Exemption revoked

Donating to your favorite charity? If you're expecting a tax deduction, you might want to double check the organization's status to see if the federal government still recognizes it as a charity.

The Internal Revenue Service has revoked the tax-exempt status from more than 6,000 nonprofit organizations in Virginia for failing to file annual information returns with the agency. Without tax exempt status, charities will not receive tax benefits and donors will not be able to claim deductions on contributions made toward the organizations.

Approximately 275,000 organizations across the nation have lost their tax exempt status, although the IRS states that many of the nonprofits are now defunct. The IRS offers to help existing charities that wish to apply for reinstatement, although it could cost the organizations up to $850 in fees.

"During the past several years, the IRS has gone the extra mile to help make tax-exempt groups aware of their legal filing requirement and allow them additional time to file," said IRS Commissioner Doug Shulman in a June 8 press release. "Still, we realize there may be some legitimate organizations, especially very small ones that were unaware of their new filing requirement."

The Pension Protection Act, passed by Congress in 2006, requires tax-exempt organizations to file annual returns, such as Form 990, with the IRS. If the returns are not made for three consecutive years, the law mandates that the organization automatically lose its tax-exempt status.

"If we don't have that nonprofit exemption, then we have to pay taxes on income earned, even though we're giving the income away," said Lynchburg Junior Woman's Club President Gretchen Perkins to The Lynchburg News & Advance. She told the News & Advance that she hadn't even realized her organization had lost its status until contacted by the paper. She blamed the error on confusion over the Pension Protection Act.

"Local chapters of national organizations lose their group exemption even if the local chapter has filed and the national organization has not," said Darcy Oman, president and chief executive of the Community Foundation, according to Richmond BizSense. The Foundation, which facilitates donations made to nonprofits, cannot award funds to local chapters of national organizations that have lost tax exempt status.

See a full list of Virginia non-profits that have lost tax exemption status here.

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