Poof! The IRS Revokes Tax Exemption for 20,000+ Arts Groups (Updated!)
Posted by Jun 09, 2011 5 comments
In 2006, Congress asked the IRS to keep better track of the nation’s 1.7 million nonprofit organizations. Yesterday, the IRS revoked the tax-exempt status of 279,599 of them for not filing legally required documents for three consecutive years (2007-2009). Nearly 27,000 of them are nonprofit ARTS organizations.
The 26,875 arts groups represent 20 percent of all arts nonprofits—the largest percentage decrease among any of the charities. By contrast, only seven percent of religion-related organizations lost their exemptions. Cuts were noted in all arts categories, including 304 symphony orchestras, 702 museums, 395 arts councils, 2,533 theaters, 254 arts alliance/advocacy organizations, and 664 choirs.
Wondering who in your city got scraped from the rolls? Click here to download a full list of the nonprofit arts organizations, including address, EIN, and year established---organized by city and state.
The IRS believes that the vast majority of these organizations are out of business; our random sampling of the list found the same. When you review the list, you will find some of these don’t really look like arts organizations. The IRS assigns every nonprofit organization an NTEE Code to describe its type (A52=Children’s Museums, for example). Sometimes organizations are miscoded.
Do you see an organization that does not belong on this list? The IRS has an appeals process as well as a way to apply for reinstatement of their tax-exempt status, including retroactive reinstatement. (Details available at Notice 2011-43, Notice 2011-44 and Revenue Procedure 2011-36.)
A couple of notes . . .
- Your past tax deductible contributions to these organizations are safe; future contributions, however, may not be.
- We don’t know when these folks stopped operating—everyone has the same effective date of revocation—so we can’t assign any single policy or economic cycle to their closure.
- I write “Poof!” in the title, but I'll give the IRS major props for a genuine effort to connect with these organizations—extending deadlines and conducting extensive outreach efforts.
- Any surprises in your community’s list?
*This post was updated with new information on June 10, 2011, after initial publication on June 9.
The IRS is offering transitional relief for small revoked groups. It's one of the best deals I've seen in my four decades of professional involvement with non-profit taxes. If you can honestly say there is still a need for your non-profit, and you feel you can muster the human and other resources needed to sustain it, don't pass up this opportunity to regain your tax exempt status.
There are no shortcuts. You will have to fill out a new exemption application and pay an IRS User Fee. But for organizations with annual gross receipts normally less than $50,000, the User Fee will be reduced to only $100 and reinstatement will be retroactive. The offer is only good through December 31, 2012. You can find the details in IRS Notice 2011-43.
Thanks Randy, I reviewed the list specifically for IL & KY (where I have lived/worked)... More than anything I am surprised at the list... I have heard of over a dozen of these groups. I also know the difficult process to launch and earn the 501c3 designation. I feel it's quite sorry to see such energy and efforts gone POOF!
I wonder how many hours and dollars have been spent (now wasted) to create and fund these groups?
I also wonder if in a parallel universe these same dollars and hours were invested creating these same groups in the L3C structure what the outcome would be?
It looks like, for the most part, the IRS did some needed house cleaning and many of these organizations just didn't file their closing papers.
Well, I want to feel sorry for these groups, but everyone has the same set of rules. You MUST file a 990 and perform an audit. Can't really blame the IRS for this.
Accountability is a huge issue with our new leadership in North Carolina. We need to find every way possible to demonstrate we are transparent stewards of public dollars.