We have discussed in class a little about tax exempt status that nonprofits are able to obtain if they meet the IRS’s criteria. We also mentioned the issue that many organizations are not annually filing with the IRS and could potentially lose that status. The question came up, that if the IRS was not monitoring this, were taxpayers possibly donating to fake or false nonprofit organizations (for example, operating out of someone’s trunk!).
It appears, however, that the IRS has now stepped up its game and has begun revoking tax exempt status from some organizations that did not submit their annual postcard. In the past couple of weeks, the department has been working hard to ensure that all organizations are following the letter of the law. According to this article on the nonprofit times, there are now approximately 275,000 less nonprofits today than there were a few weeks ago. What does this mean to nonprofit executives? Well obviously it means GET YOUR STUFF DONE! But moreover, it means that the government is going to increase its handling of this “third sector”.
Already there are many legal rules for nonprofits to follow, such as the IRS code, state regulations, etc. However, the simple fact that in years past the IRS has not been as active in enforcing the annual reporting requirement of filing the 990 forms shows that these rules were fairly lax. Moreover, since the IRS has taken such a huge effort and created such a splash, nonprofits need to realize that this is more than filling out a dinky little postcard. The IRS is saying “Hey, listen, we are really in charge here. If you do not follow our rules, we can eliminate you”. Now, those nonprofits that had their tax exempt status revoked can certainly renew that status later once they have met requirements again. However, the fact of the matter is, the federal government is showing these “independent” organizations who is really boss.