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One-Fourth of Nonprofits Are to Lose Tax Breaks
The New York Times ^ | 22 April 2010 | STEPHANIE STROM

Posted on 04/23/2010 3:37:24 AM PDT by Palter

As many as 400,000 nonprofit organizations are weeks away from a doomsday.

At midnight on May 15, an estimated one-fifth to one-quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.

“It’s going to be an unholy mess once these organizations realize what’s happened to them,” said Diana Aviv, president of the Independent Sector, a nonprofit trade group.

The federal legislation passed in 2006 required all nonprofits to file tax forms the following year. Previously, only organizations with revenues of $25,000 or more — or the vast majority of nonprofit groups — had to file.

The new law, embedded in the 393 pages of the Pension Protection Act of 2006, also directed the Internal Revenue Service to revoke the tax exemptions of groups that failed to file for three consecutive years. Three years have passed, and thus the deadline looms.

Bill Solomon, who founded Titan Youth Development in Brooklyn to provide after-school youth sports programs, first learned about the law when a reporter called to inquire about his organization’s status. The charity received its tax exemption in 2005 — but it did not start operations until last year.

“It was merged with another nonprofit — or I guess more like operated under the other nonprofit,” Mr. Solomon said. “I let this one be dormant for a while.”

He said Titan had brought in about $100,000 in revenue in 2009 through fees for service and private donations, so although he did not know about the law, he has an accountant working to prepare tax forms.

The I.R.S. has long complained it lacks adequate data on nonprofit groups because so many of them did not file tax forms.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Government
KEYWORDS: charity; irs; nonprofit; taxes

1 posted on 04/23/2010 3:37:24 AM PDT by Palter
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To: Palter

Ping for later use. I have one of these targeted nonprofits and, yes, had no warning about this impending deadline at all. It might have been nice for them to have sent out a one-pager alerting us to this. After all, I got two census forms.


2 posted on 04/23/2010 3:43:23 AM PDT by BelegStrongbow (Dear Leader: you have two ears and one mouth. Start using them in proportion.)
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To: BelegStrongbow

For non profits with revenues over $25,000 per year who have been ignoring the law to file for three consecutive years, they probably deserve this. Like the guy in the example with $100k revenue, clearly he has always been required to file which he chose to ignore. I am surprised that only now are they taking away the tax exemptions for serial non-filers.

For non-profits with revenues under $25,000 per year (and many of them probably under $5,0000 as so many of these are small local sports teams and clubs) it probably makes it less appealing to set up the non-profit with the administrative costs associated with filing.


3 posted on 04/23/2010 3:55:34 AM PDT by RobFromGa (The FairTax is to tax policy as Global Warming is to science.)
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To: Palter

The regimes attempt to nationalize and secularize the charities in this country.


4 posted on 04/23/2010 4:12:01 AM PDT by JohnLongIsland ( schmuckie schucks)
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To: Palter

let’s hope Rahm Emmanuel’s home grown tax shelter is one of them


5 posted on 04/23/2010 4:12:27 AM PDT by silverleaf (Karl Marx was NOT one of America's Founding Fathers)
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To: RobFromGa

Well, it happens that I have been closely tracking revenues and expenses right from the beginning in QuickBooks, so it’s not so onerous as would otherwise be true. It’s just a bother. The biggest problem is being sure to get the right forms. I may have to contact a CPA I know for that kind of support, which will eat into reserves.

Oh, well, that’s how fascism works: insist on being able to look inside private concerns and then meddle in how they do their work, no matter how small the concern.


6 posted on 04/23/2010 4:13:15 AM PDT by BelegStrongbow (Dear Leader: you have two ears and one mouth. Start using them in proportion.)
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To: Palter

Good. I never claim charity donations that I give. I feel you should give from your heart and not for the tax bill.


7 posted on 04/23/2010 4:21:41 AM PDT by napscoordinator
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To: Palter

In the new Union of American Socialist Republics, all assets are the property of The State; you MAY be allowed to keep a bit of it if you consistently vote for the socialists - uh... Democrats.

Otherwise, you will be stripped of your position and sent to the Gulag for re-education, Comrade.

And the Russians and Chinese laugh at us as we self-destruct.


8 posted on 04/23/2010 4:24:46 AM PDT by Jack Hammer
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To: Palter

No charity... all STATE dependency... clearly another obamunism ploy.

