Beaufort News

IRS strips state, local nonprofit groups' tax-exempt status

The Internal Revenue Service has stripped 3,048 South Carolina nonprofit groups -- including some that serve Beaufort County -- of their tax-exempt status for failing to file financial information with the agency for the past three years.

Losing that status not only subjects those organizations to paying taxes on future donations, but it could scare off potential donors who no longer would be able to write off donations on their tax returns. Nationwide, about 275,000 nonprofits lost their tax-exempt status for failing to file necessary paperwork with the IRS.

GuideStar, a clearinghouse for information on nonprofits, said the move fundamentally changes the landscape for the industry.

But it appears that many, if not most, of the local groups targeted by the IRS are dormant or long-defunct.

Some groups on the list, however, are very much active. The Historic Port Royal Foundation has been stripped of its tax-exempt status, as has Old Village Association of Port Royal, which puts on the Soft Shell Crab Festival and other events.

Nancy Vista, president of the Old Village Association, said the group's change in status was an oversight. The member in charge of filing paperwork had been doing so with the state instead of the federal government. That mistake was corrected several months ago, Vista said.

"I just don't think people are aware they even have to file," Vista said. "What happens is, we're all volunteers, so every year you have new officers."

It was unclear last week just how many groups on the IRS list are still active. Still, GuideStar's chief predicted the action will have a lasting effect.

"This event will have a tremendous short-term impact on the nonprofit sector and those who support and rely on it. The true impact, however, will be long-term," Bob Ottenhoff, GuideStar's president and CEO, said in a written statement. "Over time, knowing which organizations are in good standing with the IRS will increase public confidence in the sector as a whole, which in turn will increase support for the nonprofits it comprises."

Among the dormant local groups stripped of nonprofit status is the Arts and Cultural Council of Southern Beaufort County, an organization for Hilton Head Island residents and groups that was still on the IRS rolls despite having dissolved.

"We disbanded, like, three years ago," founder W. Raymond Ackerman said.

Another long-gone organization is the Hilton Head Community Foundation. The group was around when the Community Foundation of the Lowcountry formed, according to vice president for marketing and communications Carolyn Torgersen, but as far as she knew, it never had a board, made grants or sought donations.

Other organizations on the list don't formally solicit donations. Among them is the Keith Foundation of Beaufort, created by John Herbert Keith to use family money to support missionaries. An attorney had suggested seeking tax-exempt status when he formed the foundation nearly a decade ago, in case he decided to expand it. But he has never sought donations, Keith said.

Staff writer Allison Stice contributed to this report.