Wednesday, January 18, 2012

990 Troubles

A recent Chronicle of Philanthropy story higlights problems faced by nonprofit organizations that lost their tax exempt status as a result of failing to file their Forms 990for three years in a row.  The IRS's process for granting reinstatement has been cumbersome, murky, and slow. 

Although the article does not say so, it seems clear that most of the organizations dropped from the list were low-budget charities that under the previous law were not required to file 990s.  As we all know, many of those organizations run on a shoe-string and lack the assistance of lawyers and accountants.

My clinic is representing one such organization.  They are an African-American community center whose primary function for many years has been to receive food pantry donations and distribute them to hungry community residents, mostly senior citizens.  They were unaware of the new requirement and only discovered their plight when the food pantry agency informed them that they could no longer receive distributions because they had lost their tax exempt status.  Last summer, they filed a new Form 1023 and paid a fee to the IRS as required, but they still have heard nothing and have had great difficulty determining the status of their application.  In the meantime, people are going hungry.


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