Nonprofits face deadline to retain status

New reporting rules mean smaller agencies need to file paperwork with the IRS or risk losing their tax-exempt status, which would cut off charitable donations.


Before you write that next donation check to your favorite nonprofit agency, you may want to do a little background checking.

There's a chance that, from Monday on, it might not have tax-exempt status, experts advise.

And that's thanks to a change in Internal Revenue Service regulations made in 2007 that comes to fruition this year, noted Sandra Gill with Spokane-based Northwest Nonprofit Resources.

In years past a nonprofit organization with gross receipts under $25,000 had only to prove to the federal government upon startup that it was what it claimed to be, intent on doing what it said it would do, she said.

After that, it could go about its business without ever checking back in with the government, at least as far as tax-exempt status goes.

That's no longer the case. Now every nonprofit agency, regardless of monetary size, must file a special tax filing form called a 990. That lets the IRS know what's going on with staffing, mission and money.

The filing must happen on the 15th day of the fifth month from the end of an agency's fiscal year. With May 15 falling on a Saturday this year, there are two additional days of breathing room.

There's even the "e-postcard," the 990-N, created for small and simpler nonprofit agencies, Gill said.

According to the National Center for Charitable Statistics, there are 7,663 organizations in Washington state at risk of losing tax-exempt status if they miss the Saturday deadline. As of late Wednesday afternoon, 27 of those are based in Walla Walla, seven in Waitsburg, eight in College Place, seven in Dayton. There are six in Milton-Freewater, out of 43 in Umatilla County overall, including Umatilla Museum and Historical Foundation.

Churches are exempt from the new rule.

Some on the list are little-known and may no longer be operating. Others include Milton-Freewater Neighborhood Senior Center, the Italian Heritage Association, Columbia County Search and Rescue, Blue Mountain Audubon Society, the Teri L. Kuhlman Cancer Foundation and Walla Walla Valley Youth Baseball.

As well, numerous 4-H clubs from each community are on the list.

Part of the reason for demanding every nonprofit file with the IRS involves some housekeeping, explained Lawson Knight, executive director of Blue Mountain Community Foundation. "Basically, the feds are trying to shrink the size of the database, the master file. They never had a way to track the smaller ones before, this is a cleanup. It's like all of these accounts sitting on the books and not sure of some of then are still alive. So the government will send a 'ping' and see if they ping back."

One likely reason there is now a large number of nonprofits under the filing gun is that too many smaller organizations either ignored the letters from the IRS coming over the past three years or assumed someone else on the board had the filing chore covered, Gill speculated Wednesday.

It's at their own peril, she added. Losing tax-exempt status means starting over from scratch. "It's not an easy process. I can take up to two years -- the minimum is 90 days -- and they will go through a major amount of scrutiny. They have to prove what they do is within the context of the law as related to charitable purposes," Gill said. "And they have to have the system in place to be accountable for the work they do."

Should the tax-exempt status lapse, organizations will not be able to accept charitable donations, she added.

The government is asking for only eight pieces of identifying information, noted Bruce Toews, associate professor of accounting and finance for Walla Walla University. "What they need to file now probably takes less than five minutes to complete, compared to larger nonprofits that have significantly more to disclose."

Today's nonprofit buzzwords are "transparency" and "accountability," according to Gill. "What this is going to do is provide visibility for all for all organizations. And they need to be communicating with the government and their constituents."

The recently-added regulation and looming deadline should be an alarm, she said, "This is going to wake up organizations that thought they could just continue doing things as they've always done them."

It seems to him the right direction to take, Toews said.

There is some movement in the political world to simplify taxes by eliminating the charitable-giving exemptions, he explained. "In a way, the government is subsidizing the success of the nonprofits and the public has a right to know what's being done with that money."

Some nonprofits have abused the privilege, paying too-high salaries for leadership positions and not managing funds well, Toews said.

He believes the government's Sunshine Act -- dealing with disclosure and public meetings -- should apply to nonprofit organizations. "They are using government money in a way the public has a right to know."

For more information about filing status, go to Nonprofit organizations can call Northwest Nonprofit Resource at 509-325-4303.

Sheila Hagar can be reached at or 526-8322. Check out her blog at


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