Nonprofits could lose tax-exempt status

More than 30 Sussex County nonprofits are slated to lose their tax-exempt status unless proper paperwork is filled out. In Delaware, the list includes more than 850 organizations.

American Legion Post 20 in Milton was one of the organizations recently informed its tax-exempt status had been revoked.

Robert Moore, spokesman for Post 20, said he heard June 17 through friends that Post 20 was on the revoked list.

“It came as a complete shock,” said Moore. “I open all the mail we receive, and I never got anything from the IRS about this.”

Gregg Semanick, spokesman for the Internal Revenue Service, said tax-exempt organizations other than churches and church-related organizations are required to file annual notices with the IRS. If they fail to file the paperwork for three straight years, they automatically lose tax-exempt status.

Moore made several phone calls to the IRS to find out what he had to do to regain Post 20’s status. He said he found out Post 20 had been revoked since May 2010. He said if that’s true, the Post did not file the proper taxes for 2010; the post would be subject to corporate taxes if its tax-exempt status was revoked. Moore said he became very upset and called Sen. Tom Carper’s office in Wilmington to express his concerns. He is now working with Carper’s office on letters to send to the IRS on Post 20’s behalf.

In order to appeal the revoked status, the IRS requires organizations to pay $100; the regular filing fee is $400. In addition to filing paperwork and paying the fee, organizations have to show what safeguards they will put in place to prevent future status revocations.

“I feel like I’ve cost my Post $100, and we just don’t have that kind of money,” Moore said. “We are veterans that have served, and we really don’t need this.”

Once the organization’s status is revoked, the group must apply to have its status reinstated. The proper forms must be filed and a fee paid to the IRS.

“There is no way for the IRS to determine if an organization is defunct or is simply not filing returns as required,” said Semanick. “This is one objective of this law, to screen out those organizations that no longer are in operation and to require organizations that are in existence to file in order to keep the IRS records current.”

Semanick said once the IRS approves the application, the status will be reinstated, going back to the date when it was revoked. If the organization is not reinstated, then it is responsible for paying federal income taxes.

“Since 2006, the IRS has taken numerous steps to alert organizations that were at risk of forfeiting their exempt status including mailing more than one million notices, conducting an extensive outreach and education campaign, alerting the public through the news media, publishing a list of at-risk organizations and providing smaller, exempt organizations with filing relief that allowed additional time to come into compliance,” Semanick said.

The full list is posted at www.irs.gov/autorevocationlist.

Of the more than 30 organizations listed in Sussex County, some have changed names or affiliations, thus letting the old name slide off the list. The following are among those on the revoked status list:

• American Legion of Millsboro

• American Legion Auxiliary of Dagsboro

• American Legion Post 20 of Milton

• American Society of Law Enforcement in Lewes

• Ann Hsu Memorial Fund in Rehoboth

• Archaeology Excavation Incorporated of Dagsboro

• Bay Shore Community Church of Millsboro

• Broadkiln Sportsman Club Inc of Milton

• Cape Henlopen Educational of Lewes

• Cape Henlopen Elks Home of the BPOE

• Cape Henlopen House of Milton

• Citizens Coalition Action of Rehoboth Beach

• Citizens for Responsible Zoning of Bethany

• Citizens for Affordable Sewer of Nassau

• Delaware Warriors Youth Baseball of Millsboro

• Pinetown Civic Association of Lewes

• Pop Warner Little Scholars Inc of Millsboro and Lewes

• Sussex Community Swim Team of Georgetown

• Sussex Development Corporation of Georgetown

• Touchdowns for Kids Inc of Dewey Beach, The Starboard

• Wings for Greyhounds of Lewes