In the background, I could hear the old Righteous Brothers song “You’ve Lost That Lovin’ Feeling,” which expressed my own feelings as I read the words, “Your organization’s tax-exempt status has been revoked…” Apparently, I am not alone. There are 270,000 organizations that have received the same notice, but we are the lucky ones. At least we know know we have a problem to fix.
There are many non-profits around the country, including many inventor groups, who were formed years ago by people who are no longer involved. In some cases, legally required procedures have been passed down or maybe not. Some realized the need to change contact information with the authorizing agencies or maybe not.
Some understand that these non-profits organization are considered a business entity by the IRS and the State and are subject to almost all the rulings, regulations and fines that any other business would encounter along with some special ones just for us, isn’t that nice.
For example it is our duty as a business to keep abreast of any changes in the law concerning us and abide by them.
I am the President of the Inventors Society of South Florida and I take full blame for not doing my own research when I took office. In fact I have praised the officers who put together our articles of incorporation and bylaws, because of their attention to details, contained everything I needed to satisfy certain requirements for the IRS.
I am extremely fortunate to have senior members on the board who have been with the organization from its’ founding to guide and advise me. As you will see it is all a case of misunderstandings, unfortunate and sometimes fortunate circumstances. But if this could happen to our group my guess is that it is likely happening to other groups around the country.
The sad tale begins with the passing of the Pension Protection Act of 2006, which made it mandatory for all non-profits to file an annual 990. Also, should an organization fail to file for 3 consecutive years their non-profit status would be revoked.
In 2007 the IRS sent us a notice. Unfortunately, that notice came to the attention of the incumbent president a year later, but it was answered immediately at that time.
There was no mention of the change in the law. As a matter of fact it would lead one to believe that the law had not changed and they just wanted to make sure that we were still below the minimum gross income level that would require annual reporting.
It requested certain information and then had him check off a statement that specifically stated “This organization’s gross receipts were normally $25,000.00 or less for each of the past three tax years and therefore not required to file Form 990 for any of those years.” The key word being “those”. He even changed our address as requested by the notice.
When I contacted the IRS in January 2011 to get an updated proof of tax exempt status letter to comply with State requirements to have them issue a current exempt certificate, I was told about the problem and filed a 990 for 2010 that night which I thought would meet the requirement from 2007. As with many things with the IRS, it wasn’t so easy.
Before I could even get to talk to the IRS representative I had to prove who I was by supplying her with the physical address they had on file, which was not the current one and could not be a PO Box. We had just changed our bank account but I still had three checks from the old ledger with the address they had on file and where our notices were being sent to a founding officer who had passed away many years ago.
To get our exempt status reinstated I had to fill out a 30 page Form 1030 with all sorts of support documentation including financials for the past 4 years. I can’t stress it strongly enough that you should read the instructions as you go along. Everything seems pretty straight forward, but it still would have been nice to not have to go through this effort, so if you are a non-profit I can’t stress enough how important it is to make sure you are complying with the new Pension Protection Act requirements.
If you are like our group and you did lose your non-profit status and you are now facing Form 1030, remember this form is not just for inventor clubs. It also includes hospitals, churches and all sorts of non-profits. There is a clear distinction between non-profits and charities. So you must be careful regarding what you check off. When I caught myself making one such mistake, I went over the whole thing with a fine tooth comb and found others.
There is also a suggested conflict of interest policy that should be incorporated into your organization and updated every year. When the IRS suggests something, I get visions of Tony from the TV show the Sopranos, and do my best to comply.
We are still in limbo. I got a post card from the IRS telling us that they have received of our materials and that they will be working on it but with 270,000 extra cases to process I am not expecting anything real soon.
If you knew of the change and have been filing annual 990s, my hat is off to you. However, no news in this case is really bad news because if you haven’t been filing an annual 990 and you haven’t received the notice, the IRS probably doesn’t know where you are. So rather than assuming everything is OK it might be a good idea to make inquiries.
I would suggest getting whatever information you have regarding old addresses and names then calling the Telephone Assistance for Exempt Organizations, Retirement Plan Administrators, and Government Entities: Toll-Free, 1-877-829-5500 whose Hours of Operation are: Monday – Friday, 7:00 a.m. to 7:00 p.m. Central Time before your non-profit status is …Gone…Gone ….Gone… and you can’t go on… Oooo Oh……(Huge Finally) Bring back, your exempt status… Oh it’s a lovely feeling…