IRS ends tax status for 5,132 Minn. nonprofits

One of every seven nonprofit groups in Minnesota lost its tax-exempt status as the IRS winnows out defunct organizations.

More than 5,000 Minnesota nonprofit groups, and 275,000 nationally, have lost their tax-exempt status because they failed to meet new IRS reporting requirements.

They range from Lions Clubs and fraternal groups statewide, to tennis and soccer associations, to offbeat groups with names such as "Hawg Hookers" and "Snow on the Roof."

Most are unknown -- or little known -- by Minnesota's nonprofit leaders. But some have names that are surprisingly familiar.

"They represent about a third of Minnesota's smallest nonprofits,'' said Jon Pratt, executive director of the Minnesota Council of Nonprofits. "This is the answer to a long-standing question: How many of our nonprofits are really defunct?''

The loss of tax-exempt status announced this week results from new reporting requirements from the IRS. For decades, nonprofits raising less than $25,000 a year didn't have to file tax returns. But last year they were required to file -- or lose their tax status.

The May 15 filing date even had a nickname: Doomsday.

"Doomsday" has translated into a 14 percent drop in the total number of nonprofits in Minnesota, previously set at 35,000. Nationally, it represents a 17 percent reduction among the previous 1.3 million nonprofits.

Losing tax-exempt status is huge for nonprofits, because that status allows them to raise money tax-free and allows donors to get a charitable deduction for their gift.

But achieving an accurate list of valid nonprofits also is critical, said Pratt. It allows donors to know with certainty that the organization they are giving to is alive and well. And it allows the state to gauge the growth and impact of its nonprofit sector, one of the nation's most vibrant.

Many aren't well known

Most of the 5,132 nonprofits that have lost tax-exempt status are not exactly household names. Think Friday Fiddle Club. Or the Fertile Annual Fund. Or All Season Santa.

Some are throwbacks to another era, such as the Veterans of World War I Ladies or various "Mrs. Jaycees" clubs across the state.

But other names are very familiar -- and point out imperfections in the data.

The Minnesota Hospital Association, for example, is on the list. However, the tax ID number listed is not the current ID number, said Jan Hennings, association spokeswoman.

"What we figured may have happened ... is we merged with the Metropolitan Health Care Council [in about 1995]," said Hennings. "Maybe we took their tax ID number or maybe we created a new one." Staff members are currently rummaging through old accounting boxes, she said.

Likewise the Wallin Family Foundation is on the list. This was a foundation started by Winston Wallin, a former Medtronic and Pillsbury executive and widely known philanthropist who died last year.

However the "Wallin Foundation" is the legal entity that the foundation operates under, said Bradford Wallin, a foundation trustee. "The Wallin Family Foundation" was created by Winston Wallin for possible future use, but never was used, he said.

Nonprofits that are alive and well, yet are part of the IRS list, can get their tax-exempt status reinstated, said Pratt.

All told, the list of 5,132 ousted Minnesota nonprofits includes 3,132 charitable organizations related to everything from health care to education. Another 766 are civic organization such as women's clubs and volunteer fire departments.

Another 321 are business-related organizations, such as chambers of commerce. And 277 are social and recreation clubs, such as American Legion auxiliaries and Jaycees.

"All of these groups at one time did work," added Sara Koslow, spokeswoman for the National Association of Nonprofits.

"Maybe they sponsored an event, and the event has passed. Maybe they merged with another group. You may see a recognizable name. But when you try to reach them, there's no contact information."

Pratt and Koslow think that having a real count of working nonprofits will help the sector.

"Yes, it's a loss," Pratt said. "But it's a natural cleansing.''

To see a list of the nonprofits that have lost their tax-exempt status, go to http://www.startribune.com/a475.

Jean Hopfensperger • 612-673-4511

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