Opinions

In nonprofit limbo at the IRS

I have read with great interest the coverage of the Internal Revenue Service’s review of applications for tax-exempt status from organizations with tea party ties. But I think the real problem with the IRS is much broader than whether it was playing politics.

My organization, DC Theater Arts Collaborative, is in the middle of constructing a performing arts venue east of the Anacostia River. In early August, we applied for 501(c)(3) tax-exempt status as a nonprofit. Given our construction schedule, we figured that if we had this status by the beginning of 2013, the timing would be right to kick off a fundraising campaign to help cover a shortfall in the construction, and we could then begin to bank operating and production funds. But in the months that followed, we received nothing from the IRS except a couple of form letters, one saying our application had been received and another saying we had been put in the pile for “further review” and that there might be delays.

Checking the IRS Web site not long after we applied, we learned that applications from that March were being assessed. As I write, the IRS Web site still bears the same message. We have been waiting almost 10 months for our review, but, worse, many others have apparently been waiting twice that long. The IRS does offer the possibility of “expedited review” if you can prove that a promised grant will not be given if nonprofit status is not achieved in a timely fashion. The only problem with that? One often cannot even apply for a grant without nonprofit status. Joseph Heller himself could not have come up with a better Catch-22.

And in case anyone thinks applying for a 501(c)(3) is easy, it’s not. First, one must create a local corporation; it then takes weeks or months to compile the necessary information, form a board or directors, write biographies and a good case statement, and come up with a budget (which, of course, is based on being able to raise funds). It’s not cheap, either. You must send in $850 with your application and, in most cases, hire a lawyer to help dot every I and cross every T. (We were fortunate, at least, to have this work donated to us.) And then you wait. And wait. And wait.

We left multiple voice-mail messages but still failed to receive a call back from the IRS. What ultimately did get a response was writing what, I must admit, was a pretty nasty letter, which I both mailed and faxed. Even then, the return phone call was from an employee who told me they were “swamped” with applications and that “it just takes a long time.” His prediction? Another three to four months. Maybe.

Our lawyer also called, and here’s how he summarized their response: “Due to the sequester, furloughs and general government ‘efficiency,’ the IRS still has no estimate as to when they will perform the next round of reviews of your application.”

According to the IRS’s phone support staff, the agency’s Web site is accurate: It is still reviewing applications from March 2012. I have tried to enlist the help of Del. Eleanor Holmes Norton’s staff, to whom I have sent all supporting documents (at their request). But they, like the IRS, do not return my calls.

I don't know when this ordeal will be over, but here’s something I do know: I cannot tell the IRS that I am “behind” and can’t get around to my taxes. I can’t tell my clients that I can’t finish their projects because of the “sequester.” I have to return phone calls or I will have no clients, and we will have no renters at our new venue.

Why does the IRS get to play by a different set of rules?

 
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