By Ryan Quinn
Edited by Josh Dawsey
Paul Pickens' Original Five Points Wild Irish Band has a problem, and so do those who might want to donate to its mission of promoting "Irish music free to the public." Like more than 4,000 other South Carolina charities, it has lost its federal tax exemption.
But unlike many of them, the band is trying to get its exemption back. It's been caught up in the federal government's new efforts to clear the dead underbrush from the thicket of nonprofit groups that spring up, only to be neglected or abandoned. Despite feel-good names like Helping Hands International of South Carolina, Loving Assistance Adult Day Care and South Carolina Children's Emergency Shelter, many have been dead or dormant for years.
The 2006 federal law prompting the cleanup was designed to promote financial transparency and weed out dead nonprofits for the sake of potential donors. For the first time, small nonprofits with less than $25,000 in annual revenue had to file electronic returns, known as Form 990s, each year.
Jennifer Chandler, vice president of the National Council of Nonprofits, said her organization supports the new rules. Though the revocations initially caused anxiety among charity advocates, Chandler said they would shed more light on the fast-growing nonprofits sector.
"We're going to have a much better idea of how many charities are out there operating," Chandler said.
Many groups die out because people underestimate the work needed to run a nonprofit, she said, but the likelihood that most on the list are gone is promising, meaning few are stuck "trying to fix a very big oops."
More than 275,000 nonprofits nationwide lost their tax exemptions last year for not filing returns for the previous three years. But while the Internal Revenue Service thinks most were defunct, some, like Pickens' group, which used donations for T-shirts and sheet music, want to regain their exemptions.
Until the end of this year, the IRS will let small nonprofits pay $100 to have their tax exemption reinstated retroactively instead of the typical fee up to $800.
Pickens acknowledges dragging his feet on Wild Irish Band's Form 990 because at age 88 he wasn't sure he wanted to continue the band, which toured Europe and is to march in this year's Five Points St. Patrick's Day Parade.
But when fans said, as Pickens puts it, "hell no," he decided to pass the group down to two fellow players. Until they get the exemption back, state law requires they tell donors any gifts cannot be written off income taxes.
Pickens said they were working on it, but he did not have a contact number.
At least the band is still registered with the state. The South Carolina Dairy Goat Association, in Greenville, lost its federal exemption last year and its state registration in 2009.
Without state registration, the association could be fined up to $2,000 for asking South Carolina residents for money. Of the more than 3,000 S.C. nonprofits that lost their tax-exempt status last year, only about 4 percent were registered with the state, Secretary of State Mark Hammond said.
Karen Smith, the dairy goat association's secretary, said the person who was president of the nonprofit five years ago handed her the IRS revocation letter and that it was addressed to an even earlier president. Confused, she handed it off to the current president.
She was surprised when told her group was also no longer among the 8,174 nonprofits registered with the state. Calls to the current president, Michael Casdorph, were unreturned.
The organization needs gifts to hold its 23rd Annual South Carolina Dairy Goat Classic in Clemson because the $15 annual member dues will not cover the show's approximate $5,000 cost, Smith said. Membership, once as high as 50, has dropped to about a half-dozen.
With some exceptions for chambers of commerce and religious organizations, most nonprofits must file paperwork each year to stay registered with the state. Kim Wickersham, the secretary of state's public charities director, said nonprofits can re-register in 10 minutes online at scsos.com and pay the $50 with a credit card.
Donors who want to check a charity can find the list of revoked exemptions at irs.gov, though some organizations may have since recovered their tax-exempt status. Calling the IRS at 877-829-5500 is the only sure way to find out if a group is tax-exempt, but groups not in the state's charity database at scsos.com also should raise questions. Click here to learn more.
More than 4,000 South Carolina nonprofits, including 720 in Columbia, are now on the IRS list. Most of their last listed numbers are disconnected, and what little paperwork remains often ends in the 1990s.
Some do still operate, however, but are not registered with the state, such as USC's chapter of the Society of Professional Journalists. Ernest Wiggins, an associate professor of journalism and the group's adviser, said it stopped filing returns for two years before becoming active again in fall 2010. The chapter is working on renewing its state registration, he said.