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Tax Protection Ends for Dormant Causes

IRS Hits Nonprofits Long Behind on Disclosures

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Former Majority Leader Tom DeLay’s grass-roots group was one of thousands still able to collect tax-exempt donations long after closing down. The IRS changed that in June.

Five years have passed since House Majority Leader Tom DeLay resigned from Congress, and it has been 24 since the Texas Republican created a conservative grass-roots group that failed to take root.

But until last month, you could still make tax-free donations to that nonprofit, People Restoring an Internationally Competitive Economy.

Like tens of thousands of defunct organizations that gave up their causes years ago, DeLay's PRICE has lingered on official books because the federal government had no process to flush it out.

That changed in June, when the IRS stripped tax-exemption privileges from 275,000 nonprofits that had not filed required disclosure forms. In one move, the IRS eliminated about 15 percent of the entire sector.

Congress passed a law five years ago requiring the IRS to do so as a way to ensure nonprofits file information about their donors and expenses. The process has also helped shutter inactive groups to prevent misuse of the nonprofit status.

"It is a game changer because nothing like this has happened before," said Lindsay Nichols, a spokeswoman for GuideStar, which collates data on nonprofits.

Nichols praised the IRS move, saying it could help clarify how many tax-exempt charities and foundations are active.

Despite a yearlong effort by the IRS to alert groups about the change, the sweeping revocation of tax-exempt status caught some off-guard. Groups with annual budgets of less than $25,000, which have not had to file in the past, must now do so to retain their exemption status.

Scores of local American Legion groups and AARP chapters were on the list, as was the active Muslim advocacy group Council on American-Islamic Relations. IRS staff members are helping such organizations reapply for tax-exempt status.

But a large chunk of the list consisted of groups that disbanded long ago. Nichols said half of the groups on the IRS list were not in the GuideStar database, indicating that they probably have not been active for years.

For them, losing tax-exempt status was the final nail in the coffin of their bygone movements.

PRICE, which DeLay described to Roll Call in 2003 as the only ambitious goal he set and did not meet, failed to get off the ground after it was established in 1987. Jeff Judson, a DeLay staffer who served on the PRICE board, did not respond to requests for an interview.

Some of the groups, such as the Nuclear Freeze Foundation and Citizens Against Nuclear War, stopped functioning after the Cold War subsided. David Cohen, who was active in organizing grass-roots support for arms control bills, said the movement had accomplished its mission when the Berlin Wall came down.

But other movements on the IRS list fizzled before they could win.

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