For the Wichita Trojans youth football team, fundraising is part of the lifeblood of the small, nonprofit organization. Donations buy equipment and help pay yearly enrollment fees for some players.
There's no money left at the end of each season; no money to carry over to the next.
So when Gino Pipkins found out that his team's tax-exempt status had been revoked by the IRS, making it impossible for the team to accept tax-deductible donations, he was shocked.
"It's probably going to really hurt us financially," said Pipkins, president of the Trojans and a former coach. "At the end of the year, we're broke. We're back at a zero balance."
The team is one of more than 250 nonprofits in Wichita that automatically lost their tax exemptions this month after they did not file required paperwork with the IRS, making them ineligible to receive tax-deductible contributions and sales tax exemptions on purchases.
A 2006 change in the laws governing tax exemptions — called the Pension Protection Act — is the reason for the rash of revocations.
Before 2006, organizations with yearly earnings less than $25,000 were not required to file annual returns. The change requires all tax-exempt groups to file each year regardless of revenues.
Those that did not file for three consecutive years starting in 2007 automatically lost their exemptions in June.
Nationwide, the IRS revoked tax exemptions for more than 275,000 organizations, including more than 400 charities, trade associations, sports organizations and labor unions in Wichita.
According to a New York Times article, IRS officials said the action helps eliminate tax exemptions for defunct organizations across the United States.
That's a positive move by the IRS, said Perry Schuckman, executive director of the Nonprofit Chamber of Service of Sedgwick County. He said the action helps strengthen legitimate nonprofits.
"It's a constant effort by the IRS to validate organizations that claim to be a nonprofit, so they are constantly looking at ways to validate that through new rules," Schuckman said.
Local certified public accountant Mark Dodds said the IRS rules hurt small nonprofits, like youth sports teams.
Mostly run by parents, the groups didn't know their tax-exempt status would be revoked, Dodds said, because the change in was buried in 393 pages of law dealing mostly with pension issues, according to a New York Times report.
And now that they've lost their status, the fees to reapply for tax-exemptions are too high, Dodds said — up $850 depending a charity's annual revenues — for small charities already operating on tight margins.
"Seasonal-type organizations don't have the resources to spend a lot of money on compliance," Dodds said.
" (They) need every dollar they can get a hold of."
Some better-known charities, like the Foundation for Big Brothers Big Sisters of Sedgwick County, also appeared on the list.
President and CEO of Kansas Big Brothers Big Sister Dan Soliday said the charity is still dissolving "unused corporate entities and federal ID numbers" of individual agencies that merged into one statewide nonprofit years ago. The loss of the foundation's tax-exempt status doesn't affect Big Brothers Big Sisters' ability to accept tax-deductible contributions, he said.
The IRS is offering a re-application process including a reduced filing fee of $100 to small nonprofits with annual revenue of less than $25,000.
More information, including eligibility requirements, is available at www.irs.gov.