Another 96,500 charities have deadlines between now and April 15, 2011.
Human-service organizations account for the largest number of organizations that did not file (29 percent), followed by advocacy organizations, fund-raising federations and other so-called public-benefit organizations (22 percent) and education organizations (15 percent).
The report found that most of the organizations that failed to file are run entirely by volunteers, lack a permanent address, and change officers annually.
The center attempted to contact 100 organizations, to get a rough sense of what percentage of the organizations that did not file were defunct. It was able to confirm that only 25 were still operating, and only two of those charities were aware of the new filing requirement.
Comments
1. cattiva - July 09, 2010 at 02:42 pm
What are your thoughts on this...
I have an opinion, that may not be popular, and just to check it, to see if i'm totally off base.
I think nonprofits need to follow the rules to keep their status. They were given several years to comply. I am too familiar with small nonprofits who are abusing the system by getting their NPO status and then going about their own way doing whatever they please. Truly behaving more like a small business than an NPO.
Also, there are so many nonprofits duplicating services. Maybe this will encourage the ones who aren't really providing Public Benefit, to get back to doing what they stated they would be doing in their mission.
I have been part of organizations that are totally run by volunteers--getting by on a shoestring. And as I grow older I realize that organizations can't survive this way. Getting *public support* for your work is critical. And, besides, isn't it a *requirement* of being an 501(c)(3)? Outside funding proves that the Public Need is truly there -- and the Public Benefit you provide is truly needed.
I am willing to be shown the error of my thought process... I hate to think that critical, much needed nonprofits would loose the benefits that come with being a federally recognized NPO
2. gmcray - July 09, 2010 at 03:42 pm
I agree with Cattiva that NPOs should be required to get their houses in order. It is very true that too many get status and then go do whatever they please.
I do not believe, however, that the approach taken with this legislation was the right one. Instead of issuing a death sentence to these organizations, a better way would have been to suspend their tax exemptions and provide a regulatory path to reinstatement. The wake-up call would still have been accomplished without effectively abolishing these NPOs...many of which still have no idea what's happening to them.
While there is no real excuse to not know and follow the rules, the punishment does not fit the crime in this case.
3. bill__huddleston - July 09, 2010 at 09:37 pm
"I didn't know that there are rules regulating how fast I can drive officer" makes as much sense as the comments posted.
The legislation passed severl years ago, and to say that this is a surprise means the non-profits in question haven't been paying attention to actions that aalking about how non-profits that haven't filed the postcard form required will be removed from the active roles that mainly creates an inflated and inaccurate picture about the size of the non-profit community in the US.
I'm very hesitant to use a 100 organization survey as the predictor for all 300,000 nonprofits in question, but if the 75% rate holds for truly defunct organizations, it's better to have those 225,000 "dead" non-profits off the official roles. The remaining 75,000 (25%) may have to reapply, but they can not say that there was no warning.
Regards,
Bill Huddleston
The CFC Coach
www cfcfundraising dot com
4. vhamblin - July 09, 2010 at 11:12 pm
Although I am a stickler about following rules, I do have a unique perspective on this. I am willing to bet that a large portion of these groups that will lose their status are Parent Teacher Organizations. Since they have an annuaal turnover in officers, and their ability to find people that are able to understand and comply with the requirements is limited, they are bound to find themselves in trouble at some point. The schools have a definate need, but they are hesitant to let the organizations run their funds through the school budgets. Without that benefit, the groups only have two choices. They can fill out the paper work and jump through all of the hoops to become a non-profit and then file non-profit tax forms, or they can pay taxes on their earnings. Either way, parents are hesitant to be responsible for such things. So, the schools are the ones that will often end up suffering. I'm just wondering if there isn't another way to bring them into, and keep them in compliance. That's just my take . . .
5. jshatan - July 12, 2010 at 10:59 am
I think vhamblin might be on to something there - I wonder if the IRS has even cared to wonder about that idea.