Thousands in region lose tax-exempt status

More than 19,000 organizations in Pennsylvania, New Jersey, and Delaware have lost their nonprofit status after failing to file federal tax returns for the last three years, according to the Internal Revenue Service.

The IRS believes most of the groups are defunct, no longer raising money or spending it, according to an IRS spokesman. But the revocations, publicly disclosed Thursday for the first time, caught some still-active local organizations by surprise.

"I guess they want more paper so they can keep themselves busy," said accountant Louis J. Cissone, vice president and treasurer of the Frank L. Rizzo Monument Committee, which maintains the statue of the former Philadelphia mayor in front of the Municipal Services Building.

Cissone said the organization was properly registered with the state Bureau of Charitable Organizations. But he wasn't aware of a 2006 change in federal law that required all tax-exempt groups to file annual tax returns regardless of their size.

"I think we have about $13,000 in our account," Cissone said. "We maintain an insurance policy in case anyone jumps off the head of the statue and gets injured." He said he intended to look into the federal requirements and file whatever was necessary to restore the group's tax-exempt status. "I'm sure they'll need to hire five more people to read it," he said.

Nationwide, about 275,000 nonprofits lost their tax exemptions with Thursday's action, mandated by the Pension Protection Act of 2006 after the organizations failed to file tax returns for calendar years 2007, 2008, and 2009.

The list of revocations covered 10,492 organizations in Pennsylvania, including 1,967 with Philadelphia addresses. An additional 7,876 nonprofits in New Jersey lost their tax-exempt status, as well as 852 in Delaware.

"There's no way to say how many of them are active," IRS spokesman William Cressman said. Though they needed initial approval from the IRS to get tax-exempt status, he said, until the passage of the 2006 law, they did not have to file tax returns unless their annual income reached $25,000.

"Since many had no tax-filing requirement, they never had to notify us they were ceasing operations," Cressman said.

Several active organizations on the IRS revocation list had filed the appropriate tax returns and were apparently listed by mistake, like the Delta Phi Epsilon sorority, which has 75 chapters across the country and its national headquarters in Philadelphia.

Its executive director, Nicole DeFeo, speculated that the IRS confused a defunct local chapter with the national organization.

Another local nonprofit on the list, the Austin Meehan Memorial Fund, named for the former Philadelphia sheriff who ran the city Republican Party from the 1930s to the 1950s, is close to winding down its operations, according to Meehan's grandson attorney Michael P. Meehan.

Jill M. Michal, president and chief executive officer of the United Way of Southeastern Pennsylvania, said the organization would use the IRS list to review the tax-exempt status of all entities receiving United Way support. "Organizations that do not comply will be removed," she said.