LLS


9 posted on 04/23/2010 4:32:28 AM PDT by LibLieSlayer ( WOLVERINES!)
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To: RobFromGa
""For non profits with revenues over $25,000 per year who have been ignoring the law to file for three consecutive years, they probably deserve this.""

In theory what you are saying makes sense, but in reality, you are way off the mark.

For example, the local elementary school Parent Teacher Association holds a candy sale to raise money for a class trip and presto, they are over $25,000 instantly.

I work with non-profits as a CPA filing these forms.

On the good side of things, Ogden UT office of the IRS has been very lenient in abating assessed penalties. I recently had a volunteer fire company come to me with $30,000 in assessed penalties for three years of non-filing. (Their treasurer died and the new one didn't know they were required) The IRS abated the entire amount when I prepared & filed all the returns for them.

The problem is UBIT or unrelated business income taxes due. They are looking for their $$$. The way around the law is to redefine the organizations purpose to include the unrelated fund raising operation to be part of the organization's purpose. Such as the bar/social area of the fire company is there to provide facilities to keep the volunteer fire fighters and rescue squad on premises and recruit new volunteers.

10 posted on 04/23/2010 4:36:17 AM PDT by tired&retired
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To: Palter

Looks to me like lots of non-profits that were scams dropped out of the game once the IRS demanded tax returns


11 posted on 04/23/2010 4:38:11 AM PDT by dennisw (It all comes 'round again --Fairport)
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To: napscoordinator

If this is the theology you believe correct, fine. Many have qualms with revealing their charity to anyone, even the IRS which will never tell. But most people believe in amplifying their giving power.


12 posted on 04/23/2010 4:43:57 AM PDT by HiTech RedNeck (I am in America but not of America (per bible: am in the world but not of it))
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To: RobFromGa
Homeowners Associations file under a different category and are not considered non-profit. On the other hand, if their income differs substantially from their expenses (less than 80%) they may well end up owing taxes on some of their "dues" or "fees" paid by the homeowners.

On the otherhand, if the group is typical of most such operations, it never earns enough in terms of interest on its accounts to ever owe taxes. IRS conveniently excludes the first $100 ~

In all cases, HOAs still have to file every year ~ profit or loss ~ regular as clockwork. IRS wants those filings even if you're late ~ and owed nothing ~ they still want them.

Why 25,000 non-profits should have avoided filing is a good question.

13 posted on 04/23/2010 4:53:26 AM PDT by muawiyah ("Git Out The Way")
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To: Grampa Dave

At midnight on May 15, an estimated one-fifth to one-quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.


14 posted on 04/23/2010 5:09:31 AM PDT by Liz (If teens can procreate in a Volkswagen, why does a spotted owl need 2000 acres? JD Hayworth)
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To: dennisw
Looks to me like lots of non-profits that were scams dropped out of the game once the IRS demanded tax returns

On the basis of what data, exactly?

15 posted on 04/23/2010 6:26:18 AM PDT by BelegStrongbow (Dear Leader: you have two ears and one mouth. Start using them in proportion.)
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To: Liz

So are the ones losing the tax exemptions the Christian and Jewish funds and conservative non profits?


16 posted on 04/23/2010 6:52:22 AM PDT by Grampa Dave (Use your $'s as weapons! Boycott Gay Frisco, since they keep Pelosi in congress.)
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To: Grampa Dave

Anybody who disses Ohaha is fair game.


17 posted on 04/23/2010 7:37:04 AM PDT by Liz (If teens can procreate in a Volkswagen, why does a spotted owl need 2000 acres? JD Hayworth)
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To: BelegStrongbow

Charities are non-profits and are infamous for being ways to enrich yourself. Here’s a 14 million dollar ripoff of a non profit


18 posted on 04/23/2010 10:38:30 AM PDT by dennisw (It all comes 'round again --Fairport)
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To: dennisw

Hmmm...well, that may be true, but I suspect it’s no more true than for any other kind of human organization. I grant it’s a bit sleazier than other ways, given there’s automatically fraud involved and the potential violation of the moral sense of the ‘customers’, but the question of fraud when the annual revenues are less than $25K seems so remote as to be, frankly, laughable. I suggest that all of the fraudulent charities reap more than $25K per year, and so are already being audited. You may decide for yourself the extent to which it is appropriate.

