More than 70 Kaua‘i nonprofits lose tax-exempt status

More than 70 Kaua‘i nonprofit organizations have been listed among more than 1,500 Hawai‘i organizations affected by the revocation of tax-exempt status by the Internal Revenue Service.

The IRS said Wednesday that 275,000 organizations have lost their tax-exempt status because they failed to file required annual reports for three straight years, according to an Associated Press story Thursday.

Hugh Jones, who supervises the Hawai‘i attorney general’s Tax Division, said many of the groups affected are likely small organizations which are now defunct, according to a story in the Honolulu Star-Advertiser.

The Hawai‘i attorney general’s office is eyeing groups that lost nonprofit status to possibly redistribute their assets among other similar organizations, according to AP.

The attorney general’s office wants to know whether any groups are still operating or now inactive and still have assets.

IRS data shows there were more than 1.8 million tax-exempt organizations in 2010, about two-thirds of those being religious and charitable organizations, but also included are labor and agricultural organizations, business leagues, social and recreation clubs, war veterans’ groups and others.

Last year, the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file the required reports, the AP story states.

About 50,000 organizations filed during this period.

“During the past several years, the IRS has gone the extra miles to make tax-exempt groups aware of their legal filing requirement and allow them additional time to file,” IRS Commissioner Doug Shulman said in a statement.

The IRS said the status revocation will not affect people who previously donated to organizations on the list, but those organizations will no longer be eligible to receive tax-deductible contributions and any income they receive may be taxable.

A 2006 law requires most tax-exempt organizations to file an annual information return with the IRS. The law automatically revokes the status for organizations which fail to file the required papers for three consecutive years.

The list, posted on the IRS website as www.irs.gov/charities/article/0,,id=239696,00.html pertains to organizations which did not file reports for 2007, 2008 and 2009.

If an organization has had its tax-exempt status automatically revoked and wishes to have that status reinstated, it must file an application for exemption and pay the appropriate user fee even if it was not required to apply for exempt status, initially, states the IRS website.

In most cases, the effective date of reinstated exemption will be the date the organization’s exemption application was submitted to the IRS.

However, organizations may choose to request that reinstatement be retroactive to the effective date of revocation. The IRS will grant retroactive reinstatement of exemption under certain limited circumstances, the website states.

Visit www.irs.gov for more information.

Nonprofit organizations which have had its tax-exempt status revoked must now file a federal income tax return and pay federal income taxes, states the 501connect website, a Missouri-based online community designed to be a resource for nonprofit organizations.

If the organization could previously accept tax-deductible contributions, it is no longer eligible to do so, and if it wishes to regain tax-exempt status, must apply for it with the IRS.

Donors wanting to make a tax-deductible charitable gifts will need to confirm the organization receiving it is in good standing with the IRS, otherwise, the IRS may not allow the deduction, the website states.

More information can also be found at www.hano-hawaii.org, the website of the Hawai‘i Alliance of Nonprofit Organizations.

• Dennis Fujimoto, photographer and staff writer, can be reached at 245-3681 (ext. 253) or dfujimoto@ thegardenisland.com.