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Nonprofit Law updates from Cullinane Law Group. May 2013.
Cullinane Law Group

IRS Targeting Scandal

The IRS apologized Friday for what it acknowledged was “inappropriate” targeting of conservative political groups in the process for applying for tax-exempt status. Details of the scandal emerged from excerpts of an investigative report from the Treasury Inspector General for Tax Administration (TIGTA).

Targeting Tea Party Groups

According to TIGTA, IRS agents and attorneys developed a screening process that initially identified key words in the names of groups – including ’Tea Party, ’Patriot‘ and ’9/12‘ that were being used to choose applications for greater scrutiny. “Issues” criteria were eventually developed and also used. IRS agents scrutinized references to “Government spending, Government debt, or taxes; Education of the public via advocacy/lobbying to ‘make America a better place to live;’ and Statements in the case file (that) criticize how the country is being run.” By July 2011, the IRS was no longer targeting just groups with certain key words in their names. Rather, the screening criteria had changed to “organizations involved with political, lobbying, or advocacy.” But then it changed again in January 2012 to cover “political action type organizations involved in limiting/expanding government, educating on the constitution and bill of rights, social economic reform/movement,” according to the findings contained in in the watchdog report.

Tied Up in Red Tape
One of the targeted groups, the Waco Tea Party, waited over two years after it filed its application for tax exemption before receiving a response from the IRS. Then, the IRS issued them a 20 page question form requesting, among other things, that the group provide copies of blog posts, articles, and other media distributed to members. That included copies of tweets, Facebook posts, and other social networking platforms. The Waco Tea Party was exasperated not only at the delay, but also at the prospect of gathering the material for review. Perhaps most shocking, was the IRS request for the identity of donors. The Waco Tea Party felt obligated to inform its donors of the disclosure, and donors panicked at the notion of being identified and targeted themselves. The organization considered dropping its application, as several other nonprofits did in light of the overwhelming scrutiny.

IRS Statutory Obligation

It is important to note that the IRS has a statutory obligation to assess whether an organization applying for tax exemption is charitable and organized for the benefit of the general welfare, or whether the organization is primarily political. Political organizations can’t claim the tax exemption status afforded charitable nonprofits. These distinctions are subtle but significant. Read more...

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Mollie Cullinane
 
The Cullinane Law Group serves nonprofits and social enterprises.

We set up strong and legally compliant nonprofits that have solid bases for long-term success.

We provide risk management and offer practical solutions for sound governance.

We guide nonprofits, foundations, religious organizations, and social entrepreneurs throughout the United States who seek to create positive change.

Based in Austin, Texas.
Clients Nationwide.

512.298.2898
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Jeff Cullinane


Client Highlight: Center for Natural Living

The Center for Natural Living works to demonstrate the value of voluntary cooperation and natural living in the areas of sustainability, family, and health. The group creates educational media and helps families to fulfill their basic needs.

The Center for Natural Living works to:
  • organize health education meetings in marginalized communities
  • provide fluoride water filters to new or expecting mothers
  • build and sustain community gardens
  • build aquaponics systems, and more.
Plus - stay tuned for one of their collaborative projects - a new reality tv show featuring the Blush Family Farm - Sovereign Living.

Form 990 Due May 15

US nonprofits are required to file an annual informational return with the IRS called the Form 990. For organizations that follow the Jan. 1 - Dec. 31 calendar year, their 990 report may be due on May 15, 2013.

The IRS enforces its policy of automatically revoking the tax-exempt status of groups who do not file this Form 990 for three consecutive years. 

The IRS allows organizations to apply for an automatic three-month extension by filing Form 8868.

The type of Form 990 to be filed by an organization depends on the filing year and the gross receipts of the organization.  The different forms include Forms 990, 990-EZ and 990-N. The IRS has a helpful chart available that can guide you in determining which form to file.


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