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Community Corner

Nonprofits Under New Tax Rules

The Kiwanis Club is hosting a workshop to help Hermosa groups meet requirements that if not satisfied could endanger their tax-exempt statuses.

A repository of Hermosa's treasured relics was saved at the eleventh hour from an unpleasant encounter with the tax man that could have imperiled its nonprofit status.

A recent change in tax laws requires all nonprofits to file Form 990, which was previously required only for organizations earning more than $25,000 per year. According to the National Center for Charitable Statistics, if an organization does not file as required for three consecutive years, the organization automatically loses its tax-exempt status. 

This requirement is drawing more attention this year because 2007 was the first year Congress required tax-exempt organizations that raise less than $25,000 per year to file Form 990. Now, most tax-exempt nonprofits, other than churches, must file a yearly return or notice with the IRS.

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One of the organizations affected by the new requirement is the Hermosa Beach Historical Society, which didn't find out about it until it was almost too late.

"Our friendly CPA let us know about it," said John Horger, the society's treasurer. "It wouldn't have been filed if we didn't hear about it."

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Fortunately the group was able to get its paperwork in order and filed by the May 17 deadline.

The society's programs, such as the museum it runs  on Pier Avenue, would have been at risk if the group had lost its tax-exempt status. Filled with relics from Hermosa's past, the museum is free to visitors and relies on donations.

"I try to bring history to the community and the community to history," said Anne Marie Schaaf, the museum's curator and the society's only full-time employee.

Anxious to protect such programs, Horger worried about filling out the new tax forms correctly.

"I called the IRS to make sure we were in compliance, just to be sure, " he said.

The IRS could have done a better job of alerting nonprofits to such a sweeping change, Horger believes.

"I don't recall seeing anything from the IRS," he said. "Some early notification would've helped."

According to the IRS website, new questions were added to Form 990 in response to the increasing size, diversity and complexity of tax-exempt organizations.

To help nonprofits adjust to the new requirements, the Hermosa Beach Kiwanis Club is hosting a workshop on the tax code changes.

The meeting is scheduled for May 27 from 6:30 to 8 p.m. Certified public accountant Gary Wayland will discuss the changes and answer questions.

"I've invited all the nonprofits in Hermosa, but other organizations are welcome if they RSVP," said Cathy McCurdy, the club's treasurer.

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