Walk The Walk, Talk The Talk

We have another not-for-profit story.

Spoiler Alert: it failed.

Why did it fail?

Sometimes there is a great story, the churning of technical arcana and the tease of suspense.

This is not one of those times.

Our homespun protagonist this time is the Community Education Foundation. It had changed names several times over its life, but that appears to have been its last nom de jour.

It began life as a doe-eyed and enthusiastic 501(c)(3) back in 2001. It was going to change the world:

The …. is a conservative research and educational institute focusing on public policy issues that have particular impact on African Americans, Hispanic Americans, Asian Americans, Native Americans and heritage groups (the ‘Target Groups’).”

                COMMENT: “Heritage” groups?

Anyway …

The Foundation’s guiding principle is to encourage open inquiry about public policy issues that are of particular interest and educational values for the Target Groups and the public in general and to provide programs that highlight and educate the Target Groups and the public about these germane subjects and/or public policy issues.”

Wow. Good thing someone jumped on “educating” all those “target” groups on “germane” subjects.

The (c)(3) obviously had to do stuff to bring enlightenment to the benighted and wretched, including:

(1) Town hall meetings

(2) National workshops

(3) Congressional forums

(4) Billboards, radio, television, and other media, such as town criers, bodypainting and soothing rap music drifting through open car windows while waiting at a traffic light.

Fast forward. To 2012. Eleven years later. The IRS took a look at said (c)(3). It wanted to know how it was doing.

The IRS revoked the (c)(3).

Whoa. That seemed a bit strong.

What pray tell provoked such a response?

The Community Education Foundation had done nothing – zip, zero, the square root of nada – for 11 years.

The (c)(3) disagreed and took the matter to Tax Court.

It did have an argument: it turns out that it tried but failed to do some things in 2009 and 2010, including a “Presidential Inaugural Ball” to honor veterans.

COMMENT: I too have no idea what one has to do with the other.

The Tax Court pointed out the obvious: if you want to be a (c)(3), you have to …

·      Talk the talk, and

·      Walk the walk

In eleven years, the organization had performed none of the activities it had said it would when it applied for exempt status.

There was no walk to the talk.

The (c)(3) status was revoked.

275,000 Charities Have Lost Tax Exempt Status

You may remember that charities, even small ones which previously had been exempt from IRS reporting, were required last year to file with the IRS. There was a “postcard’ filing (990N) for the smallest, but nonetheless everyone had to report.

What prompted this was a change in the tax law in 2006. The Pension Protection Act made it mandatory for most tax-exempts to file, irrespective of their gross receipts. This was a seismic change from prior law. If an organization failed to file for three consecutive years, then the PPA required it to lose its exempt status.

Counting off three years, many of these organizations had to file for the first time last year (2010). The IRS yesterday announced that approximately 275,000 organizations did not comply and have therefore automatically lost their exempt status. In addition, procedures have been announced for these organizations to regain their exempt status, in some cases by paying as little as a $100 fee.

Note that the revocation of status does not affect charitable deductions for amounts donated to these charities before 2011. However, deductions going forward will be disallowed because the organization names have been published - unless the charity reinstates its exempt status.