Our Voice: Charities bumped by IRS mistake deserve better

July 19, 2013 

Admitting to making a mistake is admirable, but it's certainly not enough.

An estimated 275,000 nonprofits across the country have been knocked off the tax-exempt list, in the first wave, and IRS officials admit that many of those were because of errors made on their end.

However, the IRS no longer has employees dedicated to revocation issues and there is no formal appeal process.

So, essentially the IRS created a mess and now has no way of cleaning it up.

That means a lot of good, helpful nonprofit agencies are out of luck. They've mistakenly lost their tax-exempt status and have no easy avenue for getting it back.

It's unacceptable.

The IRS needs to rectify this mistake as quickly as possible. The work done by charities is invaluable, often helping the most poor and vulnerable in communities nationwide.

Having a tax-exempt status allows donors to write off donations on their federal income taxes, which is a huge incentive when requesting contributions.

Without it, the effort to attract donors becomes increasingly difficult.

The cause of the problem started when Congress passed a law in 2006 requiring the IRS to kill the tax-exempt status of organizations that fail to file an annual return for three years in a row.

It was an excellent idea, as there likely are nonprofits who deserve scrutiny. The problem came in its execution.

Mistakes were made and charities that should have remained on the tax-exempt list were taken off it. Nonprofits were supposed to be able to get their tax-exempt status back if they had paperwork showing they filed the correct documents, but without anyone at the IRS in charge of that process, the charities are left floundering.

For some nonprofits, the fight with the IRS appears futile and they've given up, deciding to start over and re-apply for their tax-exempt status.

But that costs $850 just for the filing fee. (Significantly more than that when you add in advice from lawyers and accountants.)

That money would be better spent on charity work, and it's a shame it has to go to the government when it was IRS officials who made the errors in the first place.

More than 290 nonprofits in the Tri-Cities and 12,500 in Washington have had their tax-exempt status pulled by the IRS since 2011, but it is hard to say how many of those were mistakes.

But even if it is a small percentage, it is still troubling. In the Tri-Cities, a couple of charities mistakenly taken off the tax-exempt list include the Columbia Basin Veterans Coalition and the Franklin County Farm Bureau.

Officials with both agencies have tried working with the IRS to rectify the situation and have gotten nowhere. Skip Novakovich, president of the veterans coalition, said getting a 501(c)(3) tax-exempt status is difficult to begin with, but having it revoked is "catastrophic."

The organization provides transitional housing and services for veterans in the community, which is a necessary and admirable work.

It's a shame this nonprofit and others like it are spending time and resources trying to rectify a problem they didn't create.

IRS officials need to step up and make this issue a priority. Surely they can develop a process for remedying this deplorable situation.

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