For some time now, I have been writing to caution donors to check on the charitable status of a nonprofit before making a contribution. I know it sounds simple, but we continue to see nonprofit organizations that are phony and lack the IRS credentials for soliciting donations.
Making a contribution to an organization that is not tax-deductible means it is not eligible to be treated as a deduction on your income tax. For some donors that can add up. For foundations, the consequences are even worse – starting with the potential of having to pay an excise tax.
Besides the tax deductibility issue, we all want to know that our donations are going to reputable organizations, and better yet to high performing, effective nonprofits. Yesterday this simple step of due diligence took on a new sense of urgency when the IRS announced it is taking steps to withdraw the tax exempt status of approximately 275,000 nonprofits for failure to file an annual return.
This list fundamentally changes the size and scope of the sector. It finally giving us an accurate picture of the sector’s influence, while also drastically reducing the size of the sector by more than a quarter of a million—and that number is expected to grow each month as the IRS posts updates to the list each month.
The Money for Good I research from Hope Consulting showed us that one of the criterion people base their giving decisions on is a nonprofit’s legitimacy, and this action on the part of the IRS underscores that point.
Stay tuned for our in-depth analysis of which nonprofits have had their tax-exempt status automatically revoked—the size of those nonprofits, their missions, their geographic location—as well as a webinar with more information on how GuideStar can be a trusted resource for you.
In the meantime, please tell us in the comments section what this development means to you. What will you do differently?
The preceding is a guest post by Bob Ottenhoff, Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.