IRS showing teeth towards non-profits
We all know that the Massachusetts Pioneer Valley, especially Northampton, MA, is home to many non-profit organizations who serve a charitable purpose to society.
Last week, the IRS released 6 reports of adverse determinations against a variety of non-profits who were found to be non-compliant with certain regulations that govern their tax-exempt status.
Here are a few examples of things that got certain organizations in trouble (other than failing to file protest to proposed adverse determination within requisite 30 day)s:
1. Exempt orgs.—exempt status—final adverse determinations. org. didn't qualify as private foundation under Code Sec. 509(a) because it normally received substantial part of its support from govt. unit or public in excess of 1/3 total support requirement of Code Sec. 170(b)(1)(A)(vi).
e.g. You are an organization that normally receives a substantial part of its support from a governmental unit or from the public. While the majority of your income is from admission receipts, merchandise sales, and the provision of services, your sources of public support from gifts, grants, and contributions were in excess of the one third of total support requirement, as computed under section 170(b)(1)(A)(vi) of the Code.
2. IRS issued final adverse determination revoking Code Sec. 501(c)(3) org.'s exempt status, effective stated date, where org. failed to establish that it was operated exclusively for exempt purposes, and that no part of its net earnings inured to benefit of private shareholders or individuals. Also, it failed to keep adequate books and records.
e.g. Your organization has been doing good things, but hasn't done the best job with the details and documentation that would be required in the event of an examination. You have some big ticket items that are easy to trace but the little stuff that adds up might look like personal expenses to someone who was not familiar with the way you ran your organization.