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RI nonprofits scramble to renew tax-exempt status ahead of new deadline

Thousands of Rhode Island nonprofit organization are facing a Wednesday deadline to renew their tax-exempt certificates.

It's a deadline that some were not aware of, and that left others scrambling to gather the necessary information when the Department of Revenue notified them of the requirement weeks ago.

 

The state estimates it affects up to 8,000 nonprofits, although the number may be smaller as it discovers which are still active through the renewal process.

 

Tax-exempt certificates allow the organizations to make purchases without having to pay sales tax.

 

They had no expiration date until 2017, when the General Assembly passed a law requiring nonprofits to apply for a renewal every four years. That means that any nonprofit formed before July 1, 2017, is facing the deadline.

 

“Sadly, I’m not surprised this is the process, but one would hope that our governmental entities could do better,” said the Rev. Patrick W. Notley, pastor at the Barrington Presbyterian Church.

 

Notley said he has no problem with having to renew every four years, or with the $25 fee that goes with it.

 

Rather, he is mystified that the Department of Revenue had years to devise a program and only sent out a letter earlier this month in the same envelope the secretary of state mails annually to remind nonprofits that their annual reports are due.

 

Several nonprofits contacted by the Hummel Report said they overlooked the second page of the mailing inserted by the Department of Revenue.

 

Even though the deadline was less than a month away, the letter said, “The Division [of Taxation] is developing a process for applications and will post updates on its website.”

 

Barrington Presbyterian received notification the first week of June and the process required Notley, as the registered agent, to provide proof of tax-exempt status from the federal government. He said was also surprised that nonprofits have to download a form and mail in the check and paperwork.

 

 “The fact that you have to print out the form, fill it out and send in a check: are you kidding me?” he said. “Four years, you can’t figure out how to do this online? The Secretary of State has been doing this online forever.”

 

The Department of Revenue, through its spokesman Paul Grimaldi, said it understands Notley’s concerns.

 

“To the extent the applicant is simply renewing a previously existing certificate with no changes since its original application, there is no need to provide additional documentation to support the exemption,”

 

Grimaldi wrote in an email, responding to questions from The Hummel Report. “While the form can be completed online, it is necessary for it to be mailed due to the payment requirement in the law.”

 

Grimaldi added that the state will accommodate late filings to allow organizations to complete the process, although he did not say how long the amnesty period would last.

 

“I dispute their statement that if it’s an active ongoing nonprofit all they need to do is fill out the form and send the money. That’s not correct,” Notley said. “One of the questions is for your federal taxpayer ID number. You also have to send in the original letter you received from the IRS. Or a copy of that original letter to prove it.”

 

The application includes this sentence: “All organizations must include a copy of the IRS letter indicating their assigned federal identification number.”

 

Barrington Presbyterian was issued its first tax-exempt certificate in 1968 and its most recent letter from the Internal Revenue Service came in 1983.

 

Kristin Knudson-Groh, communications director for the Episcopal Diocese of Rhode Island, said each parish was responsible for its own renewal.

 

“I heard back from one congregation that their certificate was dated sometime in the 1960s, and the priest had never heard a word about renewal before, so I’m sure that this has come as a surprise to many,” she wrote in an email.

 

It’s not just churches. The Department of Revenue lists a hosts of categories that include educational and charitable institutions; nonprofit hospitals, nonprofit sporting leagues and band associations; senior citizen clubs, and parent-teacher associations.

 

Nonprofits can download the form using this link: http://www.tax.ri.gov/exemptOrg/ExemptOrgRen_w.pdf

 

The Hummel Report is a 501(c)(3) nonprofit organization that relies, in part, on donations. For more information, go to HummelReport.org. Reach Jim at Jim@HummelReport.org.