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Snafu puts nonprofit groups in tax bind More than 800 Buffalo-area organizations have to file IRS forms to regain status

More than 800 Buffalo-area nonprofit groups -- including several American Legion posts, Knights of Columbus groups and the Buffalo Municipal Housing Authority -- have lost their nonprofit status and will have to reapply quickly to regain it.

Democratic Sen. Charles E. Schumer announced the snafu Wednesday. He urged all local nonprofits to check to see if they, too, have fallen victim to a 2007 law that required them to file annual forms with the IRS or else potentially be subject to taxation.

"Little leagues, public libraries, museums, meal programs, and other nonprofit organizations that are the very fabric of communities throughout upstate New York are at risk of paying thousands of dollars in penalties through no fault of their own," Schumer said.

The IRS earlier this month released a list of 275,000 organizations nationwide that stand to lose their nonprofit status because they failed to file the proper paperwork -- an IRS 990 form -- three years in a row.

The nation's smallest nonprofits and some others were exempt from filing that form until Congress changed the law in 2007.

And now many nonprofits appear to be caught in an unusual bind.

They have not been in touch with the IRS for years because they had no reason to be -- leaving the IRS without the groups' current addresses, where they could have received the notice of pending tax trouble.

Many of the nonprofit groups on the IRS list are likely to be defunct, Schumer said.

But a close look at the 818 Buffalo Niagara area nonprofits on the list reveals both some familiar names from the past along with a vast array of community groups that are still in operation.

The Buffalo Municipal Housing Authority is the most prominent organization on the list, and the New Millennium Group and the Thurman Thomas Foundation are listed as well.

Eight local American Legion posts have lost their tax-exempt status, as have eight Knights of Columbus groups and several local labor unions.

The Niagara County Builders Association, the Niagara Falls Little League and several other youth athletic leagues are suddenly in tax trouble as well.

And among the 19,000 nonprofits on the list statewide, "you've got everything from baseball clubs to emergency response organizations to fire departments," said Daniel C. Curtis, membership, marketing and events coordinator for the New York Council of Nonprofits.

Contributions to the organizations on the list are no longer tax-deductible, and the groups themselves may now be subject to taxation.

But most of the groups still have some easy ways out of tax trouble.

Any nonprofit that can prove that it has filed a tax document within the last three years can fax copies of those documents to the IRS to have their nonprofit status reinstated at no cost.

And groups with less than $50,000 in income that have not filed the IRS 990 forms for the past three years can file for reinstatement for a fee of just $100 through the end of the year. But that fee will jump to upwards of $850 in 2012.

Curtis stressed that the IRS should not shoulder too much blame for the problem.

"The IRS can only do so much in tracking down addresses," he said. "It's tough to keep track of 106,000 nonprofits in New York State."

It's tough to keep track of changes in tax law, too.

For proof, witness this.

Even the Lawyers Club of Buffalo lost its tax-exempt status.

e-mail: jzremski@buffnews.com