Some nonprofits could lose tax exempt status

Published 6:57 am Friday, May 7, 2010

The Adams Volunteer Fire Department, the Austin Area Art Center and the Matchbox Children’s Theatre are just a few of the area nonprofit organizations that could lose their tax exempt status if they fail to file tax returns by May 17.

More than 7,500 nonprofits in Minnesota, including at least 30 in Mower County, could lose their tax exempt status if they don’t file a 990-N tax return with the IRS by May 17. Previously, nonprofit groups that raised less than $25,000 a year didn’t have the file tax returns. However, a law passed in 2006 changed that, and many of the affected organizations are unaware of the change.

Tax exempt status allows nonprofits to raise money tax-free. However, many feel this “doomsday” could lead to the end of many service clubs, labor unions, athletic leagues and other nonprofits that fail to file taxes with the IRS.

“It would be huge,” said Laura Tjomsland, a financial associate with Thrivent Financial for Lutherans in Austin.

Since Thrivent Financial for Lutherans is a national organization, Tjomsland said the corporate office has filed the necessary tax forms. However, she said the ones affected by the new rules are the nonprofits like Thrivant Financial for Lutherans, which gives to cancer telethons, the sick and the needy.

Minnesota has about 35,000 nonprofits registered with the IRS, according to the Minnesota Council of Nonprofits. About 15,000 groups need to file new tax forms this year, but only about half did.

Linda Draper, administrative assistant with the Austin Area Art Center, said she was caught off guard by the need to file a 990-N tax return. However, she said it only took about five minutes to fill out the necessary information online after working through a computer glitch. She said that effort far outweighed the risk of losing nonprofit status.

“If they don’t want to lose their nonprofit status, I think it’s a good idea to get it done as soon as they can,” Draper said of nonprofits that haven’t filed tax returns.

Losing tax exempt status would drastically change how the art center operates, and it could potentially cause the center to close, Draper said. If the center was no longer a nonprofit, Draper said they’d have to increase prices to turn a profit, and they’d no longer be eligible for a number of grant opportunities.

About 4,400 of the 7,500 nonprofits that have not yet filed are 501(c)3 organizations. A 501(c)3 organization that loses it’s tax exempt status would need to reapply and pay an application fee of $750 to apply. If half of the 4,400 501(c)3 groups fail to file the tax forms, it could cost about $3.3 million total to reapply, according to an MCN press release.

A list of all the nonprofit organizations that have not filed 990-N forms is available at the MCN Web site:

“The Minnesota Council of Nonprofits is contacting as many organizations as possible on this list,” said MCN executive director Jon Pratt in a press release. “And we also recommend that people involved in small nonprofits double check the list from the link at MCN’s website. It would be an expensive distraction for small volunteer groups to have to come up with $750 to reinstate the tax status they thought they already had.”

According to a 2007 article in the New York Times, the change was made to weed out the organizations once given tax exemptions that are no longer operating.

Volunteer organizations with new addresses are expected to be hit hard by the change, especially small groups that operate out of homes like recreational clubs and Parent Teacher Organizations.

Julie Tufte, president of the League of Women Voters Austin Area, said she was unaware of the change until she received a notice in the mail recently. Because the Austin chapter is relatively small, Tufte said it’s difficult to have enough active members to fill each role. Former league treasurers kept detailed records, but the group currently doesn’t have someone filling that role.

“I think it’s what happens with some of your smaller groups,” Tufte said.

Tufte and other league leaders are now working to turn in their tax information, though Tufte said the group’s taxes may be due at a later date. If similar organizations did not update addresses and other information recently with the IRS, the groups’ leaders may not have been notified of the change.

Groups can submit the 990-N form to the IRS online at,,id=119598,00.html.

Notable area nonprofits that haven’t yet filed a tax return:

Adams Volunteer Fire Department

American Federation of State, County & Municipal Employees

Austin Junior Chamber of Commerce

Brownsdale Lions Club

Fraternal Order of Eagles

International Association of Firefighters

Lyle Area First Responders

Matchbox Children’s Theatre

Spring Valley Chapter of Kiwanis International

— For full list of all the nonprofits in the area and across the state that haven’t filed a 990-N form, visit