According to the Internal Revenue Service, a host of area non-profit organizations are at risk of losing their tax-exempt status if they fail to file the necessary paperwork by Oct. 15. The status, known as 501(c)(3), applies to religious, educational, charitable, literary or scientific organizations. In a list published on its website, irs.gov, local organizations at risk of revocation include the Damariscotta Region Information Bureau, the Waldoboro Gallery Association, several American Legions the Ancient Free & Accepted Masons of Boothbay Harbor, and the Wiscasset Yacht Club.
The list applies to groups who did not satisfy annual filing requirements for three consecutive years. If an organization loses its exemption, it will have to reapply to regain its tax-exempt status, a lengthy and costly process. Any income received between the revocation date and renewed exemption may be taxable also.
“Organizations are required to file every year. If they don’t act now, it goes from an at risk list to a revoke list in 2011. At that point they will lose their non-profit status,” said Internal Revenue Service spokesman John Reilly.
The IRS is providing one time relief for such organizations that have filing due dates on or after May 17 and before Oct. 15. The list includes organizations for which the IRS does not have a record of a required annual filing for 2007 and 2008, and whose 2009 return, due on or after May 17 and before Oct. 15, has not yet been received.
The repercussions are considerable and could adversely affect an organization’s ability to receive grants or donations. Such a move could essentially cripple the many small but important groups who, among other things, provide social services for the area.
For some organizations like the American Legion of Damariscotta, it was not a matter of oversight but of awareness.
“We got notification. Nobody knew anything about it because we never had to do it before,” said Legion member Fred Harrington. “Under normal circumstances it would be one thing but we are staffed by volunteers. It’s a nuisance and will cost us money but we’ll be in compliance by Oct. 15.”
Lyndell Brackett of the Damariscotta Region Information Bureau echoed the frustration of the Damariscotta American Legion by saying, “The IRS has made no effort to contact us directly. This is the first I’ve heard of it.”
While some see this as another irksome intrusion from the government, the IRS argues that it’s a vital component of maintaining the integrity of non-profit organizations. With the economy still reeling from the meltdown of 2008, the number of fraudulent nonprofits is on the rise. The 501 filing requirement is one way, the IRS says, to weed out the riff raff.
“We need to stress that yearly filings are a requirement and not arbitrary. The one time relief program is meant as exactly that, one time,” said Reilly.
A complete list of affected local nonprofits can be found at irs.gov.
