The Internal Revenue Service is worried that many small nonprofits, such as volunteer fire departments, cemetery associations and 4-H Clubs, may lose their tax-exempt status despite an extension of a filing deadline.
Earlier this year, the IRS began warning charitable organizations who have enjoyed tax-exempt status that they could lose it because of a tax law change in 2006 requires even small nonprofits now to file certain forms.
As many as 1,200 such nonprofits in North Dakota, from church groups to social clubs and fire and ambulance associations, are in jeopardy of losing their tax-exempt status, according to Carrie Resch, an IRS spokeswoman, in a letter to the Herald.
"The organizations that are at risk failed to file the required returns for 2007, 2008 and 2009, according to IRS records," Resch wrote. "For many of these small organizations, complying with the new law may be as simple as completing a 10-minute form online. They can preserve their exempt status under a one-time relief program the IRS announced in July, but only if they file by Oct. 15, 2010."
It's difficult to contact leaders of many of the small, volunteer groups with changing memberships, according to Resch.
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Dana Schaar, executive director of the North Dakota Association of Non-profit Organizations in Bismarck, told the Herald in May that he was getting many calls from concerned members of such small nonprofits.
Before the 2006 law change, nonprofits with less than $25,000 in annual revenue didn't have to file a form every year to keep their tax-exempt status. The three-year grace period after the 2006 change ended this spring; but this summer the IRS extended it to Oct. 15.
Losing the tax-exempt status removes the group's ability to attract as many donations, which no longer allow the donor to claim a deduction, Schaar said.
If a nonprofit loses its tax-exempt status, it costs $750 to get it back, he said.
Resch said a list of nonprofits at risk of losing the tax-exempt status is posted at www.irs.gov , along with pointers on how to file the right forms.
There were about 5,900 nonprofits in the state in May, and about 3,384 had charitable tax-exempt status, Schaar said.
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