As long-time readers of our articles know, most of our posts focus on tips and best practices for effective nonprofit management. This post is going to be a little different. There is so much going on right now that affects nonprofits, we thought it would be a good idea to provide you with a brief run-down of some things you need to know. Some of it is related, some not. Here we go…
1. Many smaller nonprofits could lose their tax-exemption this year. How? Tax filing year 2009 is the third year that the IRS has required the filing of Form 990-N for organizations averaging under $25,000 in annual revenue. Prior to 2007, no filing was necessary. IRS regulations state emphatically that any 501(c)(3) public charity that fails to file a required Form 990 for three consecutive years will automatically lose their tax-exempt status. Unfortunately, many organizations are either still unaware or just whistling Dixie and not taking this seriously. I expect panic to set in when letters of revocation start hitting mailboxes later this year.
2. The IRS has increased filing fees for new applications for 501(c)(3) status. Yep, they did it again effective January 3, 2010. The last increase was about 3 years ago. The two-tiered structure remains two-tiered with the lower fee (for applications expecting to make under $10,000 per year in revenue) now at $400. The standard fee of $750 has increased to $850. This increase is in anticipation of Cyber-Assistant, a web-app for preparing Form 1023 (see below). Just like the last time the fees went up, the IRS has not yet updated Form 1023 to reflect the changes in the filing fee.
3. Cyber-Assistant is slated to be released sometime in 2010. The rumors have been out there long enough that more and more people are asking questions about it. Yes, Cyber-Assistant will be software specifically intended for preparing Form 1023. No, you won’t be able to get it from the IRS. It will only be available through approved, third-party partner-vendors like Foundation Group. Yes, it should improve the speed and ability of the IRS to review applications. No, it will not make it much easier to prepare Form 1023…with the possible exception that an incomplete application cannot be printed. Yes, I said printed. No, Form 1023 will not be electronically fileable…at least not yet.
4. New organizations targeting Haiti relief may qualify for expedited IRS review. This is an area often overlooked by applicants for 501(c)(3) status. The IRS has a method for requesting expedited review of a Form 1023 for an organization addressing an existing disaster situation. A detailed letter request for expedited review must accompany the Form 1023 when it is filed. There is no guarantee that the IRS will grant the request, but they often do if the applicant effectively makes their case. For all startup clients we work with that are forming such an organization, we prepare those letters for them. We’ve had a good track record over the years of seeing the request granted. Given that the IRS is taking 6-12 months to review most applications, expedited review can mean weeks instead of months.
5. 2009 was a rough year financially for nonprofits. Real newsflash, right? Last year was probably the worst in 20 years for many nonprofits. The statistics show that the pain was spread all around. I reviewed a survey this weekend regarding religious organizations that stated only 9% of churches nationwide saw donations increase in 2009 over 2008. 9%! The numbers aren’t much better for other categories.
6. 2010 will be similar. Sorry…don’t mean to be a downer. But the reality is, all signs point to another lean year. So, how can you get your nonprofit into the growth club in 2010? Though far from a scientific fact, I can tell you that the organizations we see bucking the trend just think differently. They are aggressive, focused and intentional about everything…from program operation to vision-casting to creative fundraising. Just putting into practice the advice you find in our articles will put you miles ahead of most organizations. It matters that much!
It is important to us to keep our clients and friends in the nonprofit community informed of the things that matter to them. If we haven’t already told you, “Have a great 2010!”