Nonprofits could pay under new IRS rules

These could be very taxing times for some local nonprofits.

Come Monday, many small nonprofit groups could lose their tax-exempt status if they are not up to date on filing required annual reports with the Internal Revenue Service.

In June, the IRS posted a list of nearly 1,800 nonprofits across Nevada in this situation but does not know how many have since complied.

Adopt-a-Rescue-Pet, which puts on adoption events every weekend to find homes for abandoned animals, was one of the local groups on that list.

Group President Elizabeth Rubin said the nonprofit found out about it for the first time in August after receiving an e-mail from the East Flamingo library branch.

An internal check found that the group had not correctly filed its Form 990 in 2007 during a period of management turnover. Adopt-A-Rescue-Pet may have received direct correspondence from the IRS, she added, but it was not brought to anyone’s attention.

"According to Express Mail, the IRS should have received all our paperwork (Tuesday)," she said. "We are certainly hoping so, because otherwise that’s 300 animals in jeopardy."

The American Legion Las Vegas Post 8 also got the message from an IRS notification campaign that has included direct mailing, YouTube videos and alerting community groups.

Last month, the American Legion post formally spun off its women’s auxiliary, which has existed as part of the post for decades. Staffed by wives of post members, the auxiliary normally spends well under $5,000 a year, most of it to send girls to an annual civics education camp in Reno.

"This is just the IRS creating more paperwork for nonprofits," said post commander Cliff Adele, who said this and other changes were outlined in a 198-page booklet the IRS sent the post last month.

A decade ago, the post lost its nonprofit status due to incorrectly reporting a property sale. It took five years to get it back, Adele said.

Even now, not all of the local nonprofits were aware of their IRS problems.

Agape Love Facility was still not in compliance as of Monday. Emma Love, who owns the assisted living home that cares for four people, said she was totally unaware of the IRS regulations.

Beginning Monday, nonprofits not in compliance could lose their nonprofit designation.

Losing tax-exempt status will force them to pay taxes on any income and remove the ability for any donors to deduct contributions from their taxes. The alternative of trying to regain nonprofit status can take several years.

Groups that take in less than $25,000 a year can stay on the right side of the IRS by filling out the online Form 990-N, which includes eight basic questions about a group’s identity but does not require detailed financial information. Larger groups must complete a 990 or 990EZ, the nonprofit equivalents of the 1040.

The longtime rule for many nonprofits called for revoking their status if they failed to file 990s for three consecutive years. Before legislation in 2006, however, profits grossing less than $25,000 never had to file annual reports, so they never faced any penalties.

In 2007, the IRS sent letters to about 500,000 nonprofits it knew about to notify them of the annual reporting provision contained in the Pension Protection Act of 2006, said IRS spokesman Raphael Tulino. Despite later turning to other forms of media, that was the agency’s only direct contact with the nonprofits.

But as the original deadline approached on May 17 of this year, the IRS saw a looming public relations fiasco with more than 300,000 nonprofits still having not reported. At that point, the agency extended the deadline to Oct. 15 and stepped up its publicity efforts, including posting nonprofit lists for each state on its web site.

"Everything was geared to the small nonprofits because they were the ones who weren’t filing," said accountant Dianna Russo of Houldsworth, Russo & Co.

Some of the local nonprofits, such as the 1997 National Governors Association Annual Conference Host Committee, appear to have outlived their usefulness .

"A lot of times, whether nonprofit or for-profit, a company that closes might not cross all the T’s or dot all the I’s" said Kevin Lustig, director of tax services for the local office of the McGladrey accounting firm. Instead, small groups that run out of money may just lock the doors and forget the finishing paperwork.

Others are informal groups that have only sporadic activities, such as the Las Vegas Gamblers, a club that plays Australian rules football. Also on the IRS list was Clipped Wings, the local chapter of the national association of United Airlines flight attendants.

Contact reporter Tim O’Reiley at or 702-387-5290.

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