A quarter of nonprofits will lose tax benefits
April 27, 2010
For a number of organizations that struggled to stay afloat in 2009, tax breaks were one of the few things they counted on to maintain funds in a trying climate. Hopefully, donations will increase in 2010 because many nonprofits will not be receiving the same tax breaks this year.
According to the New York Times, as many as 400,000 nonprofits will lose their tax exemption status on May 15 because of a provision of a 2006 federal bill aimed at pension reform. The legislation required all nonprofits to file tax forms back in 2007 to maintain exemption. The new law - embedded in the Pension Act - directed the IRS to revoke exemptions that failed to file for three consecutive years.
Some feel this may be good for the nonprofit sector as it will hold organizations more accountable. The IRS has long complained that it has insufficient data on nonprofit groups because so many of them did not file tax returns, report the news source. Additionally, donors have grown increasingly interested in gaining information about nonprofit groups.
Others think it is an unnecessary hardship. "It's going to be an unholy mess once these organizations realize what's happened to them," Diana Aviv, president of the Independent Sector, a nonprofit trade group, told the source.
Philanthropy News Digest says the IRS has sent out letters to potentially affected groups. Organization leaders are encouraged to find out now if they will lose tax exemptions to plan nonprofit fundraising efforts for the year accordingly. Losing tax exemption will mean more strategically planning budgets to compensate for lost funds.