Area nonprofits lose tax-exempt status

Thirty-two area nonprofits have lost their tax-exempt status, according to the Internal Revenue Service.

The agency last week released a list of 2,200 Orange County nonprofits, including 31 in Laguna Beach and one in Emerald Bay, that have automatically lost their nonprofit status because they did not file financial statements for three years. All nonprofits have been required to file financial information since 2007.

"We were never notified of any change, and we filed the short form that we had been advised was permissible," said Richard Schwarzstein, legal advisor to the Sister Cities Committee of Laguna, which was on the list. "We will have to check to clarify our status. "But we are certainly not going to lose our tax-exempt status over a form, and we will deal with it. This is just bureaucracy at work."

Restoring the tax exempt status will cost $100 for organizations that collect less than $50,000 annually in donations or dues under a "relief" program instituted by the IRS, assuming all other requirements have been met, said Laguna Beach-based accountant James McBride.

"If the 900N [short] form was filed electronically, and the organization has proof, they should be OK," McBride said. "Then it is an issue between the IRS and the organization whether the filing was made correctly."

Donors and dues-payers to the nonprofits may not take tax deductions on their contributions, and the groups will be taxed on their income until the exempt status is restored.

"Many well-meaning groups need to be aware of regulations and when they change," said Mary Fegraus, a founding board member of the Laguna Beach Community Foundation that was created to advise and give leverage to individual nonprofits. "We presented a workshop in 2009 on the change in the law for nonprofit financial statements. But the [IRS] list is creating a lot of work for us. Some of the groups we list on our website will have to be removed."

The IRS list could also prove problematic for the Laguna Beach budget sub-committee, which is culling applications for 2011-12 community grants to recommend to the City Council.

Councilman Kelly Boyd said at least one of the groups on the IRS list is up for a grant.

Grant applicants must be nonprofits and have the tax identification numbers issued to nonprofits, said Susan Cannan, director of community services.

To view the IRS list, visit,,id=240099,00.html.

Copyright © 2019, Daily Pilot
EDITION: California | U.S. & World