Tag Archives: IRS

Picture of a fading IRS sign in Washington D.C.

I Feel Bad For The IRS Determinations Unit

Picture of a fading IRS sign in Washington D.C.
IRS - photo courtesy of alykat on Flickr.
This is the team on the hot-seat-of-the-week. They’re the ones praying for a devastating tornado, locust outbreak, politician meltdown or the return of Jesus. Anything to get them off the front page and out of the crawl.

It’s the IRS office accused of unfairly scrutinizing and delaying applications for tax-exempt status from conservative political organizations like the Tea Party.

I don’t think the low-level staffers in the Determinations Unit were politically motivated. I think they were trying to deal with a mountain of work while understaffed, so they searched for keywords to aggregate applications and handle similar groups with a degree of regularity.

We’ve seen for years the unit is understaffed and struggles to keep up:
— application responses routinely take close to a year and I’ve known groups that waited months longer than that
— an online application project was delayed, and I haven’t heard about it since
— the 2011 loss of tax exempt status for 275,000 charities meant many thousands would reapply, adding monumental burden

Much is being made of the unit’s requests for donor lists, but how a group is funded has long been part of the criteria for determining whether an organization qualifies for tax-exempt status.

I’m looking at an IRS letter from 2001 confirming a client’s exempt status. The agency informs the organization that if its “sources of support, or its character, method of operations, or purposes have changed” there may be a change in the exempt status.

I predict this scandal will lead from IRS Code section 501(c)(4) to 501(c)(13):
Cemetery companies owned and operated exclusively for the benefit of their members . . .

Then we’ll learn where the bodies are buried.

Updated June 6, 2013:

IRS released these FAQs on what the Determinations Unit did and why.

A picture of IRS form 990

Calendar Year Tax Year? Your 990 Is Due

A picture of IRS form 990
IRS Form 990
If your charity’s tax year is the calendar year, your IRS form 990 is due by May 15.

Not sure if you have to file? Here’s help.

The form 990 filing deadline is four-and-a-half months after the close of your fiscal year. If your fiscal year ended on December 31, 2012, then your 990 is due by May 15th. The IRS expresses the deadline as “the 15th day of the fifth month” after close of your fiscal year.

Years ago, someone in a seminar was quite vociferous about how I was wrong to say four-and-a-half months. I couldn’t dissuade him. He wasn’t quibbling over “half a month” leading to the 14th of May.

He didn’t see the equivalence. I was polite.

Ninety-day extensions are granted automatically using form 8868. Typically charities need the extension because their previous year’s audit isn’t finished. Additional 90-day stretches aren’t hard to come by, but are not automatic. Use the same form, part II.

I’ve seen plenty of 990’s delayed for more than a year. That plays havoc, by the way, with charity registration deadlines in the states where you solicit donations. I know that work intimately. I wrote a book about it. I also published a paper.

Not sure which form to file (990, 990-EZ, 990-N postcard)? Here’s help.

Important fine print: I am not your attorney or your accountant. Seek the advice of your professional advisors in all matters of IRS compliance.

IRS Continues Inquiry On Charity Registration Compliance

IRS building courtesy of Foist on Flickr
IRS building courtesy of Foist on Flickr
The IRS form 990 for 2012 has been released, and it continues to inquire about your office’s compliance with Charity Registration laws in the states where you solicit donations.

There have been significant changes to the form and its shorter sibling the 990-EZ.

But the Charity Registration inquiries remain.

Part VI, question 17 asks you to list the states in which you are required to file form 990. That is a basic part of registration in nearly every state. If you’re required to register before you solicit in a state, odds are you’ll be required to include the 990 with your application.

This is the federal agency’s oblique way of gaining jurisdiction–or legitimacy–to inquire about your compliance with state laws. It’s interesting.

Schedule G, part I, question 3 has you explicitly list the states in which you’re registered to solicit, or have been notified you’re exempt.

I hate to nitpick, but you won’t necessarily be notified by a state if you’re exempt there. In a good number of states, you determine exemption on your own and make no filing. In others you must file for exemption and be approved.

Every charity doesn’t submit this schedule with its 990. You file schedule G if, among other things, you spent more than $15,000 for professional fundraising services or reported more than that in fundraising event gross income. (See form 990, part IV, questions 17-19.)

Form 990 is signed by an officer under penalty of perjury. (See part II.)

There are precious few places where our IRS inquires about your compliance with state laws where you solicit donations.

But they’re alive and thriving.

If you want a fuller explanation of Charity Registration, take a look at the article I published in the journal “Taxation of Exempts.”

CMA Section: I am not your attorney or your accountant. Seek the advice of your professional advisors in all matters of IRS compliance.

Nonprofit Radio, March 22, 2013: IRS Sale In Aisle 403(b) & Compensation Clarity

Big Nonprofit Ideas for the Other 95%

Listen live or archive:

Tony’s Guests:

Evan Giller
Evan Giller
Evan Giller: IRS Sale In Aisle 403(b)

Evan Giller, a founding member of the law firm of Giller & Calhoun, explains the IRS’s 50% off-the-penalty sale for 403(b) retirement plans that are not in compliance. Many plans are not up to code and this is the year to fix the problems. We’ll talk about the common mistakes and what to do.



Gene Takagi & Emily Chan
Gene Takagi & Emily Chan: Compensation Clarity

Our regular legal contributors, Gene Takagi and Emily Chan of the Nonprofit & Exempt Organizations Law Group (NEO) answer these questions: how do you determine what’s reasonable compensation for executives? What happens if comp is excessive? What’s the automatic penalty that kicks in if you don’t disclose benefits? Plus, we’ll do a board role play. Let’s see who chairs the meeting. (This is from the Nonprofit Radio vintage archive. Last October was a very good month.)

Top Trends. Sound Advice. Lively Conversation.

You’re on the air and on target as I delve into the big issues facing your nonprofit—and your career.

If you have big dreams but an average budget, tune in to Tony Martignetti Nonprofit Radio.

I interview the best in the business on every topic from board relations, fundraising, social media and compliance, to technology, accounting, volunteer management, finance, marketing and beyond. Always with you in mind.

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Here is the link to the audio for the show: 134: IRS Sale In Aisle 403(b) & Compensation Clarity. You can also subscribe on iTunes to get the podcast automatically.

Expect Expanded IRS Revocation List In March

IRSYour IRS wants to help you.

Since June 2011 IRS has released a monthly list of charities whose tax-exempt status has been revoked for failure to file the annual form 990 or one of its smaller siblings, the 990-EZ and 990-N postcard, for three consecutive years.

This was big news when the automatic revocation list was inaugurated and close to 300,000 charities were revealed.

Next month’s list will be larger than usual because IRS is changing the admission standard. It’s easier to get on.

Starting in March, charities will get one month notice that they’re facing revocation. Until now, you didn’t make the list until tax-exempt status had been revoked for six months.

March’s list will have a seven month catch up–all those revoked but not yet revealed, plus those soon to be revoked–so it will be much longer.

The service offers a search page. It’s bad news if you’re a hit. Here’s how to get tax-exempt status reinstated.

I don’t understand why only one month of advance notice. Why not three or four months? That would presumably be enough time to make a 990 filing and avoid the revocation. One month isn’t enough time to pull it together.

In any case, expect a longer revocation list in March from IRS. There’s something to live for.