More than 1,100 small nonprofit organizations in Fairfield County entered the second half of the year at risk of losing their federal tax-exempt status ”“ and having to pay three years of back taxes as a result.
The Internal Revenue Service published the names of more than 3,900 nonprofits in Connecticut that failed to file their financial results covering the 2007, 2008 and 2009 fiscal years. Under an amnesty program that ends Oct. 15, nonprofits can file those tax returns ”“ those that do not do so risk losing their nonprofit status and additional penalties.
The IRS plans to publish a final list early next year naming those organizations whose nonprofit tax-exempt status is revoked. Donors who contribute to at-risk organizations are protected until the final revocation list is published early next year. In Fairfield County, that list includes organizations ranging from common organizations like Little League Baseball in Bridgeport and Stamford; to those farther afield, like the Esoteric Society of America Inc. in Stamford or Monroe Skydivers Inc.
“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” said Doug Shulman, IRS commissioner, in a prepared statement. “If you do not have your filings up to date, now”™s the time to take action and get back on track.”
The amnesty program is being run in the wake of the Pension Protection Act of 2006, which required all tax-exempt organizations except churches to file an annual return with the IRS, creating Form 990-N for small tax-exempt organizations that had not previously had to file returns. The law also mandates that tax-exempt organizations that fail to file for three consecutive years automatically lose their federal tax-exempt status.
The IRS says it has conducted an extensive outreach effort about the new requirements, as have independent organizations like the Connecticut Association of Nonprofits and the National Council of Nonprofits. Even so, many organizations have not filed returns on time.
To regain compliance, small organizations required to file Form 990-N can simply visit the IRS website by Oct. 15, supply eight pieces of information and file the form electronically.
Under the voluntary compliance program, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee. Details about the voluntary compliance program are on the IRS website, along with frequently asked questions.
The programs are not available for larger nonprofits required to file Form 990; or for private foundations that file Form 990-PF.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
