Groups’ tax-exempt status in jeopardy

Published 6:40 pm Wednesday, July 28, 2010

It’s just as hard to get into a new habit as it is to get out ofan old one. But the IRS understands …

The leaders of several charitable and nonprofit groups aroundSouthwest Mississippi were caught a little off guard Tuesday whenthey discovered their organizations were named on an InternalRevenue Service list of around 2,800 entities in Mississippi atrisk of losing tax-exempt status for failure to file the properreturns from the past three years. The tax system rule change wasput into effect in 2007 as part of the Pension Protection Act of2006, and requires several types of tax-exempt groups that havenever had to file tax returns to annually submit a Form 990-N.

Those groups that have not gotten into the swing of things haveuntil Oct. 15 to turn in tax returns for 2007, 2008 and 2009.

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Judging by the list of organizations not yet in compliance,they’re going to need it. The list of offenders includes 30charitable and nonprofit groups in Brookhaven and well more than 50total in neighboring locations like Bogue Chitto, Meadville,Monticello and Wesson.

The lengthy list includes a host of Masonic lodges, AmericanLegion posts and Veterans of Foreign Wars establishments, and whatappears to the untrained eye to be almost every friends of thelibrary group in the state.

Who knew?

“To be honest, right now I don’t know what the situation is,”said Bob Smira, director of the Lawrence County CommunityDevelopment Association, which is one of around 10 Monticello-basedorganizations that haven’t complied. “I thought they were beingfiled every year, but evidently not.”

Smira said the association would have its accountant rectify themissing return situation soon.

The association’s tax-exempt status would be easy to reclaim iflost, he said, and the lack of the status wouldn’t have much effectbecause the association is funded primarily through localmunicipalities, not donations. Public funding is not taxable, hesaid.

“The only thing that could jump up and bite us could be the factwe’d have to pay income taxes,” Smira said.

Losing tax-exempt status could be a bigger problem for theBrookhaven Exchange Club, which was also caught unawares by the IRSlist.

“We don’t receive donations per se, but 99 percent of ourfundraising is done all in one week at the fair. I’m sure it wouldprobably affect our bottom line, what we could contribute to thecommunity if we had to turn around and pay something out in taxes,”said Ted Ratliff, club president. “We’ll do our paperwork so wedon’t negatively impact what we can do for the community.”

For the five pages of affiliates of the Friends of MississippiLibraries, Inc., the singling out brought on confusion. MarilynBritt, a member of Friends of the Wesson Library, said thestatewide group informed its members in 2008 it would file allreturns on their behalf.

“I guess we just need to follow up with Friends of MississippiLibraries,” she said. “It’s not that we’ve ignored it or pushed itunder the rug. We will definitely be in the process of getting someanswers.”

There are a handful of reasons why so many organizations in thestate have made it onto the non-compliance list, said Dee Stepter,an IRS spokesperson over Louisiana and Mississippi.

“When the law was enacted, we went to the last known address foran organization and sent out letters advising them of the newrequirement,” she said. “Sometimes these organizations don’t havephysical addresses, maybe they just use their current president’saddress, and maybe they’ve changed leaders and didn’t get ourletters. Or they could have terminated; maybe they’re no longeroperating.”

Stepter said the Oct. 15 deadline was an extended deadline tomake sure all the at-risk groups had ample time to right theirrecords.

“If they lose their status the contribution they receive may notbe tax deductible. We don’t want that to happen,” she said.

Officers in the groups listed may find the necessary complianceinformation online at www.irs.gov. The Form 990-N, which asks eightbasic questions, may also be completed and submitted on thewebsite.