Photo: Saturnism (Flickr)
A new report from Indiana University professor Kirsten Grønbjerg found that one in ten Indiana nonprofits have lost their tax-exempt status for failing to comply with new IRS regulations for registered nonprofits. In total, 6,152 Indiana nonprofits lost their tax-exempt status.
Certain types of nonprofits were affected more than others. Cemeteries, social advocacy organizations, and nonprofit business associations had the highest rates of revocation.
“It’s important to remember that these are mainly all-volunteer organizations, and they are a major mechanism by which people are engaged in their communities,” Grønbjerg said in a press release. “Many of them must now go through the time-consuming process of re-applying for tax-exempt status, disband or be prepared to operate as for-profit entities.”
Grønbjerg and her team of researchers found that about 27 percent of the Indiana nonprofits that had their tax-exempt status revoked were still active.
That means most of these organizations are actually defunct. However, those that are active are primarily small nonprofits with a budget of less than $25,000 a year, which until 2006 had been exempt from reporting to the IRS. The organizations lost their tax exempt status if they had neglected to file an annual electronic notice for three consecutive years.
Kirsten Grønbjerg is a professor with IU’s School of Public and Environmental Affairs, and has conducted a multi-year study of Indiana nonprofits.