Have you ever wanted to research a nonprofit organization to “see where the money goes?” Have you ever questioned whether you can receive a tax deduction for a contribution to a nonprofit organization or the tax exempt status of a nonprofit organization? The following website can provide answers to those questions.
The Internal Revenue Service (IRS) website has a “tax exempt organization search tool” in which you can review filed information returns for the past five years, determine if organizations can receive tax deductible contributions, review IRS determination letters, and verify nonprofit status.
Most nonprofit organizations are required to file an annual nonprofit informational return (Form 990, Form 990-EZ, Form 990-N, or Form 990-PF). A nonprofit’s private or public charity status, as well as its total annual assets and revenues, determines the type of information return that is filed. Each nonprofit organization’s information return for the past five years is available to be viewed. This includes information about the composition of revenues (contributions and grants, program service fees, investment income), the types of expenditures (program, general & administrative, fundraising), as well as total assets, total liabilities, and total net assets. In addition, the information return includes a description about the nonprofit’s mission and answers to governance and informational questions. Collectively, the contents in the informational return can be used to determine the financial health of the nonprofit organization, the efficiency in how funds are spent (program expenses vs total expenses), as well as the implementation of governance policies.
Not all nonprofit organizations are eligible to receive tax-deductible contributions. The tax exempt organization search tool discloses such information, along with the type of charity (public or private). This should be verified prior to supporting a nonprofit organization as this could influence an individual or business’s decision.
The last two search items listed on the IRS website involve the IRS determination letter and auto-revocations. Organizations receive their tax exempt status from the IRS via a determination letter. All letters dated on or after January 1, 2014 are available to be viewed on the IRS’s website. Each letter provides the type of exemption (i.e. 501c3) as well as determine that the nonprofit is a public or private charity. IRS determination letters can also be obtained from nonprofit organizations that do not have their letters listed by calling the relevant organization and/or visiting the organization’s website.
The IRS website provides information about all nonprofit organizations that have had their exempt status revoked. There are a variety of reasons why a nonprofit organization could lose exempt status; one of the most common reasons is not filing an information return for three consecutive years. Although troublesome, there is a procedure that the nonprofit can undertake to regain tax exempt status.
There are a lot of worthy nonprofit organizations to contribute to. Many gain prominence through word of mouth, goodwill, advertising, etc. Performing a little due diligence by implementing the IRS tax exempt organization search tool can provide further guidance in your charitable contribution decision-making process.
Article submitted by Jeffrey A. Wilson, CPA
