Hundreds of Valley nonprofit organizations that rely on charitable contributions stand to lose one of their best sales pitches - the tax-exempt status that makes donations tax-deductible.
The groups include school boosters, veterans organizations, service clubs, church auxiliaries and many others run by well-meaning volunteers who perform thousands of hours of community service and raise hundreds of thousands of dollars in contributions.
But unless they meet a Friday deadline to catch up on their federal tax returns, they risk having their tax-exempt status revoked by the U.S. Internal Revenue Service.
That's a potentially disastrous double-whammy for nearly 1,100 nonprofits in Fresno, Kings, Madera and Tulare counties that appear on an IRS list of at-risk organizations. Revocation means donors could no longer deduct contributions to those groups from their taxes; it also means the organizations would be liable for taxes on their income, said Jesse Weller, an IRS spokesman.
Nonprofits across the country are tripping over a 2006 law requiring them to file annual tax returns with the IRS. Before 2007, when the law took effect, only groups that took in more than $25,000 a year had to file yearly returns.
In addition to the new filing provisions, the law also requires the IRS to revoke the tax-exempt status of any organization that fails to file a return for three consecutive years. But the IRS is giving charities that skipped tax returns for 2007, 2008 and 2009 a one-time amnesty to preserve their status if they file a simple online form by Friday.
Those groups that know about the changes are scrambling to meet the deadline.
"We are painfully familiar with it," said Suzanne Bertz-Rosa, board chairwoman of Creative Fresno, a nonprofit that raises funds to underwrite mural projects in downtown Fresno. Bertz-Rosa said she and other new officers only learned the organization had overlooked its tax filings after they took office in May.
"All of our funding comes from donations, and we always let people know those donations are tax-deductible to the extent allowed by law," Bertz-Rosa said. "Some people might continue to donate without that, but it does make a difference to most of the people who are donating."
Creative Fresno hired an accountant to get its paperwork filed in time.
But many other groups on the IRS list haven't heard about the filing requirements or the threat to their tax status.
Brian Watson, financial secretary for the Clovis chapter of the Sons of Italy fraternal society, didn't know about the issue until he was contacted by The Bee last week. Watson - who works for the IRS at its Fresno office - said he was anxious to look into the needed paperwork.
IRS officials are worried about cases like that.
"We're concerned that these small organizations need to know about the law so they can stay in compliance," Weller said. "We're not trying to do a 'gotcha.' We want them to stay in existence so they can continue doing their good works in the community."
Weller said the IRS sent out more than 500,000 letters this year to charitable organizations across the country warning about the filing deadline, produced public-service announcements and posted special notices on its website, www.IRS.gov.
One problem, however, is that as a group's membership changes, so do the people in charge of its finances and records.
Many charities formed with the best intentions - including about two dozen school booster clubs, both active and inactive, on the IRS list - are ill-prepared to keep up with changing laws, said Larry Powell, Fresno County's superintendent of schools.
"People form a club because of a passion, not because of their expertise dealing with the IRS," he said.That's the case with the Garfield Elementary School Parents Club in Clovis, which only recently learned about the filing requirement from a tax preparer who contacted the group's president trying to drum up business.
"We didn't know about it, and we didn't receive any [IRS] notices," said Tammi Chapman, historian and past president of the club. "But we are getting it taken care of."
Chapman said the club raises money to help the school buy extra supplies that aren't in its budget, including computers for classrooms "or any other items the school is in need of."
For parents who have work and family obligations in addition to selling candy or organizing carnivals to raise money for the school, Chapman said, an annual IRS tax return "is just more legal mumbo jumbo they keep throwing in people's faces."