Nonprofits Take Note! | Harvard Business Services, Inc.

By Brett Melson Thursday, May 6, 2010

As many as 400,000 nonprofit organizations are weeks away from a doomsday. At midnight, May 15, an estimated one-fifth to one quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.

In 2006, the Pension Protection Act was passed, and within the Act was a provision giving the IRS the authority to revoke tax exemptions for groups that did not file for three consecutive years. (Before this law, only organizations making $25,000 or more had to file.) The three years will be up next week, and many small organizations may be surprised, even though the IRS has made a great effort to get the word out. Probably most at risk are small organizations that have been inactive for a period of time.

The IRS needs a way of tracking organizations, but “It’s going to be an unholy mess once these organizations realize what’s happened to them,” said Diana Aviv, president of the Independent Sector, a nonprofit trade group.

For detailed information on the filing of form 990 with the IRS 

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