But, if you’re good with the government seeing it necessary to pry into every nook and cranny, no matter how modest or small, I can’t stop you. This puts a burden on me, a very small church-leader, for no appreciable reason. I can’t say thanks for you thinking it appropriate.


19 posted on 04/23/2010 10:56:43 AM PDT by BelegStrongbow (Dear Leader: you have two ears and one mouth. Start using them in proportion.)
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To: BelegStrongbow

I missed that the new law only applied to charities taking in less that $25,000 per year.

At any rate you are one of the good guys no matter how much your church charity takes in. Here is one of the bad guys that just came out in the news yesterday. 14 million plundered from his non-profit alleged ——>>>

http://www.nytimes.com/2010/04/21/nyregion/21espada.html

Cuomo Accuses Espada of Diverting Millions From ClinicsBy NICHOLAS CONFESSORE
ALBANY — Attorney General Andrew M. Cuomo filed a civil lawsuit against the Senate majority leader, Pedro Espada Jr., on Tuesday, accusing Mr. Espada, his family and his political aides of siphoning more than $14 million from a network of nonprofit health care clinics he founded — money used for meals, vacations and campaign expenses.

Mr. Espada used the network as a “personal piggy bank,” the suit said, to pay for expenses over the last five years like $20,000 worth of takeout sushi and $50,000 to maintain a Bronx apartment where opponents have asserted that he does not live. He was also given a severance package now worth $9 million that would leave the clinics bankrupt if paid out, the suit said.

Mr. Espada, a Bronx Democrat, was able to drain money from the organization, the Comprehensive Community Development Corporation, by stacking its board with relatives and Senate employees, the suit said.

“I have not seen anything on this scale,” Mr. Cuomo told reporters in a conference call on Tuesday. He said that the civil suit was probably only his first move against Mr. Espada, who was elevated to majority leader by Senate Democrats last summer after agreeing to end a monthlong coup that had paralyzed state government.

“I think criminal charges are a very real possibility,” Mr. Cuomo said. “Stay tuned.”

The suit, part of a continuing investigation by Mr. Cuomo into Mr. Espada’s political and business activities, seeks to remove Mr. Espada as president of the nonprofit corporation, which runs four health clinics in the Bronx that receive most of their financing from the federal and state governments.

The lawsuit, which names 19 current and former directors of the corporation in addition to Mr. Espada, also seeks to remove its entire board. Mr. Cuomo said it had rubber-stamped millions of dollars’ worth of inappropriate contracts and expenditures.

Those expenditures, the suit said, also included the use of a Mercedes-Benz by Mr. Espada; vacations for the senator and his family to Las Vegas, Miami and Puerto Rico; and at least $100,000 worth of campaign literature paid for with money funneled through the clinics, known as the Soundview HealthCare Network.

The board also appears to have approved for Mr. Espada a $9 million severance package, which far exceeds Soundview’s net assets, leaving the network technically insolvent


20 posted on 04/23/2010 12:54:39 PM PDT by dennisw (It all comes 'round again --Fairport)
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To: BelegStrongbow

but the question of fraud when the annual revenues are less than $25K seems so remote as to be, frankly, laughable.>>>>>>>

Very true! My mistake


21 posted on 04/23/2010 12:56:39 PM PDT by dennisw (It all comes 'round again --Fairport)
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To: RobFromGa

It’s easy to file,you just go online and answer 5 questions.


22 posted on 04/23/2010 1:05:22 PM PDT by fatima (Free Hugs Today :))
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To: dennisw

I agree with your point when huge ‘charities’ are involved. It is much the same as government bodies that begin to consider themselves noble or even royal. They indulge and spend as if the public money is simply part of their heritage. Witness Dear Reader’s romantic getaway to Asheville, NC. Lots of cost on the public dime (of which he has already spent every loose one through, let’s say, 2100). No public purpose. No civic reason. Just that he wants something nice for the missus. I’d’ve liked something nice for the missus, too, but we had to stay within budget.

Then there’s city councils that adopt sister cities just so they can junket to them (or the vicinity) when the mood strikes. I see these as easily as egregious as fake charities and would like to see public anger applied to them as much as to charitable frauds.

None of that is strictly on-topic, of course. I beg your pardon for using the occasion to vent. Thanks.


23 posted on 04/23/2010 7:44:21 PM PDT by BelegStrongbow (Dear Leader: you have two ears and one mouth. Start using them in proportion.)
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