IRS paperwork mistake knocks Columbia Basin Veterans Coalition off tax-exempt list

The Columbia Basin Veterans Coalition's mission to help veterans find services and housing may be threatened by an Internal Revenue Service paperwork snafu.

The Pasco-based nonprofit recently learned its tax-exempt status was revoked. For charities, that status allows donors to write off donations on their federal income taxes.

The Mid-Columbia charity is one of 275,000 nonprofits nationwide knocked off the tax-exempt list two years ago -- many of them because of IRS mistakes.

The root of the problem is a law passed by Congress 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.

The IRS began to enforce the law in 2011, taking those 275,000 nonprofits off the tax-exempt list, according to GuideStar, a national nonprofit that gathers information about IRS-registered nonprofits to help donors make informed decisions.

The IRS admitted many of those nonprofits lost their status because of IRS mistakes, said Lindsay Nichols, GuideStar's communications director.

Nonprofits were supposed to be able to get retroactive tax-exempt status if they had paperwork showing they filed the correct documents, Nichols said. However, the IRS no longer has employees dedicated to revocation issues. And there is no formal appeal process.

Some charities are giving up the fight and starting over, reapplying for their status by paying another $850 filing fee. That's money many charities say they don't have to spare.

Officials from the Franklin County Farm Bureau thought they were back in good standing after they proved they'd filed the right documents -- only to learn from the Herald this week that they're still on the reject list.

It took a lot of work to get their tax-exempt status back, they said. The IRS claimed it did not receive the annual e-postcards they sent.

The e-postcards are fairly simple. A not-for-profit essentially checks a box to signify that their gross receipts were less than $50,000 per year.

Ramona Rommereim, the farm bureau's secretary, said the agency filed the e-postcards online each year but still was notified that its tax-exempt status was lost.

Rommereim sent every form and document the IRS asked for, which ranged from copies of minutes to budget statements, she said. She spent hours on the phone and talked to both a taxpayer advocate and the office of U.S. Rep. Doc Hastings, R-Pasco.

The farm bureau, which has been a nonprofit since 1955, finally ended up applying for tax-exempt status again and paying a fee.

Finally, Rommereim said they received a letter dated April 23, 2012, confirming tax-exempt status.

In Enterprise, Ore., the Wallowa County's Rotary Club faced a similar dilemma. The IRS revoked its tax-exempt status even though the club claims it sent in the required reports, according to the Wallowa County Chieftain. The club ended up reapplying for tax-exempt status after about a year of fighting.

How many other nonprofits share similar stories is anybody's guess.

More than 290 nonprofits in the Tri-Cities and 12,500 in Washington state have had their tax-exempt status revoked by the IRS since 2011, according to data analyzed by the Herald. But the data shows only the charity name and the date of revocation, not the circumstances surrounding the loss.

David Tucker, an IRS spokesman based in Seattle, said a number of smaller nonprofits didn't realize they had a reporting requirement when the agency first began to enforce the law.

Tucker couldn't say how many charities may have met the law's requirements, but had the paperwork lost in transition. He told the Herald he couldn't talk about any specific nonprofit's situation.

Organizations that have had their tax-exempt status revoked will need to reapply, he said.

Skip Novakovich, president of the Columbia Basin Veterans Coalition, said getting a 501(c)(3) tax-exempt status isn't an easy task for a charity. To have it pulled is "catastrophic."

The coalition is still waiting to find out if the IRS will fix its problem. Its leaders say it has met all reporting requirements. It's been difficult to get answers because no one at the IRS is assigned to the case.

They've tried all the avenues the IRS has suggested and gotten nowhere.

Donald Taylor, the coalition's accountant, said some of the e-postcards submitted to the IRS are essentially untraceable, because the agency's website did not provide confirmation notices.

Taylor sent in the dates the e-postcards were sent, as well as copies of the coalition's 990 form, which nonprofits must file each year if they earn more than 50,000 in revenue, he said.

The coalition will reapply and pay the fee if they have to, Taylor said. In the meantime, they won't change how they operate.

"All we can do is just operate as if we were OK," Novakovich said.

At the moment, their operations are being supported by a donation received more than a year ago from the Southeastern Washington Central Labor Council, Novakovich said. The labor council donated $215,000 and a property mortgage that brings in $6,500 a month for the coalition.

But the coalition has already used about two-thirds of the $215,000, Novakovich said.

It operates a transitional housing program for up to five veterans in Kennewick. And it is nearly finished remodeling a Richland home near Washington State University Tri-Cities to house up to eight veterans.

The veterans who stay at the Kennewick home are typically older, with no income.

Mike Brown, the coalition's residential program director, said they have had 11 veterans make a positive transition from the program since September 2011.

Some have moved to a Walla Walla transition housing program to attend school, while others have been able to receive some income, such as for a service-related disability, he said.

Brown said the goal is to help older veterans build a better life and make sure younger veterans avoid some of the same problems.

The coalition also operates a service center in Pasco where veterans can receive help from counselors. Other than medical benefits, it is a one-stop shop for veterans. Brown estimates 50 to 75 veterans each week receive help from the center.

-- Kristi Pihl: 582-1512; kpihl@tricityherald.com